Crusader Resources plans to produce iron ore in Brazil has received a set back after the local government withdrew its environmental licence for the Posse iron project.
Crusader Resources plans to produce iron ore in Brazil has received a set back after the local government withdrew its environmental licence for the Posse iron project.
Last week, the government informed Crusader that its environmental licence for the project had been incorrectly granted.
The Posse project is situated within a buffer zone around a national park, where an alternative licencing process is required.
Crusader is applying for a new licence, but production at the project will be delayed because it will take a minimum of 6 weeks for the new licence to be granted.
In a statement Crusader said the placees from the $4.2 million capital raising have been advised of the most recent developments.
"The vast majority of placees have confirmed they will proceed with the placement under the same terms," the statement said.
A Share Purchase Plan (SPP) also planned for Friday will still go ahead.
"While the requirement for an alternative license is a setback, it also presents Crusader with the opportunity to increase the scale of the first phase of Posse production to 1.0 Mtpa," said Crusader managing director, Rob Smakman.
At 1.00pm Crusader shares were down slightly 0.5 cents or 1.22 per cent.
Full company statement below:
Crusader Resources Ltd initiated a trading halt over its shares on July 8, 2010, in response to information from Supram (the Minas Gerais state government environmental agency in Brazil) regarding the environmental license applicable to its 100% owned Posse iron project.
The state government informed Crusader that its environmental license had been
incorrectly granted and would be withdrawn immediately. The Posse project is situated within a buffer zone around a national park, wherein an alternative licensing process is required.
As a result Crusader will immediately apply for a new license which will delay production from the Posse iron ore mine for a minimum of six weeks.
Documentation for this process will be lodged by July 15 triggering a 45 day public comment and governmental review process.
The Posse iron project was set to begin production this week, at an annual rate of 300,000 tonnes a year, pending the completion of the iron ore processing plant for commissioning.
Under the new environmental license application Crusader will seek to increase the annual mining rate, for the initial dry processing project, to 1.0 million tonnes a year.
The placees from the $4.2 million capital raising, which had been initiated prior to the advice regarding the environmental license, have been advised of the most recent developments. The vast majority of placees have confirmed they will proceed with the placement under the same terms.
A Share Purchase Plan (SPP) will also proceed on same terms and conditions previously announced. The SPP will open on Friday, July 16 and documents will be dispatched to shareholders this week.
The withdrawal of the environmental license does not reflect on the Posse iron project's expected environmental performance or on any other aspect of the planned operation.
Crusader has received strong encouragement from the Brazilian authorities that a new environmental license for mining at Posse is likely to receive favourable consideration.
Crusader managing director, Rob Smakman, said, "While the requirement for an
alternative license is a setback, it also presents Crusader with the opportunity to increase the scale of the first phase of Posse production to 1.0 Mtpa."
"The issues surrounding the Posse iron environmental licensing does not reflect in any way on Crusader's other projects, particularly the Borborema gold project in north east Brazil where fast track evaluation is underway. This project sits on a granted mining lease."
Background.
-Crusader applied for an AAF (Autorização Ambiental de Funcionamento or basic
environmental license) for the Posse project in 2008.
-The license was granted in September 2009.
-This AAF was an important step in receiving the trial mining license or GU (Guia de
Utilizacao) for Posse which was then granted to Crusader in November of 2009.
-Crusader was close to starting production from Posse with the construction of the processing mill and major earthworks close to completion.
-On Wednesday, July 7, Crusader's office in Brazil received a call from Supram, the State government environmental agency, requesting a meeting regarding the AAF.
-On Thursday, July 8, Crusader representatives, including its environmental consultants
attended a meeting with Supram, during which Supram explained that AAF license was being cancelled on the grounds that it had been erroneously granted.
-Upon receipt of this news (Friday, July 9) Crusader requested a trading halt of its securities.
-Further clarification has since been sought regarding the reasons for the cancellation of the original license and Crusader's alternative licensing options.
-The Posse Iron Ore Project lies within the buffer zone surrounding a national park. The
project lies approximately 4 kilometres outside the park boundary. The government
believes an AAF license is not appropriate for this region and should not have been granted.
Crusader Response.
For mining to commence at Posse, Crusader will initiate the alternative licensing process by applying this week for a LP (Licença Prévia or initial licence) and a LI (Licença de Instalação or installation licence).
An application for a LP involves a basic description of the project, as well as its environmental impacts and associated mitigation and rehabilitation measures. An application for a LI requires a project design, including a detailed tailings dam design (if applicable), waste dump, etc., a detailed environmental plan and a community and social plan (PCA). The majority of this documentation is already complete and Crusader will submit a modified plan for a project with dry treatment (i.e. no tailings dam), with a capacity of up to 1.0 Mtpa.
The applications for a LP and a LI can be submitted and granted concurrently. Crusader is aiming to have the documentation ready for submission by Thursday, July 15. The application initiates 45 day community comment and government evaluation process.
Crusader is working in close cooperation with Supram, the environmental agency, to minimise the delay to the start of mining operations at Posse. Crusader understands that Supram intends to evaluate Crusader's application at its next meeting in late August.
If no community comment is raised and the government approves the applications, Crusader can commence mining operations immediately. This would allow mining to start at Posse in September.
If a public hearing process is required, due to public comment, a further delay of up to three months is possible.
As the project is within a national park buffer zone it requires approval of IFAN, the body
responsible for policing national parks and monuments. Crusader's consultants do not anticipate any difficulty with this approval.
Project Update
Posse site activities were well underway last week, with earthworks and plant construction nearing completion. Earthworks to complete drainage on site and the plant will be completed over the coming weeks, allowing for immediate start-up pending a positive result from the licensing.
