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IMPORTANT INFORMATION
IMPORTANT NOTICE
OFFER jurisdiction outside of Australia.
The Offer contained in this Prospectus is an invitation The distribution of this Prospectus in jurisdictions to acquire fully paid ordinary Shares in Fertoz Ltd outside Australia may be restricted by law and (Fertoz or the Company). persons who come into possession of this Prospectus should seek advice on and observe any of these restrictions. Failure to comply with these restrictions LODGEMENT AND LISTING may violate securities laws. Applicants who are resident in countries other than Australia should This Prospectus is dated 16 July 2013 and was consult their professional advisers as to whether lodged with ASIC on that date. It is a replacement any governmental or other consents are required or prospectus which replaces the prospectus dated whether any other formalities need to be considered 26 June 2013 and lodged with ASIC on that date and followed. (“Original Prospectus”). Neither ASIC, ASX nor any of their respective officers take any responsibility This document may not be released or distributed in for the contents of this Prospectus or the merits of the United States. This document does not constitute the investment to which this Prospectus relates. No an offer to sell, or a solicitation of an offer to buy, Shares will be allotted or issued on the basis of this Shares in the United States. The Shares described Prospectus later than 25 July 2014. The Company has in this document have not been, and will not be, applied to ASX for Listing and the quotation of the registered under the US Securities Act of 1933 and Shares on ASX. may not be offered or sold in the United States except in transaction exempt from, or not subject to, registration under the US Securities Act and NOTE TO APPLICANTS applicable US state securities laws. The Offer contained in this Prospectus does not take into account your investment objectives, financial situation or particular needs. ELECTRONIC PROSPECTUS A copy of this Prospectus is available and can be It is important that you read this Prospectus carefully downloaded from the website of the Company and in full before deciding whether to invest in the at www.fertoz.com. If you access the electronic Company. In particular, in considering the prospects version of this Prospectus for the purpose of of the Company, you should consider the risk factors making an investment in the Company you must that could affect the financial performance of the be an Australian resident and must only access the Company in light of your personal circumstances Prospectus from within Australia. The Corporations (including financial and taxation issues) and Act prohibits any person passing an Application seek professional advice from your accountant, Form onto another person unless it is attached to a stockbroker, lawyer or other professional adviser hard copy of this Prospectus or it accompanies the before deciding whether to invest. complete and unaltered version of this Prospectus. You may obtain a hard copy of this Prospectus free No person named in this Prospectus, nor any other of charge by calling the Lead Manager, Blackwood person, guarantees the performance of the Company, Capital Ltd, on 02 9252 2647. the repayment of capital or the payment of a return on the Shares.
No person is authorised to give any information or EXPOSURE PERIOD make any representation in connection with the Chapter 6D of the Corporations Act prohibits Fertoz Offer which is not contained in this Prospectus. Any from processing Applications in the 7 day period after information or representation not so contained may the date of lodgement of the Original Prospectus not be relied on as having been authorised by the (“Exposure Period”). This period was extended by Company or the Directors. ASIC pursuant to the Corporations Act for a further 7 days. The purpose of this Exposure Period is to enable the Original Prospectus to be examined by NO OFFERING WHERE OFFERING WOULD BE market participants prior to the raising of funds. ILLEGAL Application Forms received during the Exposure Period (as extended) will not be processed until after This Prospectus does not constitute an offer in any the Exposure Period. No preference will be conferred place in which, or to any person to whom, it would not on Application Forms received in the Exposure be lawful to make such an offer. No action has been Period and all Application Forms received during taken to register or qualify the Shares or the Offer, or the Exposure Period will be treated as if they were to otherwise permit a public offering of Shares, in any simultaneously received on the Opening Date. PROSPECTUS 2013
RESOURCES RISK cannot and do not give any assurance that the results, performance or achievements expressed or The Company’s tenement assets are at an early stage implied by the forward-looking statements contained of exploration. This, and the fact that the Company in this Prospectus will actually occur and you are has limited history of phosphate exploration cautioned not to place undue reliance on these and development, makes any investment in the forward-looking statements. Company’s Shares highly speculative. The Shares to which this Prospectus relates carry no guarantee We have no intention to update or revise forward- with respect to return on capital invested, payment looking statements, or to publish prospective of dividends or future value of the Shares. You should financial information in the future, regardless of consider the entire contents of this Prospectus whether new information, future events or any other carefully and refer to Section 6 (Risk Factors) of this factors affect the information contained in this Prospectus. Prospectus, except where required by law.
