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Great quest-tilemsi-phosphate-project-pea-(06 feb13)

  1. 1. 2012 Prepared for Great Quest Metals Ltd. TILEMSI PHOSPHATE PROJECT MALIPRELIMINARY ECONOMIC ASSESSMENT Effective Date: December 20, 2012 Qualified Person: Jed Diner M.Sc., P.Geol.
  2. 2. COMPILED BY:Roy Movsowitz, Gaya Resources Development Ltd. – Project ManagerM.Sc., B.Sc. Chemical Engineering, B.Com. – Registered Professional Engineer, Israel (37938)CONTRIBUTIONS BY:GEOLOGYJed Diner, Principal Consultant – Resource Geology– Independent Qualified PersonM.Sc., P.Geol. – Registered Association of Professional Geoscientists of Ontario (registration. Nr.1560)MININGKathleen Body, Coffey Mining – Principal Consultant – Resource GeologyB.Sc. (Geology), GDE (Mining), Pr.Sci.Nat.Steven Rupprecht, Coffey Mining – Principal Mining EngineerB.Sc. (Mining Engineering), PhD (Mech. Engineering), Pr. Eng., FSAIMMGRANULATION/NPK BLENDINGJulien Cryspen, CFIh – Chemical EngineerEcole Nationale Supérieure Des Industries Chimiques (Ensic), France Process and ChemicalEngineer, University Of Twente, Enschede, NetherlandsDEA in Chemical Engineering, Institut d’Administration des Entreprises (IAE), Paris 1, La Sorbonne,FranceMBA in Company Administration, IAE – Institut d’Administration des Entreprises (Paris X), France(completed 2005)BENEFICIATIONChristopher Stinton, GBM – Minerals EngineerB.Sc. (Hons) Minerals Engineering Birmingham UniversityChartered Engineer – Member of the Institution of Materials, Metals and MiningColin Powers, GBM – Mechanical EngineerBachelor of Mechanical Engineering (Hons)MIEAust – Chartered Professional Engineer of Engineers Australia (2742841)MARKETINGBalu Bumb, Policy and Trade Specialist, BLB Associates, Florence, Alabama, USA – MarketingPhD Economics (University of Maryland, USA), MA Economics University of Udaipur (India), andB.Com. University of Rajahsthan (India)Uzo Mokwunye, Development Strategy Consultant – MarketingB.Sc. Agronomy and M.Sc. in Soil Chemistry from Ohio State University (USA) and PhD in SoilChemistry from the University of Illinois (USA)Member of the Soil Science Society of America and American Society of Agronomy Tilemsi Phosphate Project – PEA Page | ii
  3. 3. Tilemsi Phosphate Project – PEA Page | iii
  4. 4. TABLE OF CONTENTS1 SUMMARY ........................................................................................................................................................... 1 1.1 PURPOSE .......................................................................................................................................... 1 1.2 THE TILEMSI PHOSPHATE PROJECT ......................................................................................................... 1 1.3 GEOLOGY AND MINERALIZATION ........................................................................................................... 2 1.4 MINING ............................................................................................................................................ 3 1.5 BENEFICIATION................................................................................................................................... 3 1.6 GRANULATION ................................................................................................................................... 4 1.7 NPK BLENDING .................................................................................................................................. 4 1.8 PROJECT INFRASTRUCTURE ................................................................................................................... 4 1.9 MARKETING ...................................................................................................................................... 5 1.10 LOGISTICS ......................................................................................................................................... 5 1.11 FERTILIZER PRICES............................................................................................................................... 6 1.12 ECONOMICS ...................................................................................................................................... 6 1.13 MAJOR CONCLUSIONS AND RECOMMENDATIONS ..................................................................................... 72 INTRODUCTION .................................................................................................................................................... 93 RELIANCE ON OTHER EXPERTS ........................................................................................................................... 144 PROPERTY DESCRIPTION AND LOCATION ........................................................................................................... 15 4.1 THE TILEMSI LICENSE ......................................................................................................................... 16 4.2 THE TARKINT EST LICENSE .................................................................................................................. 16 4.3 THE ADERFOUL LICENSE ..................................................................................................................... 165 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ..................................... 176 HISTORY ............................................................................................................................................................. 187 GEOLOGICAL SETTING AND MINERALIZATION.................................................................................................... 198 DEPOSIT TYPE ..................................................................................................................................................... 209 EXPLORATION .................................................................................................................................................... 2110 DRILLING ............................................................................................................................................................ 2211 SAMPLE PREPARATION, ANALYSES, AND SECURITY ........................................................................................... 2412 DATA VERIFICATION ........................................................................................................................................... 2513 MINERAL PROCESSING AND METALLURGICAL TESTING...................................................................................... 27 13.1 INTRODUCTION ................................................................................................................................ 27 13.2 PROCESS SUMMARY .......................................................................................................................... 27 13.3 OVERALL EXPECTED RECOVERIES ......................................................................................................... 27 13.4 MINERALOGY................................................................................................................................... 29 13.5 ASSAY BY SIZE ANALYSIS .................................................................................................................... 31 13.6 FINES REMOVAL BY SCREENING ........................................................................................................... 34 13.7 DRY MAGNETIC SEPARATION OF BLENDED COMPOSITE SAMPLE ................................................................ 35 13.8 GRANULATION TEST WORK ................................................................................................................ 36 Granulation Test on Blended Composite Sample ................................................................................ 36 Solubility Test on -4 mm +1 mm and -1 mm Granules ....................................................................... 37 13.9 FUTURE TEST WORK ......................................................................................................................... 3814 MINERAL RESOURCE ESTIMATE .......................................................................................................................... 39 Additional Potential ............................................................................................................................ 4015 MINERAL RESERVE ESTIMATES ........................................................................................................................... 4116 MINING METHODS ............................................................................................................................................. 42 16.1 INTRODUCTION ................................................................................................................................ 42 Tilemsi Phosphate Project – PEA Page | iv
  5. 5. 16.2 GEOHYDROLOGY AND DEWATERING ..................................................................................................... 42 16.3 GEOTECHNICAL ................................................................................................................................ 42 16.4 MINING METHOD AND EQUIPMENT SELECTION ...................................................................................... 42 16.5 DRILL AND BLAST .............................................................................................................................. 43 16.6 LOAD AND HAUL .............................................................................................................................. 43 16.7 MINING EQUIPMENT UTILIZATION AND PRODUCTIVITY ............................................................................ 43 16.8 PRODUCTION PROFILE ....................................................................................................................... 4717 RECOVERY METHODS ......................................................................................................................................... 50 17.1 MINERAL PROCESSING (BENEFICIATION) ............................................................................................... 50 Process Overview ................................................................................................................................ 50 Material Handling ............................................................................................................................... 52 Coarse Classification ........................................................................................................................... 52 Hydraulic Classification ....................................................................................................................... 52 Attrition and Classification ................................................................................................................. 53 Milling and Classification .................................................................................................................... 