GrowMax Resources Corp.
TSX VENTURE : GRO

GrowMax Resources Corp.

September 12, 2016 09:08 ET

GrowMax Resources Announces Strategic Plans

CALGARY, ALBERTA--(Marketwired - Sept. 12, 2016) - GrowMax Resources Corp. (TSX VENTURE:GRO) ("GrowMax" or the "Company") is pleased to announce its various initiatives and strategic plans for the remainder of 2016 and 2017.

All dollar amounts are in nominal U.S. dollars, unless otherwise noted.

So far in 2016, the Company has been focusing its efforts on the following initiatives and intends to continue to concentrate on these areas over the next 12 to 16 months:

  1. Reducing general and administration (G&A) expenses.
  2. Exiting the remaining Argentina oil and gas assets.
  3. Advancing the Bayovar project in Peru.
  4. Developing plans for early cash flow.

1. Reduce G&A Expenses and Discretionary Capital Spending in Argentina

During the past several months, the Company has completed several initiatives to reduce its G&A spending in Argentina and Canada. A number of extraordinary G&A expenses were incurred during 2016 however the vast majority of these expenses have now been completed. The G&A expenses for the fourth quarter of 2016 are estimated to be approximately Cdn$500,000 less than in Q4-2015. In addition, in conjunction with the Company's plan to exit Argentina, it has also significantly reduced discretionary capital spending in Argentina.

2. Exit Argentina

GrowMax has initiated a sale process for the Company's remaining assets in Argentina. Several companies have entered into a confidentiality agreement. Results of the process are expected to be announced by fourth quarter 2016.

3. Phosphate & Brine Resources

GrowMax's primary focus continues to be on the Company's phosphate and brine/potash mining assets in Bayovar, Peru. The Bayovar concessions contain significant phosphate Mineral Resources with Measured and Indicated Mineral Resources totaling over 175 million tonnes, and Inferred Mineral Resources exceeding 430 million tonnes on all four Bayovar 5, 6, 7 and 8 concessions.

Summary of Mineral Resources, All Areas, All Beds*

Mineral Resource Category Vertical Thickness (m) Dry Tonnes (MT)** Wet Tonnes (MT)** P2O5
(wt%)
SiO2
(wt%)
Dry Density
(g/cm
3)
Wet Density
(g/cm
3)
Total Measured 0.61 29.7 38.9 12.00 30.90 1.21 1.58
Total Indicated 0.59 149.3 196.8 12.48 31.23 1.20 1.58
Total Inferred 0.47 430.1 568.8 13.60 29.97 1.18 1.55
* In Situ Measured, Indicated and Inferred Mineral Resources, no minimum thickness applied.
** MT: million tonnes

For further details, refer to "Updated 43-101 Mineral Resources Technical Report on the GrowMax Bayovar Phosphate Project, Piura Region, Peru" with an effective date of June 27, 2016 and filed on SEDAR on August 11, 2016.

The Company also announced today the results of a preliminary economic assessment ("PEA") on the Bayovar 7 concession which considers a phosphate mine of 1.0 million tonnes per year of beneficiated phosphate rock. The net present value, after tax, at a 10% discount rate is estimated to be US$71 million. The internal rate of return is estimated to be 13.3% after tax. For further information, refer to the press release entitled "GrowMax Announces Results of a Preliminary Economic Assessment for Phosphates on Bayovar 7 Concession, Peru" and dated September 12, 2016.

In addition to the phosphate Mineral Resources presented above, the Bayovar project area also includes significant amounts of brine/potash Mineral Resources. For further information, refer to "Amended and Restated NI 43-101 Mineral Resource Statement for Mineral Concessions Bayovar 5 to 8, Sechura Area, Piura Province, Peru" with an effective date of January 11, 2013 and filed on SEDAR on February 24, 2014. GrowMax has initiated a study to help the Company evaluate the economic merit of the brine-related fertilizer products at Bayovar. In addition to the potential for potassium chloride, initial testing of samples obtained from the pilot evaporation ponds indicates good content of sulphates suitable for sulphate of potash ("SOP") product.

4. Plans for Early Cash Flow

a) Fertilizers (SSP Plant)

In studying the local fertilizer market in Peru and the surrounding region, the Company determined that there is an excellent opportunity to pursue a market for fertilizers, particularly single super phosphate ("SSP"). GrowMax initiated a study for the potential to produce and sell SSP in Peru with an objective of providing early cash flow for the Company. The study contemplates that phosphate rock, which is readily available in Peru, will be purchased for the plant. Sulfuric acid, a major input for the production of SSP, is also readily available in Peru. Depending upon the Company's assessment of its Bayovar concessions, phosphate rock from the concessions could be utilized by the plant, should the concessions be developed. The consideration of an SSP plant is independent of the Company's ongoing assessment of its Bayovar concessions.

A leading global phosphate engineering consultancy prepared the engineering study for the SSP plant. The Company also received marketing information from international and Peru-based marketing consultants that, in management's opinion, suggest significant demand for SSP could be developed at attractive prices in line with the assumptions used in the economic modeling for the study, as described below.

  • SSP is the oldest manufactured phosphorous for fertilizers. It has been the principal phosphate fertilizer for more than a century.
  • SSP is still an important phosphate fertilizer and this is likely to continue.
  • SSP has a soluble P2O5 equivalent in the range of 16-22%.
  • The SSP manufacturing process involves reaction of phosphate rock with sulfuric acid to produce a fertilizer containing 16.9% P2O5.