EXPLORATION TARGETS FORECAST FINANCIAL INFORMATION The potential quantity and the grade of the Given the speculative nature of resource exploration exploration targets referred to in this Prospectus are and development and the fact that the Company is conceptual in nature. There has been insufficient in an early stage of exploration, there are significant exploration to define a Mineral Resource for the uncertainties associated with forecasting future purposes of the JORC Code. Furthermore, there is revenues and expenses of Fertoz. On this basis the currently no guarantee that such studies will result in Directors believe that there is no reasonable basis for the determination of a Mineral Resource as defined in the inclusion of financial forecasts in this Prospectus the JORC Code. and accordingly have not included financial forecasts in this Prospectus.
COMPETENT PERSONS STATEMENT The information contained in Section 7 (Independent STATEMENT OF PAST PERFORMANCE Geologist’s Report) and elsewhere in this Prospectus This Prospectus includes information regarding the which relates to exploration results is based on past performance of the Company or its business. information compiled by Jeames McKibben and You should be aware that past performance should Stefan Mujdrica. Mr McKibben’s and Mr Mujdrica’s not be relied upon as being indicative of future qualifications and Competent Person statements are performance. set out in full in Section 12.6.
FINANCIAL AMOUNTS FORWARD LOOKING STATEMENTS Money as expressed in this Prospectus is in This Prospectus contains forward-looking statements Australian dollars unless otherwise indicated. which are identified by words such as ‘may’, ‘could’, ‘believes’, ‘estimates’, ‘targets’, ‘expects’, or ‘intends’ and other similar words that involve risks and uncertainties. It also contains statements of PRIVACY ACT intentions, statements of opinion and predictions The Application Form requires you to provide as to possible future events. Such statements are information that may be personal information for only predictions and are subject to inherent risks the purposes of the Privacy Act 1988 (Cth) to the and uncertainties. These statements are based on Company (directly or through the Share Registry). The an assessment of present economic and operating Company will collect, hold and use that information conditions, and on a number of assumptions to assess your Application, service your needs as regarding future events and actions that, as at the a Shareholder, facilitate distribution payments date of this Prospectus, are expected to take place. (if made) and send corporate communications to you as a Shareholder and carry out appropriate Such forward-looking statements are not guarantees administration. The information may also be of future performance and involve known and used from time to time and disclosed to persons unknown risks, uncertainties, assumptions and inspecting the register, bidders for your securities other important factors, many of which are beyond in the context of takeovers, regulatory bodies, the control of the Company and its Directors and including the Australian Taxation Office, authorised management. These risks include those set out securities brokers, print service providers, mail in Section 6 (Risk Factors) of this Prospectus. We houses, legal and accounting firms, auditors, IMPORTANT INFORMATION
CONTENT contractors, consultants and other advisers, and the KEY INFORMATION OFFER 1 Share Registry. You can access, correct and update the personal information that we hold about you. CORPORATE DIRECTORY 2 Please contact the Company or the Share Registry if you wish to do so at the relevant contact numbers set out in the Corporate Directory on page 2 of this CHAIRMAN’S LETTER 3 Prospectus. You should note that if you do not provide the information required on the Application Form, the 1. INVESTMENT OVERVIEW 5 Company may not be able to accept or process your Application and, accordingly, you may not be allotted any Shares. 2. INDUSTRY OVERVIEW 17
3. COMPANY AND PROJECT OVERVIEW 23 PHOTOGRAPHS AND DIAGRAMS Photographs used in this Prospectus which do not 4. DETAILS OF THE OFFER 39 have descriptions are for illustration only and should not be interpreted to mean that any person endorses 5. DIRECTORS AND CORPORATE GOVERNANCE 49 the Prospectus or its contents or that the assets shown in them are owned by the Company. Diagrams used in this Prospectus are illustrative only and may 6. RISK FACTORS 63 not be drawn to scale. 7. INDEPENDENT GEOLOGIST’S REPORT 73
GLOSSARY 8. INVESTIGATING ACCOUNTANT’S REPORT 161 Certain terms and abbreviations used in this Prospectus have the meanings defined in the 9. FINANCIAL INFORMATION 165 Glossary (set out in Section 14 of this Prospectus). 10. SOLICITOR’S TENEMENT REPORTS 173
11. MATERIAL CONTRACTS 217
12. ADDITIONAL INFORMATION 223
13. DIRECTORS’ RESPONSIBILITY AND CONSENT 231
14. GLOSSARY 232
APPLICATION FORM 234 1 LTD REPLACEMENT PROSPECTUS 2013
KEY OFFER INFORMATION
KEY DATES1 DATE Prospectus Lodgement Date 16 July 2013 Opening Date of Offer 22 July 2013 Closing Date of Offer 16 August 2013 Expected date for allotment of Shares 23 August 2013 Expected date for despatch of holding statements 23 August 2013 Expected date of quotation of the Company’s Shares on the ASX 30 August 2013
1 The above dates are indicative only and are subject to change. The Company in consultation with the Lead Manager reserves the right to vary the dates and times of the Offer, including the Closing Date without prior notice. Applicants are encouraged to submit their Application Forms as soon as possible after the Offer opens.
