Resource World Magazine

44 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 4 DuSolo Fertilizers counting down to production launch F or a junior mining company, the tran- sition from development to production can be one of the most risky phases of the development curve. DuSolo Fertilizers Inc. [DSF-TSXV] is an emerging phosphate producer that aspires to make the transition a smooth one; there are many reasons to be optimistic that it will be successful. Perhaps the most significant aspect to this company is that it is entirely focused within Brazil, an enormous country that is one of the largest worldwide producers of agricultural products. More to the point, fertilizers are an essential component to modern agriculture, and most of the fertil- izer used in Brazil must be imported. So the allure of establishing a domestic source of phosphate supply with this backdrop of high demand is obvious. DuSolo currently controls a suite of three properties in Brazil within a corri- dor of highly prospective geology known as the phosphate belt. The most advanced is the Bomfim Project with an established NI 43-101 compliant, initial resource esti- mate, representing the flagship prospect. No fewer than 10 distinct exploration targets have been identified on this large holding, and only small portions of three of them have undergone comprehensive exploration. Nonetheless, the company has already posted some impressive discovery results, including some very high-grade intervals that are now the basis for a small scale production scenario. A higher grade resource of roughly 4.5 million tonnes has been defined at surface, averaging 14.5% phosphate content. This is rich enough to allow for low cost extrac- tion, drying, and crushing, to produce a product used in Brazil that is known as Direct Application Natural Fertilizer, or "DANF". This product is in high demand because the heavy rainfall that occurs in the best agricultural areas of Brazil tends to leach phosphates from the soil. The addition of DANF allows a lower cost solu- tion to maintain ideal nutrient balance for sustainable farming. Another positive consideration is that the company can lease most of the heavy equip- ment needed to commence production. This means that the upfront capital expenditure to advance to production – another stum- bling block for many emerging producers – will not amount to a huge commitment. DuSolo has already secured the financ- ing necessary to commence operations in the smaller scale production scenario. Thereafter, operating costs are projected to be extremely low, allowing for high profit margins and strong cash flow generation even in the early phases. The Bomfim Project is surrounded by agricultural centres; there is ample demand, just from the locals, who can show up at the processing facility and pur- chase the phosphate output from this first phase of production. DuSolo has set an objective to produce at least 60,000 tonnes of DANF this year, and expects to expand to more than 100,000 tonnes in 2015. Meanwhile, the company will continue to advance work on its other properties in Brazil. Over the longer term, the strategy is to establish a portfolio of assets with at least one phosphate project in each signifi- cant agricultural district in Brazil. For any junior miner, a strong manage- ment team can be the difference that will enable successful development. DuSolo has been working with local geologists from the University of Brasilia that has a background of discovery success at phosphate projects elsewhere in the country. The management team has been further bolstered with some key appointments that will provide the advantage of direct experience to advance through the learning curve at the com- mencement of production. Among them are mining engineers that have led the development of other phosphate projects in Brazil, and a sales team that has established relationships with the local farms that will become the market for the mine output. It should be noted that Brazil is a mining-friendly jurisdiction with a government policy that supports mine development, including a favorable tax regime. In addition, phosphate is con- sidered a strategic commodity given its importance to the agricultural sector, and royalties on phosphates are much lower Drilling at the Santiago target in Brazil's phosphate belt. Photo courtesy DuSolo Fertilizers Inc. MINING

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