PhosCan Chemical Corp.
TSX VENTURE : FOS

PhosCan Chemical Corp.

June 25, 2008 09:00 ET

PhosCan Chemical Announces Results for Quarter Ended April 30, 2008

TORONTO, ONTARIO--(Marketwire - June 25, 2008) -

(All dollar amounts are expressed in Canadian currency unless otherwise noted.)

PhosCan Chemical Corp. (TSX VENTURE:FOS) announces its financial and operating results for the quarter ended April 30, 2008.

Highlights for the quarter include:

- Martison Project now wholly-owned following the acquisition of Baltic Resources Inc.

- Continued advancement of the Martison Phosphate Project with the commencement of a Bankable Feasibility Study during the 2008 winter field program

- James Gowans, President of De Beers Canada Inc., and former Baltic directors Donald McKinnon, Chris Hodgson and Gordon McKinnon elected to the Board of Directors

- James Pringle appointed as Vice President, Finance and CFO

Subsequent to April 30, 2008, PhosCan announced the following developments:

- Private placement of 29 million common shares at $1.90 per common share completed to raise gross proceeds of $55.1 million

- Preliminary Feasibility Study on the Martison Project completed and an N.I. 43-101 compliant technical report filed

Financial Results

PhosCan reported a net loss for the three months ended April 30, 2008 of $1,367,989 compared to a net loss for the same period during the previous year of $74,361. The increase in net loss of $1,293,628 was primarily due to a $1,101,165 increase in stock option compensation expense. General and administrative and management and professional fee expenses were also higher during the current quarter reflecting increased levels of corporate and Martison Project development activity.

Stock option compensation expense was $1,101,165 higher during the three months ended April 30, 2008 compared to the same period during the previous year primarily as a result of the issue of 1,120,000 stock options in exchange for stock options previously granted by Baltic, all of which vested immediately, and the grant of 2,890,000 stock options to new and existing directors, officers and employees of the Company, a portion of which vested during the period. PhosCan did not record any stock option compensation expense during the same period of the previous year as the Company did not issue any stock options during the period and none vested.

Cash and cash equivalents decreased by $2,689,017 during the current period. At April 30, 2008, PhosCan had working capital of $27,460,606 versus $31,642,631 at January 31, 2008. The decreases were primarily a result of development expenditures on the Martison Project during the three months ended April 30, 2008.

Capitalized expenditures on the Martison Project were $77,301,383 at April 30, 2008, an increase of $72,571,062 from January 31, 2008. The increase is primarily due to the acquisition of the remaining 50% interest in the Martison Project. The pre-tax fair value of the 50% interest in the Martison Project acquired by PhosCan was $70,381,415.

A future income tax liability of $18,606,637 was recorded on the acquisition of the remaining 50% interest in the Martison Project as a result of the fair value of Baltic's 50% interest in the Martison Project being greater than the carry-forward tax value. This has been recorded as a non-current liability on the Company's balance sheet as at April 30, 2008.

PhosCan had no long-term debt at April 30, 2008 and has met all of its financial obligations. The Company expects that existing working capital together with the net proceeds of the private placement completed on June 17, 2008 will be sufficient to complete a Bankable Feasibility Study on the Martison Project and certain critical path activities related to the development of the Martison Project. The Bankable Feasibility Study commenced during the winter of 2008 with an extensive field program and is expected to be complete in 2010, at which time (assuming that the results of the study are positive) the Company would begin construction of the Martison Project. The Company will be required to raise a significant amount of additional funds to construct the Martison Project and will investigate various financing options.

Operating Results

During and subsequent to the quarter ended April 30, 2008, management and the Board of PhosCan continued to strengthen and better position the Company for the development of the Martison Project. PhosCan completed the Preliminary Feasibility Study and commenced the Bankable Feasibility Study; the Company completed a private placement financing to raise gross proceeds of $55,100,000; PhosCan acquired Baltic such that the Company now owns 100% of the Martison Project; James Gowans, President and CEO of DeBeers Canada Inc., was appointed to the Board of Directors and, following the merger with Baltic, former directors of Baltic Donald McKinnon, Gordon McKinnon and Chris Hodgson also joined the Board; and the Company appointed James Pringle as Vice President, Finance and CFO.

On May 28, 2008, PhosCan received the results of a Preliminary Feasibility Study on the Martison Project. The Preliminary Feasibility Study included: a comprehensive review of information and studies on the Martison Project generated over 25 years, including 16,284 meters of drilling over seven drilling programs, extensive metallurgical testing, and environmental and geotechnical studies; an assessment of mineral resources; tests producing phosphate concentrate, phosphoric acid and the two fertilizer products contemplated for the market place; marketing and logistics studies; engineering studies of vertically-integrated high-analysis fertilizer production facilities, including the preparation of capital and operating costs (in fourth quarter 2007 U.S. dollars); and the preparation of a technical report.