MINIMUM MAXIMUM KEY OFFER STATISTICS SUBSCRIPTION SUBSCRIPTION Offer Price per Share $0.20 $0.20
Number of Shares on issue prior to the Offer1 25,009,595 25,009,595
Options on issue prior to the Offer 6,615,384 6,615,384
Options to be awarded to Lead Manager on Listing 4,000,000 4,000,000
Total Options on Listing 10,615,384 10,615,384
Number of Shares offered under this Prospectus 15,000,000 20,000,000
Number of Shares on issue following Completion of the Offer 40,009,595 45,009,595
Amount to be raised under the Offer $3,000,000 $4,000,000
Undiluted market capitalisation at the Offer Price2 $8,001,919 $9,001,919
Proforma cash as at 31 March 2013 prior to IPO raise3 $1,189,032 $1,189,032
1 See Section 12.3 (Shares on Issue) for particulars regarding certain capital raisings which have taken place in the 6 months prior to the date of this Prospectus. 2 Capitalisation is not indicative of the amount or future value of the Company. 3 Cash as at 31 March 2013 plus $250,000 tenement sales plus $500,000 capital raise – refer to Section 9.5.3. CORPORATE DIRECTORY 2
CORPORATE DIRECTORY
DIRECTORS INVESTIGATING ACCOUNTANT James Chisholm – Non-Executive Chairman BDO Audit Pty Ltd Level 18, 300 Queen St Dr Les Szonyi – Managing Director Brisbane, Qld 4000
Peter Bennetto – Non-Executive Director CANADIAN LAWYERS Adrian Byass – Non-Executive Director
Ontario COMPANY SECRETARY Peterson Law Professional Corporation Julien McInally 390 Bay Street, Suite 806 Toronto, Ontario Canada, M5H 2Y2 REGISTERED & BUSINESS OFFICE
40 Balgowlah St British Columbia Wakerley, Qld 4154 Anfield Sujir Kennedy & Durno LLP (ASKD Law) T: 07 3396 0024 1600 - 609 Granville Street F: 07 3396 0024 Vancouver, British Columbia Canada, V7Y 1C3
WEBSITE LAWYERS TO THE OFFER http://www.fertoz.com Porter Davies Lawyers Level 5, River Quarter 46 Edward Street SHARE REGISTRY Brisbane, QLD 4000 Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston St Abbotsford VIC 3067 LEAD MANAGER Blackwood Capital Ltd Level 12, 139 Macquarie St INDEPENDENT GEOLOGIST Sydney, NSW 2000 Xstract Mining Consultants Pty Ltd Level 20, 333 Ann Street PO Box 10312, Adelaide St Brisbane, QLD 4000 3 LTD REPLACEMENT PROSPECTUS 2013
CHAIRMAN’S LETTER
Dear Investor,
On behalf of the Directors I am pleased to present this Prospectus and to offer you the opportunity to invest in Fertoz Ltd (Fertoz or the Company).
This Prospectus has been issued by Fertoz for an initial public offering of 15,000,000 new fully paid ordinary Shares at 20 cents per share to raise $3,000,000. The Company retains the right to accept oversubscriptions of 5,000,000 Shares to further raise up to an additional $1,000,000.