The advantages of SSP are:

  1. The process is relatively simple, requiring minimal technical skills and small capital investment.
  2. The economies of scale are minor, thus, small plants can be economical.
  3. Since the process is not capital intensive, there is little advantage of a high percentage utilization of capacity. In fact, many SSP plants operate on a planned seasonal schedule.
  4. SSP is an effective fertilizer and is a standard of comparison for other phosphate fertilizers.
  5. SSP supplies two secondary elements, sulfur and calcium, which are sometimes deficient in soil.

The SSP plant study results presented below use base pricing assumptions that are below current prices and high pricing assumptions that are marginally above current prices in the limited existing SSP market in Peru. Other assumptions include:

  • 60,000 tonnes per annum ("tpa") SSP production.
  • Plant location in northern Peru.
  • Construction start in early 2018 (with potential to accelerate).
  • Initial capital of US$13.7 million in real (2016) terms.
  • Additional sustaining capital of US$2.2 million in real (2016) terms over 20 years of operations.
  • Plant OPEX of US$51 per tonne of SSP in real (2016) terms.
  • Sulfuric acid and phosphate rock (both of which are readily available for purchase in Peru) at an average purchase price of US$42 per tonne and US$140 per tonne, respectively, in real (2016) terms.
  • 2% annual inflation of prices and costs.

Results of SSP Plant Study

Cases High Price Base Price
SSP Price (2016 US$) $380 $250
Capital (2016 US$) $13,670,000 $13,670,000
Debt Financing 0 % 0 %
Production Rate (tpa) 60,000 60,000
Revenue (2016 US$) $22,800,000 $15,000,000
Average Costs (2016 US$ per tonne of SSP)
Plant Opex $51 $51
Sulfuric Acid Cost $15 $15
Phosphate Rock $89 $89
Total OPEX $155 $155
NPV10 (after tax)* $48,296,000 $12,341,000
Internal Rate of Return 43 % 21 %
Payback 5.5 Years 7.5 Years

* Net present value after tax at a 10% nominal discount rate

b) Sodium Chloride (NaCl) Sales

In the process of evaluating the brine/potash Mineral Resource on our concessions, we have considered the potential for the sales of raw or refined common salt (Sodium Chloride, or NaCl) that is produced in significant volumes in the process of recovering any other mineral salts from the brine. Based on initial market assessments, the Company believes there is an opportunity for early sales of NaCl to meet significant local demand at attractive prices.

SUMMARY CONCLUSIONS

"We believe the steps we have taken so far in 2016 have focused the Company and positioned it well to maximize the value of our mining assets in Peru, as well as identifying several potentially synergistic business development opportunities, achievable in the near term, within our financial capabilities. By early 2017, we are aiming to make a decision regarding the SSP Plant and path forward for our Bayovar concessions, and to announce a 2017 capital budget and estimates of total spending required to pursue our strategic plan," commented Executive Chairman, Abby Badwi.

GrowMax Resources Corp. updated website dated September 12, 2016 can be accessed at www.growmaxcorp.com.

About GrowMax Resources Corp.

GrowMax Resources Corp. (formerly Americas Petrogas Inc.) is an international mining company with headquarters in Calgary, whose shares trade on the TSX-V under the symbol GRO. GrowMax Resources Corp. owns approximately 91.6% and Indian Farmers Fertiliser Co-operative Limited (IFFCO) and its affiliates own approximately 8.4% of GrowMax Agri Corp, a private company involved in the exploration for near-surface phosphates, potash brine and other minerals, and potential development of fertilizer projects in the Bayovar region of Peru.

Forward Looking Information

The statements in this press release contain forward-looking information within the meaning of applicable securities laws including, but not limited to: our strategic plans, the consideration, timing and costs of an SSP plant, demand for SSP, the results of our studies of an SSP plant and opportunities regarding potential NaCl sales, the results of the PEA, expectations regarding production and cost guidance, references to Mineral Resource estimates, future growth, potential expansion, exploration activities, construction and operation of new facilities, developing deposits, future work related to the Company's potash/brine project at Bayovar; the expansion of exploration and economic assessment activities of the Company's phosphate deposits. Forward-looking information is not based on historical facts but rather is based on expectations. The words "anticipate", "contemplating", "develop", "estimate", "expect", "exploration", "flexibility", "focus", "future", "model", "option", "pending", "plan", "potential" and "priorities", and statements that certain actions, events or results will affect, or will occur or result, and similar such expressions, identify forward-looking information. Forward-looking information is necessarily based upon a number of assumptions that, while considered reasonable by the Company as of the date of such statements, are inherently subject to significant uncertainties and contingencies. Such forward-looking information reflects management's current beliefs and assumptions and is based on information currently available to GrowMax
Resources' management. Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, including but not limited to, risks associated with the natural resources industry; the uncertainty of Mineral Resource estimates; the uncertainty of geological interpretations; the uncertainty of estimates and projections in relation to costs; the risk of commodity price and foreign exchange rate fluctuations and other risks identified our filings with the securities regulators in Canada, including but not limited to those cautionary statements made under the headings "Business Risk Factors" and "Forward Looking Information" in our management's discussion and analysis for the year ended December 31, 2015 and under the heading "Forward Looking Information" in our interim MD&A – quarterly highlights for the period ended June 30, 2016. These factors are not intended to represent a complete list of the factors that could affect the Company. All forward-looking information contained in this press release are expressly qualified by this cautionary statement. This forward-looking information is made as of the date hereof and the Company assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law. Because of the risks, uncertainties and assumptions inherent in forward-looking information, prospective investors in the Company's securities should not place undue reliance on this forward-looking information.

NI 43-101 Qualified Person

The information in this press release regarding the Company's phosphate Mineral Resources was based on information contained in the PEA, which was prepared by or under the supervision of Jerry DeWolfe, MSc. P.Geo, an independent Qualified Person as defined under NI 43-101.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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