SAGUENAY, QUEBEC – (December 21, 2017) – Arianne Phosphate (the “Company” or “Arianne”) (TSX VENTURE: DAN; OTC: DRRSF; FRANKFURT: JE9N), a development-stage phosphate mining company, advancing the Lac à Paul phosphate rock project in Quebec’s Saguenay-Lac-Saint-Jean region, is pleased to provide a corporate update for the year-end. “This year has been one of sure and steady progress,” said Brian Ostroff, CEO of Arianne Phosphate. “As nice as it would be, you don’t just flip a switch and it’s done. This is a big project that should generate large returns for our investors, stakeholders and the community as a whole. Advancing our Lac à Paul project requires many pieces to come together and I believe that the year 2017 has been a successful one in moving us towards our goal.”
Selection of Key Suppliers
Arianne, through the first few months of 2017, finalized agreements with several large suppliers for various aspects of its project. Among the organizations selected were Constructions Proco for structural and architectural engineering, ABB for integrated electrification and FLSmidth for the production processing line. These agreements were a culmination of the Company’s efforts through the back half of 2017. The key takeaway is that Arianne has been able to interest and partner with some of the world’s most respected organizations and this will be of tremendous benefit as the project moves forward. Equally, the fact that some of these agreements came with a commitment on the suppliers’ part to assist Arianne in financing these contracts has been a big help as we have moved the project into the financing stage.
Continued Project Optimization
Throughout 2017, Arianne has continued to look at ways to optimize its Lac à Paul project and, as a result, has been able to reach agreements with various organizations that should help improve the cost effectiveness of its project. Early in the year, the Company announced an MOU with Rio Tinto to explore potential synergies around maritime transport focusing on the use of Rio Tinto ships to deliver Arianne’s phosphate concentrate. The Company also entered into an agreement with Groupe Alfred Boivin regarding the trucking of Arianne’s phosphate concentrate to maritime loading facilities on the Saguenay River. Additionally, Arianne announced a favorable power agreement with Hydro-Quebec that has allowed for an increased allotment of power for its phosphate concentrate production facilities. This agreement, along with the economic benefits, also will make Arianne the lowest greenhouse gas emitter of all apatite [phosphate] concentrate producers.
Review of Potential Strategic Associations
Arianne continuously reviews opportunities to partner with like-minded organizations that see the opportunity in collaborating on various business ventures that can provide for both economic and environmental benefit. To this end, Arianne has announced that it is reviewing the possibility of partnering to set up downstream operations to transform its phosphate rock into phosphoric acid. The potential project continues to be explored and headway is being made in understanding the economic benefits involved. As well, during the year, Arianne joined with several current and pending phosphate producers to form Safer Phosphates™. The organization was formed to share information and address concerns about contaminants, such as heavy metals like cadmium, in many of today’s phosphate concentrates. Arianne’s igneous Lac à Paul deposit does not contain many of the deleterious elements of concern today. Further, the EU Parliament, late in the year, agreed to institute legislation limiting the amount of cadmium in the phosphate that can enter the European Union. The Company believes that this will cause European buyers to seek out alternatives such as Arianne’s high-purity phosphate concentrate.
Board and Management Activities
It was with great sadness that 2017 marked the loss of Arianne’s Chairman Jean Lamarre after a brief and courageous fight with illness; his vision and wisdom will be missed. Mr. Lamarre has been succeeded by Mr. Dominique Bouchard who moves from Executive Vice-Chairman to Executive Chairman. Mr. Bouchard is a native of the Saguenay-Lac-Saint-Jean area where he has held numerous senior positions throughout his career. The Company believes that Mr. Bouchard’s talents and network are well-placed to assist in progressing the Arianne project to development. As well, the Company also expanded the role of Mr. Siva Pillay who is the Chair of the Company’s audit/finance committee. Mr. Pillay, who is the Managing Director of Ocean Partners, a global off-taking and commodity trading company, brings with him extensive knowledge of project finance and off-take agreements will work alongside Arianne’s CEO and CFO as the project moves through the project financing.
In very late October, Arianne announced that it had completed its comprehensive Information Memorandum (IM). This document followed many months of work and extensive due diligence by independent engineers. Every aspect of the project from extraction, processing, infrastructure and environmental were reviewed and results modeled into Arianne’s CapEx and OpEx and subsequently into a financial model for prospective financial partners. The IM has been provided to parties with executed Non-Disclosure Agreements, that have indicated a strong interest in reviewing the materials and being included in the finance syndicate. Although just a short period since these materials have been fully available, the Company has already started to receive expressions of interest and correspondence to this effect and, Arianne continues to be in regular dialogue with these parties to discuss terms and conditions that would be part of any comprehensive financing package.
Macro Outlook for Phosphate
The overall macro for phosphate in 2017 remained subdued for most of the year after several years of poor pricing. The last couple of months however, has seen an uptick in several of the fertilizer components including DAP (finished phosphate fertilizer) and the equities of several large fertilizer companies. Arianne continues to see a strong future for its project as annual demand continues to grow for phosphate. Many industry observers believe that new supply will be required in the next few years if we are going to keep up with demand; currently supply will not be sufficient to meet this demand. Work done as part of the due diligence process shows the Company’s Lac à Paul project to be extremely cost competitive and ultimately Arianne believes this to be the best defence in an uncertain pricing environment; at today’s multi-year lows for phosphate rock, Arianne can still be very profitable by operating at the low end of the cost curve. Additionally, the phosphate industry continues to see environmental concerns appear. New legislation in the European Union has highlighted issues associated with cadmium as well as other impurities in the phosphate imported into Europe. This adds to other environmental issues in North America seen over the last couple of years involving producers of phosphate. Arianne believes that as these issues continue to gain awareness, it will provide a growing market for its high-purity/low-contaminant phosphate concentrate and the Company has already seen an uptick in interest as a result.
Lastly, as the world’s phosphate demand continues to be met with supply out of areas where geopolitical uncertainty exists, the need for supply coming from more stable jurisdictions will be of great interest as buyers look to diversify their sources. As a pending large producer with operations in the politically stable and mining friendly jurisdiction of Quebec, Canada, Arianne believes it is well-placed to meet this demand.
“It has taken a long time to get to where we are, but today, our shareholders are the owners of arguably one of the best phosphate assets in the world,” said Brian Ostroff, CEO of Arianne Phosphate. “All of our work, and that of independent parties that have come in to review our project, have demonstrated the robustness of the Lac à Paul project and, the job has now shifted to bringing the project into development and monetizing all of that hard work. We take seriously the important place that Arianne can play in the future of the region and look to crystalize on this for our investors, First Nations, stakeholders and the community at large. The last couple of months have been very rewarding in terms of the feedback we are getting and I want to thank my team at Arianne for their hard work and commitment to advancing the project. I want to wish all a very happy and healthy holiday season and look forward to a strong 2018.”