The Company’s mission is to become a fertilizer producer initially supplying Canadian / USA markets. The Company’s strategy is:
ɒ to undertake the evaluation of its exploration tenements at Wapiti, Barnes Lake and Crows Nest in Canada in order to identify any potential Direct Shipping Ore (DSO) project of 24% to 28% phosphate (P₂O₅) rock which is capable of generating early cash flow with relatively low capital cost;
ɒ to pursue the joint venture of its early stage Australian exploration projects with prospective joint venture partners to provide funding for exploration and development, in return for an equity interest in the relevant Australian project; and
ɒ to evaluate and identify low capital cost production strategies that would differentiate it from other phosphate companies. albeit there can be no guarantee this will occur. The Company’s two year exploration budget is focused on minimizing expenditure on Australian exploration assets, while developing its exploration assets in Canada in order to identify any potential DSO project. Full details of the Company’s two year exploration budget are set out in Section 3 (Company and Project Overview) of this Prospectus.
The Company’s project locations in British Columbia, Canada are shown in Figure 1 on page 4 and the Company’s project locations in Australia are shown in Figure 2 on page 4 of this Prospectus.
The Company intends to target acquiring exploration tenements that are prospective for phosphate, JORC compliant resources and near-production deposits in strategically located regions in low sovereign risk environments such as Canada, USA, Brazil and Australia.
The Company has assembled an experienced management and Board that have a track record in exploration and development.
This Prospectus includes details of the Offer, the Company, the assets and proposed operations together with a statement of the risks associated with investing in Fertoz. I recommend that you study the document carefully and seek independent professional advice before investing in Fertoz.
On behalf of the board of Directors, I commend this offer to you and look forward to welcoming you as a Shareholder of Fertoz.
Yours sincerely,
James Chisholm CHAIRMAN 3 LTD REPLACEMENT PROSPECTUS 2013
CHAIRMAN’S LETTER
Dear Investor,
On behalf of the Directors I am pleased to present this Prospectus and to offer you the opportunity to invest in Fertoz Ltd (Fertoz or the Company).
This Prospectus has been issued by Fertoz for an initial public offering of 15,000,000 new fully paid ordinary Shares at 20 cents per share to raise $3,000,000. The Company retains the right to accept oversubscriptions of 5,000,000 Shares to further raise up to an additional $1,000,000.
The Company’s mission is to become a fertilizer producer initially supplying Canadian / USA markets. The Company’s strategy is:
ɒ to undertake the evaluation of its exploration tenements at Wapiti, Barnes Lake and Crows Nest in Canada in order to identify any potential Direct Shipping Ore (DSO) project of 24% to 28% phosphate (P₂O₅) rock which is capable of generating early cash flow with relatively low capital cost;
ɒ to pursue the joint venture of its early stage Australian exploration projects with prospective joint venture partners to provide funding for exploration and development, in return for an equity interest in the relevant Australian project; and
ɒ to evaluate and identify low capital cost production strategies that would differentiate it from other phosphate companies. albeit there can be no guarantee this will occur. The Company’s two year exploration budget is focused on minimizing expenditure on Australian exploration assets, while developing its exploration assets in Canada in order to identify any potential DSO project. Full details of the Company’s two year exploration budget are set out in Section 3 (Company and Project Overview) of this Prospectus.
The Company’s project locations in British Columbia, Canada are shown in Figure 1 on page 4 and the Company’s project locations in Australia are shown in Figure 2 on page 4 of this Prospectus.
The Company intends to target acquiring exploration tenements that are prospective for phosphate, JORC compliant resources and near-production deposits in strategically located regions in low sovereign risk environments such as Canada, USA, Brazil and Australia.
The Company has assembled an experienced management and Board that have a track record in exploration and development.
This Prospectus includes details of the Offer, the Company, the assets and proposed operations together with a statement of the risks associated with investing in Fertoz. I recommend that you study the document carefully and seek independent professional advice before investing in Fertoz.
On behalf of the board of Directors, I commend this offer to you and look forward to welcoming you as a Shareholder of Fertoz.