53 Magnetic Separation .......................................................................................................................... 53 Concentrate Dewatering ..................................................................................................................... 53 Filtration and Drying ........................................................................................................................... 53 Tailings Management ......................................................................................................................... 54 Reagents ............................................................................................................................................. 54 Industrial Operations .......................................................................................................................... 54 17.2 GRANULATION PLANT........................................................................................................................ 56 Design Criteria .................................................................................................................................... 56 Process Description ............................................................................................................................. 57 Plant Performance ............................................................................................................................. 59 Product Quality ................................................................................................................................... 60 Raw material consumptions ............................................................................................................... 60 Utilities ................................................................................................................................................ 60 Industrial Operation .......................................................................................................................... 60 17.3 NPK PLANTS ................................................................................................................................... 60 Design Criteria .................................................................................................................................... 60 Process Description ............................................................................................................................. 61 Description (see flowsheet in Appendix D) .......................................................................................... 61 17.4 NPK PLANT PERFORMANCE................................................................................................................ 62 Process ................................................................................................................................................ 6218 PROJECT INFRASTRUCTURE ................................................................................................................................ 64 18.1 MINE ............................................................................................................................................. 64 Coffey Mining reviewed the infrastructure required at the Tilemsi mine site and the beneficiation plant in Bourem. .............................................................................................................................................. 64 Mine Workshop................................................................................................................................... 64 Haul Road Construction ...................................................................................................................... 64 Explosive Storage ................................................................................................................................ 64 Off-Mine Transportation ..................................................................................................................... 64 Light Vehicles ...................................................................................................................................... 64 Software and Hardware ...................................................................................................................... 64 Consumables First Fill ......................................................................................................................... 65 Diesel Generator and Diesel Storage .................................................................................................. 65 Mining Village ..................................................................................................................................... 65 18.2 BENEFICIATION AND GRANULATION PLANTS – BOUREM ........................................................................... 66 Site Access ........................................................................................................................................... 66 Power .................................................................................................................................................. 66 Water .................................................................................................................................................. 67 Sewage Treatment .............................................................................................................................. 67 Reverse Osmosis Plant ........................................................................................................................ 67 Plant and Instrument Air ..................................................................................................................... 68 Tilemsi Phosphate Project – PEA Page | v
  6. 6. Fuel ..................................................................................................................................................... 68 Communication ................................................................................................................................... 68 Warehouse and Workshop ................................................................................................................. 68 Laboratory .......................................................................................................................................... 69 Administration Office .......................................................................................................................... 69 Security Building ................................................................................................................................. 69 Emergency Services Building ............................................................................................................... 69 Accommodation Village ...................................................................................................................... 69 Community Development ................................................................................................................... 70 Tailings Storage Facility ...................................................................................................................... 70 TSF Configuration ................................................................................................................................ 71 18.3 LOGISTICS .................................................................................................................................... 73 Technical Issues................................................................................................................................... 74 Selected Equipment ............................................................................................................................ 74 Mining Haulage Manning ................................................................................................................... 7519 MARKET STUDIES AND CONTRACTS ................................................................................................................... 76 19.1 BACKGROUND .................................................................................................................................. 76 19.2 OBJECTIVES OF THE MARKET STUDY ..................................................................................................... 78 19.3 AGRICULTURAL BACKGROUND............................................................................................................. 78 Area, Production, and Yield................................................................................................................. 78 Main Crops Grown in West Africa ....................................................................................................... 81 Main Fertilizer Products Used on Crops .............................................................................................. 82 19.4 FERTILIZER MARKETS: STRUCTURE, PERFORMANCE, AND PLAYERS ............................................................. 83 Trends in fertilizer Use ........................................................................................................................ 83 Structure and Players .......................................................................................................................... 85 Fertilizer Product Use by Country ........................................................................................................ 89 Fertilizer Pricing .................................................................................................................................. 90 Phosphate Rock Price .......................................................................................................................... 93 19.5 AGRONOMIC ISSUES .......................................................................................................................... 96 Agronomic Potential of Tilemsi Phosphate Rock (TPR) ....................................................................... 96 Internal factors: .................................................................................................................................. 97 Soil Properties: .................................................................................................................................... 98 Climate Factors: .................................................................................................................................. 99 Effects of Plant: ................................................................................................................................... 99 Management Practices: ...................................................................................................................... 99 What happens to the P from PR after it has been released to the soil? ........................................... 100 19.6 DEMAND PROJECTIONS.................................................................................................................... 