Kropz impairs its delayed SA phosphate project by $49m
Kropz, in which Patrice Motsepe’s ARC is the controlling partner, again delays its phosphate project as test work reveals processing difficulties
Kropz, a company intending to build a phosphate mine in SA’s Western Cape, has run into difficulties at its Elandsfontein project, resulting in it impairing the asset by $49m or R717m.
SA billionaire Patrice Motsepe’s African Rainbow Capital (ARC) holds 47% of Kropz and its directors “consider ARC to be the ultimate controlling party of the company”, according to its 2018 annual report.
Kropz, which is traded on London’s Alternative Investment Market (AIM), said test work done by SA’s state-owned minerals research company Mintek and US-based Eriez had “confirmed the Elandsfontein ore body to be complex with regards to particle size distribution and grade variability”.
Kropz has already delayed the project once, resulting in a cost of $20m at the partially built mine, which is inland from the west coast port of Saldanha. The company said it was unable to give an update on the costs related to the latest delay and revised scheme to bring the phosphate mine to account. The mine has already absorbed $100m, or R1.46bn at the prevailing exchange rate.
The consequence of this delay is the decision to impair Elandsfontein by $49m, which Yuen Low, an analyst with Shore Capital, said was about half the carrying value of the asset by the end of 2018. “Unfortunately, it appears that the recommissioning of the 74%-owned Elandsfontein phosphate operation in SA will likely cost more and take longer than previously guided.”
The mine was originally scheduled to start in the second half of 2019, which was pushed back to the final quarter of 2020, which triggered the $20m of extra expenses towards working capital, debt repayments and capital expenditure.
Kropz CEO Ian Harebottle, who has a long history of mining gemstones, such as tanzanite and emeralds, has said the company could be listed in Johannesburg once Elandsfontein is brought into production.
The revised test work will now run until the end of 2019. Kropz did not give an update on when the mine will be brought into production. Kropz listed on AIM in November 2018, raising $35m, which it earmarked primarily for the development of Elandsfontein.
In June 2019, Kropz asked Mintek and Eriez to do the test work on Elandsfontein ore and how to process it.
“The provisional conclusion from the test work is that a reverse flotation modification to the current circuit will produce saleable product, but at lower grade than originally targeted by the company,” Kropz said on Thursday.
“Therefore, and as a direct consequence of the prevailing depressed phosphate rock prices, an alternative process modification is being considered to deliver the required process efficiencies at viable economic returns,” it said. “This will result in a consequential delay to the time required to bring Elandsfontein into production.”
Kropz will release its interim results before the end of September.