Yours sincerely,
James Chisholm CHAIRMAN CHAIRMAN'S LETTER 4
Figure 1. Fertoz Project Locations in British Columbia, Canada
Figure 2. Fertoz Project Locations in Australia 5 LTD REPLACEMENT PROSPECTUS 2013
1. INVESTMENT OVERVIEW
Important notice: This section is not intended to provide full information for investors intending to apply for Shares offered under this Prospectus. This Prospectus should be read and considered in its entirety.
Where to find Topic Summary more information 1.1 THE COMPANY Who is the Fertoz Ltd (Fertoz or the Company) Section 3.3 issuer of this Prospectus? What is the Fertoz is a phosphate exploration company. Sections 3 nature of Fertoz’s and 7 business? Fertoz was incorporated on 24 August 2010. The Company holds approximately 3,730 km2 of exploration tenements across Canada, and Australia, split between potential Direct Shipping Ore (DSO) phosphate projects (Wapiti, Barnes Lake and Crows Nest in British Columbia) and projects that may require beneficiation if resources are proven (Sherrin North in Queensland, Barrow Creek, Katherine, and Barkly in the Northern Territory).
As at the date of this Prospectus the Company has no income producing assets and will generate losses for the foreseeable future; and does not have resources that comply with the JORC Code and there is no guarantee that the Company will ever have resources that comply with the JORC Code.
What is Fertoz’s The Company aims to become a fertilizer producer initially supplying Canada / Section 3.1 strategy? USA markets. The Company’s strategy is:
ɒ to undertake the evaluation of its exploration tenements at Wapiti, Barnes Lake and Crows Nest in Canada in order to identify any potential Direct Shipping Ore (DSO) project of 24% to 28% phosphate (P₂O₅) rock which is capable of generating early cash flow with relatively low capital cost;
ɒ to pursue the joint venture of its early stage Australian exploration projects with prospective joint venture partners to provide funding for exploration and development, in return for an equity interest in the relevant Australian project; and
ɒ to evaluate and identify low capital cost production strategies that would differentiate it from other phosphate companies.
(albeit there is no guarantee this will occur).
What are the Wapiti East is the Company’s flagship project. The project is proximate to Sections 3 projects? transport infrastructure associated with the coal mines at Tumbler Ridge. and 7
A detailed review of the Company’s projects in Canada and Australia is provided in Section 7 of this Prospectus (Independent Geologist’s Report). Fertoz’s priority is to explore and develop phosphate at its four projects in British Columbia Canada:
ɒ Wapiti East (84 km2) ɒ Wapiti West (79 km2) ɒ Barnes Lake (6 km2) ɒ Crows Nest (15 km2)
The Company has entered into a joint venture with Central Australian Phosphate (ASX:CEN) in respect of one Australian property (Barrow Creek, NT, 744 km2). 1. INVESTMENT OVERVIEW 6
Where to find Topic Summary more information 1.1 THE COMPANY What are the It also has three other projects in Australia where it is seeking prospective Sections 3 projects? (Continued) joint venture partners to expedite exploration and development of potential and 7 phosphate assets:
ɒ Sherrin North, Qld (221 km2) ɒ Barkly, NT (1,630 km2) ɒ Katherine, (818 km2)
What is Fertoz’s Historical financial information regarding the Company is considered in the Section 8, historical financial Investigating Accountant’s Report contained in Section 8 of this Prospectus. 9.2, 9.4 information? You should be aware that the past performance of the Company should not be relied upon as being indicative of future performance.
1.2 SUMMARY OF KEY RISKS What are the key EXPLORATION RISK Section risks? 6.2.3 The Company is an early stage explorer. As such, the future success of the Company and the value of its Shares will depend on the results of exploration for, and development of, phosphate resources. The phosphate mineral claims and exploration licences are at various stages of exploration, and you should understand that phosphate exploration and development are high- risk undertakings. There is no assurance that the money spent on these activities will result in the discovery of recoverable phosphate resources. Even if identified, other factors may mean that the resource is not economically recoverable or may otherwise preclude the Company from successfully exploiting the resource.