Based on an estimated measured and indicated mineral resource of 62.3 million in-situ tonnes averaging 23.55% P2O5, the Preliminary Feasibility Study estimated annual phosphate ore) production of about 2.5 million dry tonnes over a 20 year mine life. Two scenarios for the development of the Martison Project were evaluated and the key parameters are provided in the following table:



------------------------------------------------------------------------
Scenario A Scenario B
------------------------------------------------------------------------
Production (tonnes per year):
Superphosphoric acid (SPA) 150,000 P2O5 -
Mono-ammonium phosphate (MAP) 474,000 775,000
Initial capital costs (million) (1)(2) US$893 US$1,017
Life-of-project capital costs (million) (3) US$1,103 US$1,248
Life-of-project annual operating cost:
SPA (per tonne of P2O5) US$334 -
MAP (per tonne) US$288 US$253
------------------------------------------------------------------------
(1) Includes working capital
(2) Excludes estimate of $28.9 million to complete a Bankable Feasibility
Study
(3) Includes initial capital, sustaining capital and reclamation and closure
costs


Constant SPA and MAP product prices of US$1,000 per tonne (P)2(O)5 (and US$650 per tonne,) respectively, were used to evaluate the economics of the Martison Project. Under these prices, which are approximately 33% and 46% less than April 2008 prices for SPA and MAP, the Preliminary Feasibility Study estimated the internal rates of return, net present values and average annual EBITDA's of the Martison Project to be as follows:



------------------------------------------------------------------------
Scenario A Scenario B
------------------------------------------------------------------------
IRR (1) 20.6% 20.9%
Net present value (million): (1)
0% discount rate US$2,817 US$3,479
10% discount rate US$608 US$752
EBITDA (million) (1) US$265 US$318
------------------------------------------------------------------------
(1) 100% equity basis


In addition to the measured and indicated mineral resource of the Martison Phosphate Deposit, there are an additional estimated 55.7 million in-situ tonnes of inferred mineral resources averaging 21.87% P2O5. The inferred mineral resources have the potential, if confirmed, to) significantly extend the life of the project.

Jacobs Engineering Inc., the independent consulting firm which compiled the Preliminary Feasibility Study, concluded that given the results of the study, including robust financial results from an economic analysis of the project, PhosCan should proceed immediately with the Bankable Feasibility Study of the Martison Project.

The Preliminary Feasibility Study is summarized in an N.I. 43-101 compliant technical report entitled "Martison Phosphate Project Preliminary Feasibility Study" dated May 16, 2008, which is available on SEDAR (www.sedar.com) and on PhosCan's website at www.phoscan.ca.

On June 17, 2008, the Company closed a private placement of 29,000,000 common shares at a price of $1.90 per share to raise gross proceeds of $55,100,000. The Company paid a cash fee to the underwriters equal to 5% of the gross proceeds of the offering. In addition, the underwriters received 725,000 non-transferable compensation warrants, each of which is exercisable for one common share at a price of $1.90 per common share until June 17, 2009. The proceeds from the offering will be used for advancement of the Martison Project, working capital and general corporate purposes.

Outlook

Based on the results of the Preliminary Feasibility Study, PhosCan's Board of Directors approved an aggressive ramp-up in Bankable Feasibility Study work. During the winter 2008 field program, the following elements of the Bankable Feasibility Study were completed: a geotechnical program on the proposed mine pit and infrastructure areas; collection of a 40 tonne bulk sample for metallurgical testing and final beneficiation plant design; and a hydrogeological program examining water flows within the proposed mine pit area. The balance of the Bankable Feasibility Study will consist of environmental impact studies, an Impact and Benefit Agreement with local First Nations, detailed engineering, additional infill drilling and permitting, as well evaluations of opportunities to enhance the financial returns of the project. The Bankable Feasibility Study is expected to be complete in 2010.

Construction of the Martison Project is expected to commence upon completion of the Bankable Feasibility Study (assuming that the results of the study are positive) and is expected to be complete in 2012. Certain critical path items such as the construction of a permanent road and the ordering of long lead time equipment are expected to be undertaken in advance of the Bankable Feasibility Study being complete.

About PhosCan

PhosCan is engaged in the development of the Martison Phosphate Project, which consists of the Martison Phosphate Deposit and a planned phosphate mine, beneficiation plant, phosphoric acid plant and solid fertilizer production facility. The Martison Deposit is located 70 kilometres north of Hearst, Ontario. If the Martison Project is successfully developed, phosphate ore from the mine will be processed into a concentrate in the beneficiation plant. The concentrate will be transported by slurry pipeline to a phosphoric acid plant near Hearst where it will be combined with sulphuric acid to produce phosphoric acid. Sulphuric acid is expected to be sourced either from existing nearby base metal smelters or a sulphuric acid plant which would be built by the Company. PhosCan will further process the phosphoric acid into superphosphoric acid (SPA) and/or mono-ammonium phosphate (MAP) fertilizer which will be sold to and further processed by fertilizer dealers serving the agricultural regions of western Canada and mid-western United States. The Company's proposed operations will be strategically located in proximity to these target markets with ready access to excellent infrastructure including rail, power and labour.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements with respect to the Martison Phosphate Project, and matters concerning the business, operations, strategy, and financial performance of PhosCan. These statements generally can be identified by use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe" or "continue" or the negative thereof or similar variations. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the estimates and projections regarding the Martison Project are realized. Forward-looking statements are based on a number of assumptions which may prove to be incorrect. Unless otherwise stated, all forward looking statements speak only as of the date of this press release and PhosCan does not undertake any obligation to update such statements except as required by law.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • PhosCan Chemical Corp.
    Stephen Case
    President & CEO
    (416) 972-9222
    or
    PhosCan Chemical Corp.
    James Pringle
    Vice President, Finance & CFO
    (416) 972-9222
    Website: www.phoscan.ca