105 Effective Demand .............................................................................................................................. 106 Potential Demand under Abuja Declaration ..................................................................................... 107 Nutrient Replenishment Requirements ............................................................................................. 107 Agronomic Requirements ................................................................................................................. 108 19.7 PRODUCT DEMAND......................................................................................................................... 108 19.8 INTERNATIONAL EXPERIENCES ........................................................................................................... 108 19.9 OPPORTUNITIES AND CHALLENGES ..................................................................................................... 109 Opportunities .................................................................................................................................... 109 Challenges: ........................................................................................................................................ 111 19.10 THE WAY FORWARD ....................................................................................................................... 112 GQ Market Share in P2O5 Demand .................................................................................................... 112 Marketing Domains .......................................................................................................................... 112 Marketing Strategy ........................................................................................................................... 113 Phasing of Marketing and Production Plans ..................................................................................... 11320 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT ........................................... 11521 CAPITAL AND OPERATING COSTS ..................................................................................................................... 116 21.1 MINE ........................................................................................................................................... 116 Operating Costs ................................................................................................................................ 116 Tilemsi Phosphate Project – PEA Page | vi
  7. 7. Capital Expenditure ........................................................................................................................... 120 21.2 BENEFICIATION PLANT ..................................................................................................................... 122 Basis of Cost Estimate ....................................................................................................................... 122 Design Basis ...................................................................................................................................... 122 Project Basis ...................................................................................................................................... 122 Methodology..................................................................................................................................... 124 Estimate Classification ...................................................................................................................... 124 Assumptions ...................................................................................................................................... 124 Currency and Exchange Rates ........................................................................................................... 124 Base Date and Reporting Currency ................................................................................................... 124 Exceptions ......................................................................................................................................... 125 Inclusions .......................................................................................................................................... 125 Exclusions .......................................................................................................................................... 125 Risks and Opportunities .................................................................................................................... 126 Management Reserve ....................................................................................................................... 126 Estimate Quality Assurance .............................................................................................................. 126 Contingency ...................................................................................................................................... 126 21.2.1 CAPITAL COST DEVELOPMENT ........................................................................................................... 126 Direct Cost Development .................................................................................................................. 127 Sustaining Capital ............................................................................................................................. 128 Indirect Cost Development ................................................................................................................ 129 21.2.2 OPERATING COST DEVELOPMENT ...................................................................................................... 129 Reagent Consumption....................................................................................................................... 129 Operating Personnel ......................................................................................................................... 130 General Administration ..................................................................................................................... 130 Site Road Maintenance ..................................................................................................................... 131 Electricity .......................................................................................................................................... 131 Utilities .............................................................................................................................................. 132 Operating Spares, Lubricants, and Wear Items ................................................................................ 132 21.2.3 COSTING REPORT ........................................................................................................................... 132 Capital Cost Estimate ........................................................................................................................ 132 Operating Cost Estimate ................................................................................................................... 139 21.3 GRANULATION PLANT...................................................................................................................... 142 OPEX ................................................................................................................................................. 142 21.4 CAPEX ........................................................................................................................................ 143 21.5 NPK PLANTS ................................................................................................................................. 146 OPEX ................................................................................................................................................. 146 CAPEX ................................................................................................................................................ 147 21.6 LOGISTICS OPEX ............................................................................................................................ 15022 ECONOMIC ANALYSIS ....................................................................................................................................... 151 22.1 GENERAL ...................................................................................................................................... 151 22.2 USE OF FUNDS ............................................................................................................................... 152 Capital Costs ..................................................................................................................................... 153 Financing Terms, Conditions, & Costs ............................................................................................... 153 22.3 SOURCE OF FUNDS .......................................................................................................................... 154 Equity ................................................................................................................................................ 154 Debt During Construction Phase ....................................................................................................... 154 22.4 ECONOMIC MODEL ASSUMPTIONS..................................................................................................... 155 Key Dates .......................................................................................................................................... 155 Production......................................................................................................................................... 155 Revenues ........................................................................................................................................... 156 Operating Costs ................................................................................................................................ 157 General and Administration .............................................................................................................. 157 Income Tax, Royalties, and other Taxes ............................................................................................ 158 Other Assumptions............................................................................................................................ 158 22.5 PROJECT PRO-FORMA PROFIT & LOSS ................................................................................................ 158 Tilemsi Phosphate Project – PEA Page | vii
