Rio Verde to secure $15M for key projects

Rio Verde Minerals (RVD-T) aims to add $15 million to its coffers to help fund exploration and development at its key potash and phosphate projects in northern Brazil, by selling its shares at a premium.

The company announced a non-brokered private placement of up to 35.7 million shares priced at 42¢ apiece for total proceeds of $15 million, of which $11 million has been committed.

The offering price represents an 87% premium to the company’s May 24 closing price, impressing investors, who pushed Rio Verde’s shares up 33% the following day to finish at 30¢.

Rio Verde plans to use the funds to fuel exploration and a scoping study at its Sergipe potash project and to advance its Fosfatar phosphate project into production, while continuing to explore its other phosphate prospects.   

The Brazilian junior is targeting first production at Fosfatar by early 2013 and says it’s in discussions with potential off-takers of phosphate.

Located in the port city of Belém in Pará State, Fosfatar is near several fertilizer consumers and hosts three main phosphate targets: Sapucaia, Boa Vista and Trauíra. However, a recent scoping study, prepared by international consultant Coffey Mining, mainly focused on the Sapucaia target.

The study released in March outlined that Fosfatar had an after-tax net present value of $62.9 million, at a 10% discount rate, and a 113% after-tax internal rate of return. Payback is expected within a year.

Based on Sapucaia’s resource estimate, annual production is estimated at 150,000 tonnes of thermophosphate at an average grade of 25% P₂O₅. The mine should run for about eight years.

Following the study, the company received a trial mining permit from Brazilian authorities to start mining activities at Sapucaia. The permit allows the company to recover up to 100,000 tonnes of phosphate bearing material a year and is renewable for up to 36 months. Construction at the project is expected to start soon.

On the potash front, Rio Verde intends to use the proceeds to complete three holes at Sergipe by the third quarter, followed by a first resource estimate by year end, with a scoping study expected out in early 2013.

Sergipe, Rio Verde’s chief potash asset, sits in the country’s north-eastern region in the Sergipe basin. This basin is home to oil producing wells and Brazil’s sole producing potash mine, Taquari-Vassouras, operated by Vale (VALE-N).

As well, the junior hopes to use the proceeds from the transaction to test up to two of its other phosphate targets.

The private placement is expected to close around June 15, following regulatory approvals.

For the three months ended March 31, 2012, Rio Verde reported a net loss of $1.56 million, or 2¢ a share, citing exploration expenses as one of the factors that contributed to the loss.