CRP project financials to benefit from exchange rate changes

Forecast CRP project financials benefit significantly from exchange rate changes

27 January 2015

Chatham Rock Phosphate today released updated key figures related to the financial forecasts for its project following the recent strengthening of the United States dollar, relative to both the Euro and New Zealand dollar.

A core assumption to the company’s project revenues are that they priced in US dollars and that most operating costs are denominated in Euros. A result of the recent foreign exchange movements is that all key revenue and profit numbers are therefore significantly higher, particularly in New Zealand dollar terms. This is compared to the forecasts included in our market announcement of 23 October when CRP provided a range of financial estimates during its marine consent application hearing to the Environmental Protection Authority. The figures were provided then to clarify some uninformed comments that arose during the hearing and to ensure there was a properly informed market for the company’s shares. A decision on the marine consent is due by 10 February.

In the light of the significant changes to the exchange rates, CRP believes it is timely to update those key numbers relating to indicative project economics and cost structures. Shareholders are cautioned that while this demonstrates the positive effect that a high US dollar and low Euro can have on the economics of our project, adverse movements in these currencies can of course have adverse effects on these economics.

Based on existing revenue and cost assumptions, the projected annual profit before royalties is now estimated to be USD69 million (NZD93 million), up from USD54 million (NZD 68 million) announced in October. Expressed in New Zealand dollar terms this is a 36.8% increase in the projected trading result before royalties and taxes. This figure is calculated after deducting estimated contract dredging costs, incoming port charges, environmental monitoring costs, community contributions, biodiversity offset costs and business overheads.

From this estimated profit Chatham now expects to annually pay royalties of USD6.9 million (NZD9.3 million) up from the previous estimate of USD5.4 million or NZD6.8 million, and USD17.4 million or NZD23.5 million in income tax (previously USD13.6 million or NZD17.2m).

Over an expected project life of 15 years CRP now expects to earn tax paid profits of USD673 million or NZD905 million, up from October estimates of US525 million or NZD663 million. Based on the updated exchange rates, total royalties would be USD104 million or NZD140 million, up from USD81 million or NZD102 million, and income tax would be USD262 million or NZD352 million (previously USD 204 million or NZD 258 million) during the 15 year period.

Valuing CRP on an EBIT (earnings before income and tax) multiple of 6 (which could be considered reasonable for international fertiliser companies) places a value for the company of NZD503 million when the company is in production (expected in 2017/18), compared with a current market capitalisation of NZD42 million.

Stakeholders are encouraged to review our announcement of 23 October when considering this announcement as it included additional assumptions relevant to these forecasts.

This release contains forward looking statements. Forward-looking statements and information are not historical facts, are made as of the date of this release, and include, but are not limited to, statements regarding discussions of future plans, guidance, projections, objectives, estimates and forecasts and statements as to CRP's expectations with respect to, among other things, mineral properties and the matters described in this release.

These forward looking statements involve numerous risks and uncertainties and actual results may vary. Important factors that may cause actual results to vary include without limitation, the timing and receipt of certain approvals, changes in commodity prices, changes in interest and currency exchange rates, risks inherent in exploration results, timing and success, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), changes in development or mining plans due to changes in logistical, technical or other factors, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications, cost escalation, unavailability of materials, equipment and third party contractors, delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), political risk, social unrest, and changes in general economic conditions or conditions in the financial markets.

ENDS

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