  8. 8. 22.6 CASH FLOW ................................................................................................................................... 161 22.7 ECONOMIC RESULTS........................................................................................................................ 163 22.8 SENSITIVITY ................................................................................................................................... 163 Equity Sensitivity Analysis ................................................................................................................. 164 Project Sensitivity Analysis ................................................................................................................ 167 22.9 ECONOMIC CONCLUSIONS ................................................................................................................ 17023 ADJACENT PROPERTIES .................................................................................................................................... 17124 OTHER RELEVANT DATA AND INFORMATION ................................................................................................... 17225 INTERPRETATION AND CONCLUSIONS.............................................................................................................. 173 25.1 RESOURCE ESTIMATE....................................................................................................................... 173 25.2 MARKET ....................................................................................................................................... 173 Socio-economic Context and Resource Endowment ......................................................................... 173 West Africa Phosphate Fertilizer Market: Structure and Potential ................................................... 174 25.3 PROCESS PLANTS ............................................................................................................................ 17526 RECOMMENDATIONS ....................................................................................................................................... 176 26.1 RESOURCE ESTIMATE....................................................................................................................... 176 26.2 MARKET ....................................................................................................................................... 176 Strategy for Market Penetration and Development ......................................................................... 176 Phasing of Investment and Marketing Plans .................................................................................... 177 26.3 PROCESS PLANTS ............................................................................................................................ 177 26.4 ENVIRONMENTAL ........................................................................................................................... 17727 REFERENCES ..................................................................................................................................................... 178 27.1 GEOLOGY ...................................................................................................................................... 178 27.2 MARKET ....................................................................................................................................... 178 27.3 MINERAL PROCESSING AND METALLURGICAL TESTING ........................................................................... 180APPENDIX A - DATE AND SIGNATURES ...................................................................................................................... 183APPENDIX B - BENEFICIATION FLOWSHEET ............................................................................................................... 190APPENDIX C - GRANULATION FLOWSHEET ................................................................................................................ 191APPENDIX D - NPK FLOWSHEET ................................................................................................................................ 192 Tilemsi Phosphate Project – PEA Page | viii
  9. 9. LIST OF ABBREVIATIONS Abbreviation Description AAS atomic absorption spectroscopy ADT articulated dump truck Al2O3 aluminium (iii) oxide AN ammonium nitrate AS ammonium sulphate bcm billion cubic metres cc cotton complex Cd cadmium CaO calcium oxide CAPEX capital cost estimate CFIh CFI holding (France) CIF Cost Insurance and Freight CIM Canadian Institute of Mining, Metallurgy, and Petroleum DAP di-ammonium phosphate Engineering, Procurement, and Construction EPCM Management ERT emergency response team FAO Food and Agriculture Organization of the United Nations Fe2O3 iron (iii) oxide FOB Free on Board g gramme GBM GBM Mineral Engineering Consultancy Ltd. GQ Great Quest GQM Great Quest Metals Ltd. GTPR granulated Tilemsi phosphate rock HDPE high-density polyethylene HGP high-grade phosphate (P2O5 > 35%) HV high voltage ICP inductively coupled plasma IFDC International Fertilizer Development Center IRR internal rate of return ISE ion selective electrode Tilemsi Phosphate Project – PEA Page | ix
  10. 10. Abbreviation Description KCl potassium chloride (sylvite) km2 square kilometres kPa kilo Pascal kt/a kilo tonnes per annum kV kilovolts kW kilowatt kWh/t kilowatt hour per tonne LDV light duty vehicle LOI loss on ignition LOM life of mine LV low voltage m metre MAP mono-ammonium phosphate MgO magnesium oxide MGP medium-grade phosphate (P2O5 > 27%) mm millimetre MM Minjingu Mazao MMFL Minjingu Mines and Fertilizer Ltd. MOP muriate of potash MPR Minjingu phosphate rock Mt/a million tonnes per annum MVA mega-Volt ampere µm micron NAC neutral ammonium acetate NFPA National Fire Protection Authority NPV net present value OEM original equipment manufacturer OPEX operating cost estimate P phosphorus pa per annum PEA preliminary economic assessment P2O5 phosphorus oxide ppm parts per millionTilemsi Phosphate Project – PEA Page | x
  11. 11. Abbreviation Description PR phosphate rock PSD particle size distribution QA/QC Quality Assurance / Quality Control QP qualified person RAB rotary air blast RM raw material RO reverse osmosis ROI return on investment ROM run-of-mine SEM scanning electron microscope SiO2 silicon dioxide SSP single superphosphate TCOE total cost of employment t/h tonnes per hour TPP Tilemsi Phosphate Project TPR Tilemsi phosphate rock TSF tailings storage facility TSP triple superphosphate UEMOA Union économique et monétaire ouest-africaine USD United States dollar USD/t United States dollars per tonne VAC volts alternating current WHIMS wet high-intensity magnetic separator wt weight w/w weight by weight XRD X-ray diffraction XRF X-ray fluorescenceTilemsi Phosphate Project – PEA Page | xi
  12. 12. LIST OF FIGURESFigure 4-1: Map Showing Different Permits of the Tilemsi Phosphate Project on Topographic Map................................. 16Figure 6-1: Geological map of the TPP area (from Van Kauwenbergh et.al 1991) ............................................................. 18Figure 6-2: Geological cross section in the TPP area (from Van Kauwenbergh et.al 1991) ................................................ 18Figure 10-1: Overview of the TPP area, with drillholes as dots, resource polygons in magenta and blue, and the outlineof license areas for Tilemsi, Aderfoul and Tarkint Est. ........................................................................................................ 23Figure 16-1: Annual ROM Tonnage .................................................................................................................................... 48Figure 16-2: Annual Phosphate Grade ................................................................................................................................ 48Figure 16-3: Annual Strip Ratio ........................................................................................................................................... 49Figure 16-4: Annual Waste Tonnage .................................................................................................................................. 49Figure 17-1: Block Flow Diagram ........................................................................................................................................ 51Figure 17-2: Site Plan .......................................................................................................................................................... 52Figure 17-3: Personnel Schedule Beneficiation and Granulation ........................................................................................ 55Figure 18-1: TPP Logistics ................................................................................................................................................... 73Figure 18-2: Proposed Haulage Routes............................................................................................................................... 74Figure 19-1: Contribution of area and yield growth to cereal production in West Africa, 1980–2009............................... 80Figure 19-2: Contribution of area and yield growth to cassava production in West Africa, 1980–2009 ............................ 80Figure 19-3: Crop yields by major region (maize, rice, and cassava) .................................................................................. 81Figure 19-4: Total fertilizer (NPK) consumption trends in Sub-Saharan Africa, 1990-2008 ................................................ 83Figure 19-5: Performance of supply chain in Ghana ........................................................................................................... 85Figure 19-6: Performance of supply chain in Mali .............................................................................................................. 86Figure 19-7: Supply chain cost components by fertilizer products in select countries in 2009 (USD/metric tonne) .......... 91Figure 19-8: Supply chain cost components—domestic marketing costs (averaged across all four countries in thesample), (USD/metric tonne) in 2009 ................................................................................................................................. 91Figure 19-9: Fertilizer Prices (FOB, bulk) Monthly averages January 2000 – May 2012 ..................................................... 93Figure 19-10: PR prices, 1990-2011 .................................................................................................................................... 94Figure 19-11: UREA Prices and Price Projections (1960 – 2020) ......................................................................................... 95Figure 19-12: Schematic diagram of the behavior of PR in the soil .................................................................................... 97Figure 19-13: Effect of granulation on solubility of PR ..................................................................................................... 102Figure 21-1: Annual Mining Operating Cost ..................................................................................................................... 118Figure 21-2: Capital Expenditure ...................................................................................................................................... 120Figure 22-1: Factors with Greatest Influence on IRR ........................................................................................................ 163Figure 22-2: Effect of Oil Price on IRR ............................................................................................................................... 164Figure 22-3: Equity Cash Flow ........................................................................................................................................... 169LIST OF MAPSMap 2-1: Map showing the Tilemsi mine site, the Bourem beneficiation site, and four propsed NPK Blending Facilities . 10Map 4-1: Location of Tilemsi Phosphate Project, West Afica ............................................................................................. 15 Tilemsi Phosphate Project – PEA Page | xii
