Value Microcaps Food, Agriculture and Soft Commodities

[cartonet]

Mixed signals for Legend's phosphate project start

TONY RAGGATT

January 20th, 2010

THERE are mixed signals over a start date for Legend International Holdings' $2 billion phosphate project in North Queensland.

While analysts are bullish about the company's prospects after a recent upturn in world phosphate prices, there are suggestions the first shipment of phosphate rock from Townsville could be set back a year to 2011.

The first shipments had been proposed for late 2009 or early this year.

A company spokesman said yesterday there was no change to the company's timeframes since its latest release to the market late last year and there were no issues at present that would impact on meeting them.

However, workers at Townsville port have been told of possible delays until 2011.

The United States-listed company is proposing to export up to five million tonnes a year of phosphate ore and beneficiated phosphate rock produced from mines in the Mount Isa region's Georgina Basin by 2012.

It also proposes to produce value-added fertiliser products and phosphoric acid by 2013.

In its latest advice, issued in November, the company says a phase 1 plan involves the shipping of 500,000 to 1 million tonnes a year of phosphate ore in 2010.

* TOWNSVILLE A `DIAMOND' PORT
* PHOSPHATE MINE BID

It says it is designing a new outer berth 12 at Townsville Port to handle Panamax class vessels with a throughput capacity of 7.5 million tonnes per annum and an integrated material handling system including rail unloader, bulk storage facility, ship loader and conveyors.

Last month, State Transport Minister Rachel Nolan announced the Government had committed $102 million over the next two years to improve efficiency and increase capacity for future demand on the Mount Isa to Townsville rail line. However industry sources suggest that work is subject to customer demand. In a research analysis, Toronto-based analyst Joel Jackson of BMO Capital Markets says improving phosphate fundamentals, a commitment by the Queensland Government to invest in the needed rail infrastructure and the potential for 'considerable near-term catalysts' provides an attractive entry point for Legend's mid-2010 launch.

He says recent phosphate rock price increases from $90 to $110 a tonne are near Legend's required break-even thresholds and raises the opportunity for profitable sales of ore in mid-2010 if the company can get its permitting, mine and dry beneficiation operation in place.

''Our development scenario has assumed rail capacity on the key Mount Isa to Townsville rail line would be brought on to eventually support a 4 million tonne operation for LGDI (Legend) by 2020,'' Mr Jackson said.

''Until December, there was some apprehension that the Queensland Government would show definitive support with financial commitments for upgrading the rail line.

''With the December announcement that the Queensland Government will spend roughly $100 million upgrading the Mount Isa to Townsville rail line, a key infrastructure concern for LGDI's prospects, we have increased confidence suitable rail capacity will be in place for LGDI to support up to two million tonnes of product by 2015, and increased confidence that the Government might also support future rail upgrades to further boost the available capacity on the line,'' he said.

http://www.townsvillebulletin.com.au/article/2010/01/20/108245_business.html