RISK OF MINERAL CLAIMS IN CANADA NOT BEING RENEWED Section 6.2.5 Several of the Company’s mineral claims in Canada are due to expire within 12 months of the date of this Prospectus. These include the Barnes Lake project, the Crows Nest project and many mineral claims forming parts of the Wapiti East and Wapiti West projects. Such claims can be renewed if requisite exploration and development work is undertaken (or payment is made in lieu of such work) . Further if such claims are forfeited (provided they have not been staked by a third-party in the interim), then Fertoz may go back at a later date and re-stake the claims. If any of the mineral claims are not renewed, the Company and its operations may be adversely affected through the loss of opportunity to discover, develop and mine any resources on these claims. For details of the process of renewing mineral claims in Canada refer to the Canadian Solicitor’s Tenement Report in Section 10.1.
The Company is mitigating the risk by providing for and commencing the requisite exploration and development work in the proposed exploration program and budget for the next 2 years for the Wapiti East, Wapiti West, Barnes Lake and Crows Nest projects. Refer to the detailed work programs for these projects in Sections 3.3.4, 3.4.4, 3.5.4 and 3.6.4.
If the exploration work is delayed Fertoz intends to make a payment in lieu of exploration to retain the tenements before they expire. The maximum payment required to extend the Good to Date a further 12 months for the tenements due to expire in 2013 / 2014 is approximately CAN$60,333.
7 LTD REPLACEMENT PROSPECTUS 2013
Where to find Topic Summary more information 1.2 SUMMARY OF KEY RISKS RESOURCES RISK Section 6.2.4 At the date of this Prospectus, the Company does not have resources that comply with the JORC Code and there is no guarantee that the Company will ever have resources that comply with the JORC Code.
DEVELOPMENT AND MINING RISK Section 6.2.6 In the event that the Company commences production, its operations may be disrupted by a variety of risks and hazards which are beyond its control, including environmental hazards, industrial accidents, technical failures, labour disputes, lack of skilled labour, unusual or unexpected rock formations, flooding and extended interruptions due to inclement or hazardous weather conditions and fires, explosions and other accidents.
EXPLORATION AND OPERATING COSTS Section 6.2.7 The estimated exploration costs of the Company (including as set out in the proposed budgets and programmes in Section 3 of this Prospectus) are based on certain assumptions with respect to the method and timing of exploration. The actual costs may materially differ from these estimates and assumptions and this may have a material adverse impact on the prospects and financial position of the Company.
PHOSPHATE ROCK PRICES Section 6.2.8 The price which the Company may receive for its phosphate rock depends on numerous factors that are beyond the Company’s control and are inherently unpredictable. This may have a negative effect on the Company’s operations and financial position.
PHOSPHATE ROCK QUALITY Section 6.2.9 The Company has conducted limited testing of phosphate rock from the Wapiti East project. Unforseen changes in phosphate rock properties may result in the product failing to meet the specifications required by potential consumers and this may have a material adverse impact on the prospects and financial position of the Company.
COMMERCIALIZATION RISK Section 6.2.11 Should Fertoz delineate a mineable phosphate resource and complete positive bankable feasibility studies there is no assurance that ultimately project development costs and production costs will result in the economic exploitation of the resource. Furthermore, market prices for phosphate could cause the project to become non-economic.
FUNDING AND ADDITIONAL REQUIREMENT FOR CAPITAL Section 6.2.13 On Completion of the Offer, the Company believes that it will be able to meet the exploration and working capital commitments set out in this Prospectus. However, there is no certainty regarding the ability of the Company to raise sufficient funds to meet the needs of the Company in the future or that such funding will be available to the Company on favourable terms. 1. INVESTMENT OVERVIEW 8
Where to find Topic Summary more information 1.2 SUMMARY OF KEY RISKS INFRASTRUCTURE ACCESS Section 6.2.15 Phosphate produced from the Company’s proposed mining operations is intended to be transported to customers by rail. To date, no definitive agreements have been entered into for rail access. If the Company cannot gain access to such infrastructure, it will have a material negative impact on the value of the Company.
JOINT VENTURE RISK Section 6.2.17 The Company’s exploration strategy for its Australian assets is to engage joint venture partners to carry out exploration in return for equity in the relevant Australian project. Any failure to engage suitable joint venture partners will lead to delays in exploration and may lead to the Australian tenements being reduced in size or relinquished.