  13. 13. LIST OF TABLESTable 10-1: Number of drillholes and metres drilled .......................................................................................................... 22Table 12-1:Major oxides in drillholes/pit phosphates samples (% per wt) ......................................................................... 25Table 12-2: Trace elements in Tin Hina phosphates (ppm) ................................................................................................. 25Table 12-3: Comparison of Geochemistry of phosphate seams in Alfatchafa, Tin Hina and Tarkint Est (% per wt)........... 25Table 13-1: Summary of Wet and Dry Screening on Blended Composite ........................................................................... 28Table 13-2: Summary of Magnetic Separation Results ....................................................................................................... 29Table 13-3: Quantitative Mineralogical Analysis of Composite Sample ............................................................................. 30Table 13-4: Quantitative Mineralogical Analysis of Composite Sample ............................................................................. 31Table 13-5: Summary of Assay by Size of Low Grade Feed Head Samples ......................................................................... 32Table 13-6: Summary of Assay by Size of High Grade Feed Head Samples ........................................................................ 33Table 13-7: Results of Fines Removal by Screening ............................................................................................................ 35Table 13-8: Masses of Granules Produced after Curing ...................................................................................................... 36Table 13-9: Summary of Abrasion Strength on -4mm+1mm Granules Test Results ........................................................... 37Table 13-10: Summary of Solubility Results on Granules and Un-granulated Samples ...................................................... 38Table 14-1: Inferred Resources in Tarkint Est ..................................................................................................................... 39Table 14-2: Inferred Resources in Tin Hina ......................................................................................................................... 39Table 14-3: Inferred Resources, Alfatchafa ......................................................................................................................... 39Table 16-1: Tilemsi Phosphate Project Tilemsi “Pitable Tonnage” Based on Selected Mining Areas ................................. 42Table 16-2: Tilemsi Phosphate Project Mining Shifts and Annual Production Hours .......................................................... 44Table 16-3: Tilemsi Phosphate Project Excavator Productivity ........................................................................................... 45Table 16-4: Tilemsi Phosphate Project Excavator Productivity ........................................................................................... 46Table 16-5: Tilemsi Phosphate Project Equipment Replacement Schedule ........................................................................ 47Table 17-1: Phosphate rock specification ........................................................................................................................... 56Table 17-2: NPK Grades ...................................................................................................................................................... 62Table 17-3: NPK 15-15-15 ................................................................................................................................................... 63Table 18-1: Tilemsi Phosphate Project Software and Hardware Costs ............................................................................... 64Table 18-2: Plant Load Requirements Summary ................................................................................................................. 67Table 18-3: Haulage Manning (Road Train Type A) ............................................................................................................ 75Table 19-1: Population Projections (all variants) for West African Countries (2010-2050) ................................................ 77Table 19-2: West Africa _Total agricultural area; area harvested; and area under permanent crops ............................... 79Table 19-3: Average annual growth in cereal production in West Africa, 1980–2009 (%) ................................................. 79Table 19-4: Main Crops Grown in West Africa, 2010 .......................................................................................................... 82Table 19-5: West Africa Fertilizer Products Used on Various Crops .................................................................................... 82Table 19-6: West Africa: Fertilizer Consumption, 2010 (nutrient tonnes) .......................................................................... 83Table 19-7: West Africa: Main Fertilizer Products .............................................................................................................. 84Table 19-8: Cotton Complex Formula in West Africa .......................................................................................................... 84Table 19-9: Key actors and constraints in the fertilizer markets in West Africa ................................................................. 87Table 19-10: Installed Fertilizer Production Units in Nigeria .............................................................................................. 88Table 19-11: Major suppliers of fertilizer during 2008 and their market in Nigeria ........................................................... 89Table 19-12: Phosphate Fertilizer Imports in West Africa, 2010 ........................................................................................ 90Table 19-13: Monthly National Fertilizer Prices by Western African Countries (USD/tonne) ............................................. 92Table 19-14: Fertilizer Prices (Retail) in Mali, JUNE 2012 (FCFA per 50-kg bag)................................................................. 93Table 19-15: The Molar Ratio of Some West African PRs ................................................................................................... 98Table 19-16: NAC Solubility................................................................................................................................................. 98Table 19-17: Chemical Properties of Soils in Food Producing zones of Mali ..................................................................... 100Table 19-18: Response of TPR in Different Locations and on Different Crops (yield kg/ha) ............................................. 103Table 19-19: Compacted fertilizers made from TPR, KCl and Urea (1988) ....................................................................... 104Table 19-20: Evaluation of annual effects of compacted fertilizers made from phosphate rock (1988) .......................... 104Table 19-21: Effects of compaction .................................................................................................................................. 104Table 19-22: Evaluation of annual effects compacted fertilizer (1989) ............................................................................ 105Table 19-23: Agronomic effects of compacted materials ................................................................................................. 105Table 19-24: West Africa P2O5 Demand Projections to 2020 and 2030 ............................................................................ 106Table 19-25: Project Demand Projections to 2020 and 2030 ........................................................................................... 107Table 19-26: Tanzania: Performance of Minjingu Mazao (MM) and DAP on Maize Grain Yield ...................................... 109Table 19-27: GQ Market ................................................................................................................................................... 112 Tilemsi Phosphate Project – PEA Page | xiii
  14. 14. Table 21-1: Tilemsi Phosphate Project - Mining Skilled Labour Costs at Peak Production ............................................... 116Table 21-2: Tilemsi Phosphate Project - Mining Salaried Labour Costs at Steady State ................................................... 117Table 21-3: Annual Operating Cost USD per ROM Tonne ................................................................................................. 119Table 21-4: Tilemsi Phosphate Project - Tilemsi Project Forecast Capital Expenditure for Mining Operations (USD ‘000).......................................................................................................................................................................................... 121Table 21-5: Process Plant Operating Inputs ...................................................................................................................... 122Table 21-6: Supporting Documents .................................................................................................................................. 122Table 21-7: Project Area Breakdown ................................................................................................................................ 123Table 21-8: Currency Exchange Rate ................................................................................................................................ 124Table 21-9: Cost Type Definitions ..................................................................................................................................... 127Table 21-10: Capital Cost Breakdown Structure ............................................................................................................... 127Table 21-11: CAPEX Cost Centre Factors........................................................................................................................... 