Financing for Congo potash project eyed for 3Q

Toronto-Developers of a proposed potash project in The Republic of Congo hope to close on financing in the third quarter of 2008, with construction to commence thereafter. Toronto-based MagIndustries Inc. reports the receipt of a final feasibility study for the development of the Kouilou Potash Mine near Pointe-Noire, Republic of Congo. MagMinerals intends to build, own, and operate a stand-alone 600,000 mt/y potash mine and plant, 16 kilometers east of the Atlantic port city of Pointe-Noire, West Africa’s best deep-water port. The capital cost of the project has been estimated at US$723 million excluding financing costs, for an operation producing granular K60 grade potash. Direct and indirect operating costs, with contingency, are estimated to be $83/mt FOB Pointe-Noire. BNP Paribas, financial advisors to MagMinerals, completed the financial analysis. Based on a net realized potash price of approximately US$500/mt the first phase of the project yields an IRR of 26 percent and an NPV of US$450 million (assuming a 12 percent discount rate). The Government of Congo will retain a 10 percent free carried interest in the Kouilou Potash Mine. BNP Paribas has approached a group of international lenders who have given a strong expression of interest to debt-finance 70 percent of the project costs to bring the Kouilou Potash Project into production. MagMinerals intends to provide the required 30 percent equity. It is MagIndustries’ intent to double the first-phase capacity as soon as possible to reach total production of 1,200,000 mt/y to more fully utilize the extensive resource base available. The capital cost required to double the capacity of the plant is expected to be significantly lower than the first phase, as it will benefit from the extensive infrastructure put in place during the first-phase building. Ameropa AG has been selected to market all potash exports from the project.