FIRST NATIONS NATIVE TITLE, BRITISH COLUMBIA Section 6.2.19 The Wapiti project is on lands which overlap the interests of the following Aboriginal groups: the McLeod Lake First Nation, the West Moberly First Nation and the Saulteau First Nation. Fertoz’s representative is currently in negotiations with all three tribes. The status of these negotiations at the date of this Prospectus is as follows:
ɒ the Company has received a letter of support for the proposed 2013 exploration program for the Wapiti Project from the McLeod First Nation, which states it has no concerns with the present proposal of Fertoz to conduct exploration and investigative activities on the Wapiti West and Wapiti East projects. This correspondence is not binding on the band, and does not in any way mitigate the rights the band, or any other aboriginal group, may adversely affect Fertoz’s ability to explore the tenements in a timely manner.
ɒ Fertoz has initiated on-the-ground archaeological studies at the request of the West Moberly First Nation to identify the existence of any sacred sites. The existence of sacred sites may restrict access to parts of the tenements.
ɒ Fertoz plans to meet with the Saulteau First Nation in the next few weeks. All three First Nations are signatories to Treaty 8 which was signed in 1899. This forms the basis of future negotiations concerning their Aboriginal Rights over the Wapiti tenements. The Akisqnuk First Nation, the Lower Kootenay Band, St. Mary's Indian Band, the Tobacco Plains Indian Band, the Shuswap Indian Band, and the Ktunaxa Nation Council are active in the vicinity of the Barnes Lake and Crows Nest projects. Consultation with these tribes is yet to commence.
The ability of the Company to progress from the exploration phase to the development and mining phases of operations will require successful negotiations with the relevant aboriginal interest group which cannot be guaranteed. The above native title interests may adversely affect the Company’s operations and its ability to explore or develop tenements in a timely manner. 9 LTD REPLACEMENT PROSPECTUS 2013
Where to find Topic Summary more information 1.2 SUMMARY OF KEY RISKS What are the key NATIVE TITLE AND LAND ACCESS, AUSTRALIA Section risks? (Continued) 6.2.20 The Company must comply with the Native Title Act 1993 (Cth) and various other legislation relating to Aboriginal rights, including:
ɒ the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth), the Aboriginal Cultural Heritage Act 2003 (Qld), the Northern Territory Aboriginal Sacred Sites Act 1989 (NT) and the Heritage Act 2011 (NT) which relate to the protection of Aboriginal sacred sites, heritage places and objects;
ɒ the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) which deals with Aboriginal freehold land in the Northern Territory. There are currently native title claims and applications over several of Fertoz’s tenements in Queensland and the Northern Territory. Fertoz has entered into certain agreements with the Indjalandji – Dhidhanu people as registered native title claimants over the land forming Fertoz’s Sherrin North project in Queensland, in relation to exploration work under that project. Fertoz has as yet not initiated native title discussions with respect to its tenements in the Northern Territory.
The requirements under the above Acts may adversely affect the Company’s operations or ability to access, explore or develop tenements.
APPROVALS, PERMITS, LICENCES AND CONSENTS Section 6.2.24 Mining exploration and development companies must obtain numerous permits issued by various governmental agencies and regulatory bodies that impose strict regulations on various environmental and safety matters. The permitting rules are complex and may change over time. This may hinder future development or mining operations and may have an adverse impact on the Company’s operations and financial position.
OTHER RISKS Sections 6.2 and 6.3 The Company is subject to more risks, including: ɒ Exchange rates may adversely affect the Company’s cash flows (as any revenue is likely to be received in US or Canadian dollars);
ɒ Share market and liquidity risk;
ɒ Environment risk;
ɒ Government approval and policy risk; and
ɒ Insurance risk 1. INVESTMENT OVERVIEW 10
Where to find Topic Summary more information 1.3 KEY OFFER DETAILS What is the Offer? The Offer is an initial public offering of a minimum of 15,000,000 Shares at 20 Section 4.1 cents each to raise $3,000,000. The company may issue a further 5,000,000 Shares to raise up to an additional $1,000,000 in oversubscriptions. All Shares issued pursuant to this Prospectus will be fully paid and will rank equally in all respects with the Shares currently on issue.