128Table 21-12: Indirect Cost Centre Definitions ................................................................................................................... 129Table 21-13: Reagent Consumption Rate ......................................................................................................................... 130Table 21-14: Reagent Cost ................................................................................................................................................ 130Table 21-15: Labour Quantity ........................................................................................................................................... 130Table 21-16: Labour Rates ................................................................................................................................................ 130Table 21-17: General Administration Costs ...................................................................................................................... 131Table 21-18: Road Maintenance Costs ............................................................................................................................. 131Table 21-19: Road Maintenance Quantity........................................................................................................................ 131Table 21-20: Power Consumption ..................................................................................................................................... 131Table 21-21: Power Costs ................................................................................................................................................. 131Table 21-22: Utility Consumption ..................................................................................................................................... 132Table 21-23: Utility Rates ................................................................................................................................................. 132Table 21-24: Operating Spares, Lubricants and Wear Rates ............................................................................................ 132Table 21-25: Capital Cost Estimate Breakdown ................................................................................................................ 132Table 21-26: CAPEX Report ............................................................................................................................................... 134Table 21-27: Phased Capital Costs (USD) .......................................................................................................................... 136Table 21-28: Operating Cost Breakdown (USD/a) ............................................................................................................ 140Table 21-29: Operating Cost Breakdown (USD/t) ............................................................................................................. 141Table 21-30: Granulation OPEX ........................................................................................................................................ 142Table 21-31: Granulation Plant and Storage Capex ......................................................................................................... 143Table 21-32: Equipment 1 ................................................................................................................................................. 144Table 21-33: Equipment 2 ................................................................................................................................................. 145Table 21-34: Equipment 3 ................................................................................................................................................. 146Table 21-35: Bulk Blending Opex ...................................................................................................................................... 147Table 21-36: NPK Blending Plant and Storage Capex ....................................................................................................... 148Table 21-37: Equipment 1 ................................................................................................................................................. 149Table 21-38: Typical Logistics Costs per Ton ..................................................................................................................... 150Table 22-1: TPP Capital Expenditure ................................................................................................................................. 151Table 22-2: Economic Results ........................................................................................................................................... 152Table 22-3: Investment Requirements for TPP ................................................................................................................. 152Table 22-4: Capital Investment Breakdown (Thousand USD) ........................................................................................... 153Table 22-5: Financing Terms & Conditions ....................................................................................................................... 153Table 22-6: Production Volume ........................................................................................................................................ 156Table 22-7: Operating Costs ............................................................................................................................................. 157Table 22-8: Advertising and Promotion ............................................................................................................................ 158Table 22-9: Profit and Loss Statement .............................................................................................................................. 159Table 22-10: Cash Flow ..................................................................................................................................................... 162Table 22-11: Economic Results ......................................................................................................................................... 163Table 22-12: Equity Sensitivity .......................................................................................................................................... 165Table 22-13: Project Sensitivity ......................................................................................................................................... 167Table 22-14: NPV versus Revenues ................................................................................................................................... 168Table 22-15: NPV versus Discount Rate ............................................................................................................................ 169 Tilemsi Phosphate Project – PEA Page | xiv
  15. 15. 1 SUMMARY1.1 PurposeThe purpose of this Preliminary Economic Assessment (“PEA”) report dated December 20, 2012, is tovalidate the Tilemsi Phosphate Project (“Project” or “TPP”), Mali, and to demonstrate its potential economicviability. The PEA is being filed by Great Quest Metals Ltd (“GQ”), a TSX Venture–listed company, incompliance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“N.I. 43-101”).The PEA has been completed in support of a Press Release dated December 18, 2012.The PEA study considers the phosphate mine drilling program (2011), as well as the construction ofphosphate beneficiation and granulation plants and their associated infrastructure and utilities. Test workwas completed to prove two saleable medium- and high-grade phosphate products. In addition, the studylooked at the construction of four NPK blending plants in West Africa. As part of the study on mining,beneficiation, granulation, and NPK blending, the investment costs (CAPEX) and operating costs (OPEX) wereprepared. This Technical Report incorporates all applicable data, interpretations, and conclusions that werein hand at the time of preparing this report.1.2 The Tilemsi Phosphate ProjectThe proposed TPP is a vertically integrated phosphate mining, beneficiation, granulation, and NPK fertilizerblending project. Tilemsi Phosphate Project Mine Location in Northeastern MaliThe mine is located some 120 km north of Gao in northeastern Mali. It is planned to mine 200 kt/aphosphates Run-of-Mine (ROM) from Year 1, increasing to 500 kt/a in Year 4 (Phase 1) and finally to 1 Mt/afrom Year 8 onwards (Phase 2). Based on the Inferred Resources, a life-of-mine (LOM) of at least 20 years isassumed and projected in the proposed mining program prepared for this study. The deposit covers threeconcessions, namely Tilemsi, Tarkint Est, and Aderfoul over a total area of 1,206 km2. GQ, through itsTilemsi Phosphate Project – PEA Page | 1
  16. 16. subsidiaries, has an option to earn a 94% interest in the Tilemsi license (417 km2), an option to earn 97% ofthe Tarkint Est license (589 km2), and wholly owns the Aderfoul license (200 km2).As part of the TPP, GQ plans to construct phosphate beneficiation and granulation plants, along with theirassociated infrastructure and utilities, near the city of Bourem on the Niger River in Mali, 95 km northwestof Gao. Two saleable products—Hyperphosphate High Grade and Hyperphosphate Medium Grade—areconsidered.Further processing will be achieved at four planned bulk blending plants for manufacturing NPK fertilizers ofvarious grades. The proposed locations of these plants are Sikasso city, Mali; Cotonou Port, Benin; Dossocity, Niger; and Tamale city, Ghana.GQ’s head office is located in Vancouver, BC. The operations in Mali are coordinated from GQ’s whollyowned subsidiary, Great Quest (Barbados) Ltd. The latter owns 100% of Great Quest Mali SA, which carriesout the exploration work in Mali. Great Quest Mali SA, owns 94% of Engrais Phosphates du Mali (“EPM”) SA.The concessions Tarkint Est and Aderfoul are held in Great Quest Mali SA, whilst the Tilemsi concession isheld in EPM.1.3 Geology and MineralizationThe geology, exploration, and mineral resource on which this PEA has been based is a 50 Mt InferredResource at an average P2O5 grade of 24.3% and cutoff grade of 10%, which have been reported in full in theNI 43-101 Technical Reports on the Tilemsi Phosphate Project authored by Jed Diner on behalf of GQ. Thesereports have effective dates of October 25, 2011, and October 17, 2012, and were filed on SEDAR on August23, 2012, and October 23, 2012, respectively. The resources are currently defined as Inferred due mainly tothe large spacing of drillholes (about 500 m separation).The PEA is preliminary in nature as it includes Inferred Mineral Resources, which are considered toospeculative geologically to have the economic considerations applied to them that would enable them to becategorized as Mineral Reserves. There is no certainty that the PEA will be realized, as Mineral ResourcesTilemsi Phosphate Project – PEA Page | 2
