Arianne Phosphate’s $1.7bn Quebec project to be major supplier

Arianne Phosphate (TSXV: DAN) says its $1.7 billion Lac à Paul purified phosphoric acid (PPA) project could be the largest producer of the fertilizer and battery ingredient outside of China, according to a new prefeasibility study.

Lac à Paul in the Saguenay-Lac-Saint-Jean region about 450 km north of Quebec City has a projected annual production capacity of 350,000 tonnes of phosphorus pentoxide (P₂O₅), Arianne said on Thursday. The company told The Northern Miner by email it wasn’t publishing after-tax figures, only pre-tax, which came in with a net present value of $4.5 billion at an 8% discount rate. The pre-tax internal rate of return is 32.8% with a payback of roughly three years.

“The advent and growth of the lithium iron phosphate (LFP) battery provides extremely compelling economics,” Ariane president Brian Ostroff said in a release. “The study also demonstrates the opportunity for our Lac à Paul mine to have a local customer.”

PPA is a crucial agricultural commodity for enhancing crop yields and meeting global food demand. North and South America, Western Europe and parts of Asia face shortfalls and rely on imports to satisfy growing demand. While about 85% of phosphate is currently used in fertilizers, emerging technologies like LFP batteries are driving additional demand. Canada added phosphorous to its critical minerals list this month.

Sales revenue

The project’s $1.7 billion construction forecast includes a contingency of about $240 million. Operating costs are estimated at $1,195 per tonne. The company expects annual sales of $1.1 billion. That’s from 350,000 tonnes of PPA priced at $2,300 per tonne, 220,000 tonnes of secondary acid at $1,200 per tonne, and three million tonnes of byproduct gypsum at $10 per tonne. Surplus electricity generated could be sold to the grid, although this revenue isn’t factored into the project’s financial model.

Industry analysts predict a significant PPA shortage by the end of the decade due to increased demand from both traditional food additives and the surging LFP battery sector. Arianne’s facility would also produce 220,000 tonnes annually of secondary phosphoric acid used in specialty fertilizers and animal feeds. This market segment is also facing constraints as current producers limit output due to operational challenges, Arianne said.

Regional benefits

The company expects to create 1,000 jobs and contribute $12 billion in economic benefits to the region. The Lac à Paul project boasts a resource base capable of supporting production for over 50 years. It has proven and probable reserves of 472.1 million tonnes grading 6.88% P₂O₅, along with 702.7 million measured and indicated tonnes at 7.16% P₂O₅ and 26 million inferred tonnes at 6.58% P₂O₅.

Shares in Arianne Phosphate closed 14% higher on Friday in Toronto at C$0.28 apiece, valuing the company at C$58 million. The stock has traded in a 52-week range of C$0.18 to C$0.31.

“The opportunity is here for the Saguenay to become a major player in the essential phosphoric acid industry,” Arianne COO Raphael Gaudreault said in the release. “The project checks so many boxes; security of supply, easy logistical access to a critical mineral, minimal operational challenge and very impressive economics.”