Focus Ventures keeps busy at Bayovar 12 in Peru

Focus Ventures (TSXV: FCV) has made progress  in a short time at its Bayovar 12 phosphate project in northern Peru — but it wasn’t always focused on phosphate.

Focus started as a shell company under the Gold Group, a stable of resource firms, including Radius Gold (TSXV: RDU; US-OTC: RDUFF) and Fortuna Silver Mines (TSX: FVI; NYSE: FSM). The junior’s chair and CEO Simon Ridgway cofounded the group.

After the 2008 recession, Ridgway and Focus’ president David Cass used the vehicle to buy assets, with a focus on Peru.

“I saw opportunities down there resulting from the financial crisis,” explains Cass, who previously spent four years as a senior geologist in Peru with Anglo American (LSE: AAL), among his other roles with the major.

Focus has drilled several precious metal properties since the recession. It even sold two silver projects to majors, netting US$5.1 million in 2012. “Those sales kept the wolf from the door and saw us through the first few years of the big downturn, while we transitioned to the phosphate business,” Cass says. 

Focus looked for phosphate projects in Colombia and Peru in 2012 and early 2013. It realized the space was largely untapped by juniors, despite the steadily growing global demand for fertilizers, especially in South America.

The change in direction “turned out to be a good move,” Cass says, explaining it shielded the firm from what became “an unprecedented downturn in the precious metals markets.”

In late 2013, Focus signed an initial letter of intent to acquire 70% of Bayovar 12 from Peruvian firm Juan Paulo Quay S.A.C., (JPQ), also finishing a definitive agreement in January 2014.

During its first year on the property, Focus undertook an initial round of drilling, calculated a large maiden resource, started a preliminary economic assessment (PEA) and set about renegotiating the option agreement.

Under the original terms, Focus needed to make cash payments totalling US$4 million over four years, with a US$3-million payment due in February 2015, as well as finish a prefeasibility study so that it could gain a 70% interest in the project.

Given the dire state of the markets — and owning zero interest in the project — Focus had trouble financing the US$3-million payment, Cass says.

In early March 2015, Focus said it would pay US$4 million to buy an outright 70% interest in JPQ, cancelling its previous contract.

The revised agreement closed in late March, giving Focus direct ownership in the project, loan security and a right to buy the remaining 30%.

To fund that deal, Focus secured a US$5-million debt facility with Sprott Resource Lending Partnership a few days before. It put US$4 million towards the option agreement and used the rest of the funds to advance the Bayovar 12 project.

The large property is in the Sechura district, 70 km south of the city of Piura and a 40 km drive to a port owned by Focus’ joint-venture partner. The project is also near Vale’s (NSYE: VALE) Bayovar mine, which taps into one of South America’s largest phosphate deposits, and where Mosaic (NYSE: MOS) and Mitsui each own a minority interest.

In April, Focus initiated a second round of drilling, which is nearly complete. The main goal of the 42-hole program is to upgrade the existing inferred and indicated resources into the measured category and expand the resource.

Bayovar 12 has 115 million dry tonnes grading 12.37% phosphorus pentoxide (P₂O₅) in indicated and 73 million dry tonnes of 12.4% P₂O₅ in inferred, based on 20 boreholes drilled in the first phase.

That works out to be 10 million tonnes per hole, “an incredible value-add per hole, considering the low cost of drilling in this part of Peru,” Cass remarks. He says the second drill phase could double the existing resource on the 125.8 sq. km property.

The resource sits in 13 horizontal phosphate beds hosted within the Diana formation — a sequence of diatomites that start less than 30 metres below surface.

Drilling to date has delineated phosphate mineralization over 8 km west to east and 5 km north to south. It has also highlighted consistent geology and grades in the phosphate mineralization, which appear to be similar to what Vale is mining at its Bayovar mine, 15 km west, Focus says.

Preliminary tests show the junior could easily recover the phosphate from each bed to produce a high-quality concentrate averaging 29% to 30% P₂O₅.

Given the high grades and highly reactive phosphate rocks on the project, Focus collected 400 kilograms of material so that it could make a direct-application phosphate rock (DAPR) product. 

While 85% of phosphate mined globally goes towards water-soluble fertilizers or food chemicals, the company says that some phosphate rock is reactive enough to simply crush and apply directly onto fields as a fertilizer.

Producing DAPR could lower capital requirements and processing costs.

The company has started an engineering study along with the PEA, so that it can investigate dry mineral-processing techniques and equipment needed for the DAPR. (The PEA will examine the making of a phosphate concentrate.)

Cass says Focus could start up the Bayovar 12 project as a DAPR operation, within up to 18 months at US$20 million, before permitting and financing a larger open-pit operation.

The firm intends to wrap up the PEA before October. It is seeking a partner to help advance the project to a DAPR operation, Cass says.

To bolster the activities planned for the year, Focus is completing a $4-million private placement. It has also sold a 2% royalty on 70% of its future phosphate production from the Bayovar 12 project to Radius Gold.

“Our two-tier approach of the smaller DAPR and large rock phosphate concentrate operation presents us with several avenues to unlock tremendous value for our investors,” Cass concludes. “If you believe that food production must increase to keep pace with global population growth, the investment thesis for phosphates — a finite resource — is clear.”

Focus closed May 14 at 21¢, with a $16.3-million market capitalization.