  17. 17. that are not Mineral Reserves do not demonstrate economic viability. As such, the information on which thePEA work is based, and the accuracy of the PEA work itself, does not support the declaration of MineralReserves. Therefore, no Mineral Reserves have been declared.1.4 MiningThe mining study investigated extracting high-grade material, greater than 27% P205, for feed to abeneficiation plant to upgrade the ROM phosphate material. An open pit resource of 15.8 Mt is conceptuallyplanned for the TPP based on mining the Tilemsi and Tarkint Est mining areas only. Waste stripping willcoincide with phosphate production with a strip ratio of 6.8:1. The open-pit design will be mined throughconventional truck and shovel mining methods applying a rollover technique, with phosphate removal beingfollowed by backfilling of overburden material and topsoil. No drilling or blasting activities are envisaged. Tilemsi Phosphate Project Open Pit Mineral Inventory” Mining Area Resource Grade Losses Dilution “Pitable Grade SR Tonnage % P2O5 % % Tonnage” % P2O5 Tilemsi 8,367,000 27.3 2.5 2.5 8,362,000 26.6 6.4:1 Tarkint Est 7,444,000 29.1 2.5 2.5 7,440,000 28.4 7.24:1 Total 15,811,000 28.1 2.5 2.5 15,803,000 27.5 6.8:1Initial mining capital expenditure for the TPP is estimated at USD23.4 million, which includes mineequipment, fuel storage, generators, and a small village for mine workers. A further USD14.4 million isrequired between Year 2 and Year 8 for further capital purchase to bring mining at Tilemsi to a steady staterate of 1 Mt/a. In Year 13, USD15.9 million is required for the replacement of mining equipment and will beused to mine the Tarkint Est area from Year 13 to Year 20.The operating cost for TPP is between USD4.22 and USD12.72 per tonne phosphate material mined formining operations producing between 0.2 Mt/a and 1 Mt/a. Coffey Mining associates a low to moderate riskto the mining activities pertaining to TPP. Many of the risks associated with the TPP should be mitigated asthe TPP advances to the next stage of advancement, i.e. Prefeasibility or Feasibility Study.1.5 BeneficiationA beneficiation study was prepared, based on laboratory mineral processing and metallurgy on the Tilemsirock, for the construction of a phosphate beneficiation plant and its associated infrastructure and utilitiesalong the Niger River, near Bourem in northeastern Mali. The plant will initially process 200 kt/a in the firstyear and ramp up to 500 kt/a ROM from Years 4–7 and then increase to 1 Mt/a for the remainder of theLOM. Two grades of phosphate rock (PR) concentrate will be produced—Medium Grade (MG) with>27% P2O5 and High Grade (HG) with >35% P2O5.The beneficiation capital expenditure, including contingency, has been estimated at USD72.2 million to anaccuracy of ±50% (Class 4 estimate). Sustaining capital is required over the 20-year project life and has beenestimated at USD37.4 million, of which USD12.2 million is required in Year 7 for the expansion to increasethroughput to 1 Mt/a.Beneficiation operating costs have been estimated to level at USD44.15/t in Phase 1 (Years 1–7) andUSD31.27/t in Phase 2 (Year 8 onwards). The operating costs are largely influenced by the price at whichdiesel can be sourced and a value of USD1.10 per litre has been used in this PEA.Tilemsi Phosphate Project – PEA Page | 3
  18. 18. 1.6 GranulationA study was done on the granulation of the Hyperphosphate Medium Grade (>27% P2O5) andHyperphosphate High Grade (>35% P2O5) products. The granulation project at Bourem consists of 300 kt/aof phosphate granulation as a first stage, with an additional two lines of 300 kt/a each to be installed in Year3 and Year 7, respectively, to meet the increased production requirements.The operating cost for granulating one tonne of phosphate rock is estimated at approximately USD37.70/tand the investment for the first granulation plant and related storage facilities is approximatelyUSD37.8 million. The power and drying costs required for granulating the phosphate rock contributeapproximately 70% of the total operating costs.Each additional 300 kt/a capacity plant will cost approximately USD19.9 million.1.7 NPK BlendingA study was done on constructing bulk blending plants to manufacture NPK fertilizers of various grades,using raw materials like granulated phosphate rock, urea, potassium chloride (KCl), and micronutrients.Four plants are foreseen, with 125 kt/a of blended NPK nominal capacity (design capacity of up to 300 kt/a)for each. In Year 3, two plants will be constructed in Sikasso (south Mali) and in Cotonou Port on the seacoast of Benin. In Year 7, two additional NPK plants will be constructed—one in Tamale in the north ofGhana and the other in Dosso City, south of Niamey in Niger.The operating cost for bulk blending one tonne of NPK (excluding raw materials) is estimated atapproximately USD1.92/t and the investment for the each NPK bulk blending plant and related storagefacilities is approximately USD5.3 million.1.8 Project InfrastructureA mining camp near the mine has been included for mine operations personnel. In addition, all utilities forthe camp and mine (power, water, and associated infrastructure) have been included.The infrastructure required to support the beneficiation and granulation plants has been specified to suitthe 20-year project life. Infrastructure includes the required offices such as the mill office and administrationbuilding, warehouse, workshops, laboratory, emergency services, and security. Access roads and perimeterfencing have also been included. Due to the remote nature of TPP, an accommodation village has beenallowed for on the outskirts of Bourem. The village includes a kitchen, dining hall, and sporting andrecreational facilities.Utilities including power, water, compressed air, and fuel will be provided to service the beneficiation andgranulation plants and their associated infrastructure. Diesel generating units will be installed to providepower, and diesel storage tanks will supply diesel to the generators, rotary driers, and heavy vehicles. Lightvehicles will be refueled from a petrol storage tank. All water for the beneficiation and granulation plantswill be supplied from the Niger River, with a reverse osmosis (RO) plant installed to treat the raw water fromthe river for use as potable water. A compressed air station will provide plant air and instrument air asrequired.As part of community development, the construction of a school and clinic in Bourem has been provided for,along with supply of the necessary power and potable water for these buildings with an allowance for publicservices within the village.A tailings storage facility (TSF) will be constructed in a phased approach to minimize the upfront capitalinvestment. It has been proposed that six cells are constructed over the 20-year life of the plant toaccommodate the 1.5 million cubic meters of tailings from the beneficiation plant.Tilemsi Phosphate Project – PEA Page | 4
  19. 19. 1.9 MarketingUnited Nations population medium variant projection indicates that West Africa’s population will increase atan annual rate of 2.5% from 304 million in 2010 to 442 million in 2025 and at 2% per annum thereafter to744 million in 2050. This growth requires that food and fibre production be increased at an annual rate of4-6%.Such population growth, along with increased per capita income and global and local commitments toreduce poverty and hunger, is driving governments and other stakeholders to seek key strategies that willensure food security while supporting sustainable agriculture. Members of the Economic Community ofWest African States (ECOWAS) have committed under the Abuja Declaration to increase fertilizer use to50 kg/ha from current levels of less than 2 kg/ha.P205 demand is projected to increase from 184,000 t in 2010 to 287,000 t in 2020 and 430,000 t in 2030.However, based on Abuja Declaration targets, potential but realizable requirements of phosphate fertilizerswill be approximately 537,000 t of P2O5 in 2020 and over one million tonnes of P2O5 in 2030. Recognizingthat increased fertilizer use is essential for preventing nutrient depletion and soil degradation, many WestAfrican governments already promote fertilizer use, including through the use of subsidies.GG should be able to capture 30% (in 2020) and 40% (in 2030) of the market share. Assuming that 20% ofthe market will be targeted with granulated Tilemsi Hyperphosphate product and 80% with NPKs (15-15-15is taken as a base) based on this granulated product and imported urea and potash, then the size of themarket for GQ will be as follows: Projected GQ Market Size for Mali PEA Realizable Market GQ Total share GTPR - avg. 30% NPKs 15% P2O5 (tonne P2O5) P2O5 (tonne P2O5) (80% share) (20% share)2020 537,000 161,100 107,400 859,2002030 1,040,000 416,000 277,300 2,218,700GQ’s marketing strategy will be based on the production of a local phosphate product that is suitable as adirect application fertilizer or as a component of blended NPK fertilizers at a price that can displace morecostly imported fertilizers. Additionally, a local source of phosphate reduces foreign exchange and offerstimely delivery to farmers.An appropriate strategy will be based on agro-dealer-based extension and promotional efforts and willinclude agronomic trials, seeding programs, partnerships with stakeholders (i.e regulation), and investmentsin downstream distribution opportunities.1.10 LogisticsLogistics is one of the most critical issues for TPP, due to the large distances from the mine andbeneficiation/granulation plants to the various West African markets and sea ports.Haulage costs vary between approximately USD70/t for distances of 800 km to approximately USD180/t fordistances up to 2,000 km. These costs include added costs of approximately 40% for customs, taxes,insurance etc. The average haulage costs calculated for granulated product to market are approximatelyUSD82/t and for delivery to NPK blending plants approximately USD92/t. Taking into account the tonnageand distances to the market and to the NPK blending plants, the calculated haulage cost corresponds to anaverage price per tonne per kilometre of USD0.083. The Malian Ministry of Equipment and Transportreported in its 2010 Transport Statistical Yearbook that the average price per ton per kilometre is between32 and 36F CFA/t/km, which corresponds to 0.064 and 0.072 USD/t/km.Tilemsi Phosphate Project – PEA Page | 5
  20. 20. 1.11 Fertilizer PricesAs most countries depend on imported fertilizers, fluctuations in global fertilizer prices are reflected indomestic prices, which are also impacted by fluctuations in exchange rates. In addition, transportation costs,port handling charges, and domestic marketing costs contribute significantly to retail prices.The prices (KCl & Urea) shown in the table below are the current world prices adjusted for West Africa andcurrent sales prices in West Africa. The model uses current prices, while the sensitivity to potential lowerworld prices is reflected in the economic sensitivity analysis. The price for granulated rock is adjusted for thegrade of P2O5. Fertilizer Prices for Mali PEADESCRIPTION PRICE ADD-ON COSTS ESTIMATED TOTAL (USD FOB) (USD) (USD)KCl 465 210 675Urea 367 147 514MG Granulated Hyperphosphate (27% P2O5) 262HG Granulated Hyperphosphate (35% P2O5) 350NPK Bulk Blend 6611.12 EconomicsAn economic analysis on the conceptual engineering design and costing was performed by generating abasic discounted cash flow. This cash flow used costs in current terms (fourth quarter 2012); no escalationsto costs over time, taxes, or royalties were applied. This approach was considered appropriate for theconceptual levels of work undertaken. The purpose of undertaking this evaluation was to determine theeconomic potential of the TPP and to motivate further work if appropriate.The total Capital Expenditure (CAPEX) required for the first two years of Project construction isapproximately USD155.7 million (USD143 million in construction costs and USD13 million for feasibilitystudies and initial project development). It is assumed that a mix of debt and equity on a 60/40 debt/equityratio shall be used to fund the total financing requirement for the construction phase and that projectoperating cash will fund the additional investments.CAPEX during construction (initial CAPEX) and operation (development and maintenance CAPEX) are shownin the table below. CAPEX for TPP NPK (IN $000) MINING BENEFICIATION GRANULATION FACILITIES OTHER TOTAL Initial CAPEX 23,455 72,731 37,832 - 21,683 155,701 Development CAPEX 5,648 16,344 39,869 21,090 - 82,951 Maintenance CAPEX 27,902 21,038 - - 2,900 51,840The results of the basic economic analysis undertaken are shown below: TPP PROJECT IRR: 33.1% NPV @10%: USD635 M PAYBACK @10%: 4.23 yearsTilemsi Phosphate Project – PEA Page | 6
  21. 21. Debt and equity financing costs including political risk insurance premium are estimated at USD28.3 M. EQUITY 40 % Equity Financing - Total required equity of USD71.3 M (See Table 22-3 below) EQUITY IRR: 42.9% NPV @10%: USD635 M PAYBACK @10%: 3.93 yearsThe cash flow pro-forma statement starts with two years of construction followed by 20 years of operation.During the first year of construction (2014), 40% of the equity and debt is spent and the balance of 60% isspent during the second construction year. The TPP is cash positive from the first year of operation andaccumulates over the project life more than USD2.8 billion.In the case of using a 60% financing package, the TPP is consecutively cash positive from the fourth year ofoperation and accumulates over the project life more than USD2.6 billion.Additionally, the statement clearly shows that the TPP is profitable from the third operating year, with thegross margin after the first three years being more than 29% and remaining at approximately 35% grossmargin for the following years.1.13 Major Conclusions and RecommendationsBased on the work undertaken, the following strongly support the potential viability for the TPP: (i) The economic results for TPP are excellent, especially for a large mining infrastructure project, indicating an economically significant resource. (ii) The sensitivity analysis also shows good results, even when making extreme assumptions. (iii) The results of the PEA strongly support the potential of a viable mine at Tilemsi, commencing production of 200 kt/a phosphates building to 500 kt/a by Year 4 and to 1 Mt/a by Year 8 with a 20-year LOM. (iv) Landlocked countries like Mali and other West African countries pay large sums for supply chain components, such as in-transit transportation from port to national markets, port handling charges, production, and financing. Facilities like those proposed for TPP, near these markets, offer added advantages in reducing prices and promoting timely delivery of quality fertilizers to farmers. (v) The current level of fertilizer use in West Africa is very low. With the population set to double over the next four decades, a several-fold increase in fertilizer use will be needed to secure future food requirements. Under the Abuja Declaration target, phosphate fertilizer use will have to be increased from 184,000 t of P2O5 in 2010 to 1,792,000 t in 2020 and 2,079,000 t in 2030 according to demand projections. The realizable potential will still be 537,000 t in 2020 and over one million tonnes in 2030. (vi) An appropriate strategy for marketing the TPP future production will be required. An appropriate strategy will be based on agro-dealer-based extension and promotional efforts and will include agronomic trials, seeding programs, partnerships with stakeholders (i.e. regulation), and investments in downstream distribution opportunities. (vii) Further exploration drilling to both indicated and measured levels should be done with aircore drills.Tilemsi Phosphate Project – PEA Page | 7
  22. 22. (viii) Power costs (the PEA assumes the use of diesel generators) are a major factor in the operating costs; alternative, cheaper sources should be investigated. (ix) Logistics is one of the most critical issues for TPP due to the large distances from the mine and beneficiation/granulation plants to the various West African markets and sea ports. (x) A detailed feasibility study is required to bring TPP to bankable level. (xi) A social and environmental impact study is required.Tilemsi Phosphate Project – PEA Page | 8
  23. 23. 2 INTRODUCTIONGaya Resources Development Ltd (“Gaya”), a team of experts specializing in the phosphate, mining, andminerals industries, and Jed Diner M.Sc., P.Geol. were retained by Great Quest Metals Ltd. to prepare a PEAand Resource Estimate, respectively, for the Tilemsi Phosphate Project (TPP) in Mali. Jed Diner is identifiedas the Qualified Person for this PEA.The PEA study considers mine development; the construction of phosphate beneficiation and granulationplants and their associated infrastructure and utilities in the city of Bourem on the Niger River in Mali, 95 kmnorth of Gao; the production of two saleable products—Hyperphosphate High Grade and HyperphosphateMedium Grade; and the construction of four NPK blending plants in West Africa as illustrated in Map 2-1. Aspart of the study on mining, beneficiation, granulation, and NPK blending, the investment costs (CAPEX) andoperating costs (OPEX) were prepared. No site visits took place during the PEA study and all the work wasdone as a desktop study only, based on the various consultants’ experience in designing and building similarplants. Similarly, the logistics and marketing of the various products in West Africa were investigated.The purpose of the PEA is to demonstrate the economic potential of the TPP and to motivate, if appropriate,further detailed work. The PEA has been completed in support of a Press Release dated December 18, 2012.The report has been prepared in accordance with the guidelines of the NI 43-101 and complies with the NI43-101.The TPP covers three licenses—Tilemsi, Tarkint Est, and Aderfoul. GQ is a publicly traded company on theTSX-Venture and, through its subsidiaries in Mali, has an option to earn a 94% interest in the Tilemsi license,has an option to earn 97% of the Tarkint Est, and owns the Aderfoul license. All three licenses together makeup the TPP, which is situated around 120 km north of Gao, a city located on the Niger River in northeasternMali.The proposed TPP is a vertically integrated phosphate mining, beneficiation, granulation, and NPK blendingproject. The mine is located some 120 km north of Gao in northeastern Mali. It is planned to mine 200 kt/aphosphates ROM from Year 1, increasing production annually by 100 kt to meet a goal of 500 kt/a by Year 4(Phase 1) and finally to 1 Mt/a from Year 8 onwards (Phase 2). Currently a life-of-mine (LOM) of at least 20years has been assumed based on this mining program.The phosphate rock (PR) will be beneficiated in a new facility for the processing of sedimentary phosphateore for the production of:  Hyperphosphate Medium Grade >27% P2O5  Hyperphosphate High Grade >35% P2O5The phosphate concentrate will then be granulated and sold either as a direct application fertilizer to existingNPK blenders or for use in four new NPK blending plants to be constructed in West Africa by GQ.The beneficiation and phosphate granulation plants will be situated near the Niger River at Bourem, which issome 95 km from the mine. Bourem was chosen for three main reasons: it is the closest large town to themine; its proximity to the Niger River provides water access for the plants; and it offers infrastructure suchas paved roads and electricity supply from the national grid.The granulated phosphate rock will be sold in West Africa, either for use as a direct application fertilizer oras input to existing independent NPK bulk blenders. GQ plans to establish four new NPK bulk blending plantsat Sikasso in Mali, Cotonou Port on the coast of Benin, Tamale in northern Ghana, and Dosso City south ofNiamey in Niger.Tilemsi Phosphate Project – PEA Page | 9
  24. 24. Map 2-1: Map showing the Tilemsi mine site, the Bourem beneficiation site, and four propsed NPK Blending FacilitiesThe proposed structure for the various phases of the TPP is shown in Figures 2-1, 2-2, and 2-3.Tilemsi Phosphate Project – PEA Page | 10
  25. 25. Figure 2.1: TPP Production Plan—Initial Development PhaseTilemsi Phosphate Project – PEA Page | 11
  26. 26. Figure 2.2: TPP Production Plan—Intermediate Development PhaseTilemsi Phosphate Project – PEA Page | 12
  27. 27. Figure 2.3: TPP Production Plan—Final Development PhaseTilemsi Phosphate Project – PEA Page | 13
  28. 28. 3 RELIANCE ON OTHER EXPERTSThe mining study was subcontracted to Coffey Mining, RSA, an international mining consultancy firm withover 50 years’ experience in the business; the beneficiation to GBM Minerals Engineering Consultants, UK,an independent engineering consultancy providing engineering services to the mining and minerals industry;and the granulation and NPK blending to CFI holding (CFIh), France, an engineering company specializing inthe fields of fertilizers, explosives, chemicals, and crystallization/evaporation processes. The market reportwas prepared by policy and trade specialist Dr. Balu Bumb of BLB Associates, Florence, Alabama, USA,formerly Program Leader of the Policy, Trade and Markets Program at the International FertilizerDevelopment Center (IFDC). A West African logistics study was also carried out by Bolloré Africa Logistics,and Mintek of South Africa carried out the laboratory and metallurgy tests.The Qualified Person (QP) has relied upon experts, as listed in section 2, and upon GQ for informationpertaining to ownership and status of the Property, the relevant permitting requirements, and the legal andfinancial liabilities pertaining to the Property and potential sites for the various plants. The writer has notindependently verified the accuracy of this information.Gaya and the PEA Consultants have followed standard professional procedures in preparing the contents ofthis report. Data used in this report have been verified where possible and the writers have no reason tobelieve that the data were not collected in a professional manner.Technical data provided by GQ for use in this report are the result of work conducted by GQ professionalstaff.Other sources of information used in this report are listed in the References or elsewhere in the text of thereport.Tilemsi Phosphate Project – PEA Page | 14

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