Why is the Offer The Offer is being conducted to: Section 4.2 being conducted? ɒ fund a 2 year program to explore and develop the current projects of the Company (primarily those located in Canada);
ɒ provide general working capital which may be applied in undertaking a review of any complementary resource projects that the Board considers has the potential to add value for Shareholders;
ɒ fund corporate administration costs;
ɒ pay the costs of the Prospectus process; and
ɒ allow access to equity markets in order to assist funding any future development of its existing projects and pursuing any other complementary resource opportunities
What will be the The capital structure of the Company on Completion of the Offer is Section 4.4 capital structure summarised below. of the Company on Completion of the Offer? CAPITAL STRUCTURE MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION Shares on issue at date of the 25,009,595 25,009,595 Prospectus New Shares issued under the 15,000,000 20,000,000 Prospectus Total Shares on Issue on 40,009,595 45,009,595 Completion of the Offer Total Options on Issue 10,615,384 10,615,384
Will existing Subject to the Company being admitted to the Official List, certain Shares on Section 4.12 shareholders issue prior to the Offer will be classified by ASX as restricted securities under be subject to the ASX Listing Rules and will be required to be held in escrow for up to 24 escrow? months from the date of Listing. In addition, the Company has or proposes to enter into voluntary escrow agreements with certain Shareholders for the escrow of their Shares and Options for a period of 12 months commencing on Listing. For more details about the proposed escrow arrangements see Section 4.12. How will the The table below sets out the intended application of funds raised under the proceeds of the Prospectus over a two year period on the basis of the Company raising the offer be used? Minimum Subscription and the Maximum Subscription under the Offer. Actual expenditures may vary from these estimates and the Board reserves the right to appropriately vary expenditure dependent on circumstances and other opportunities. 11 LTD REPLACEMENT PROSPECTUS 2013
Where to find Topic Summary more information 1.3 KEY OFFER DETAILS How will the Section 4.3 proceeds of the MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION offer be used? AUD AUD (Continued) USE OF PROCEEDS YEAR 1 YEAR 2 YEAR 1 YEAR 2 Estimated cash prior to the $1,189,032 $1,189,032 Offer1 Gross Proceeds of the Offer $3,000,000 $4,000,000 Total Cash Available $4,189,032 $2,029,032 $5,189,032 $2,809,032 Wapiti East Exploration $850,000 $500,000 $850,000 $850,000 Wapiti West Exploration $50,000 $200,000 $100,000 $450,000 Barnes Lake Exploration $50,000 $100,000 $100,000 $150,000 Crows Nest Exploration $50,000 $100,000 $100,000 $150,000 Australia Exploration $150,000 $150,000 $150,000 $150,000 Costs of Offer $410,000 $0 $480,000 $0 Working Capital and $600,000 $600,000 $600,000 $600,000 Administration
Total $2,160,000 $1,650,000 $2,380,000 $2,350,000
1 Cash as at 31 March 2013 plus $250,000 tenement sales plus $500,000 capital raise – refer to Section 9.5.3.
Will the Company The Directors believe that following Completion of the Offer and satisfaction of Section 4.8 be adequately the Minimum Subscription, the Company will be able to meet the exploration funded after and working capital commitments set out in this Prospectus. Completion of the Offer?
Will further Further funding will be required to develop the Wapiti project (if the Company’s Section 4.8 funding be exploration identifies a phosphate resource capable of being developed). This required to could take the form of debt and / or equity funding. complete the Wapiti project?
Is there a Yes, the Minimum Subscription to be raised under the Offer is $3,000,000. Section 4.11 minimum The Company will not issue any Shares pursuant to this Prospectus until the subscription Minimum Subscription is satisfied. Should the Minimum Subscription not be condition under reached within 4 months from the date of this Prospectus, the Company will the Offer? either repay the Application Monies to the Applicants or issue a supplementary prospectus or replacement prospectus to allow Applicants one month’s notice to withdraw their Applications and be repaid their Application Monies. No interest will be paid on refunded Application Monies.
Oversubscriptions of up to 5,000,000 Shares at an issue price of $0.20 each to raise an additional $1,000,000 may be accepted by the Company.
Will the Shares be The Company has applied to the ASX to be admitted to the Official List of the Section 4.11 listed? ASX and for Official Quotation of the Shares on the ASX.
Is the Offer No, the Offer is not underwritten. Section 4.11 underwritten? 1. INVESTMENT OVERVIEW 12
Where to find Topic Summary more information 1.3 KEY OFFER DETAILS Am I eligible to The Offer is open to the general public and institutional investors who are Section 4.11 participate in the Australian residents and to certain other institutional investors in certain other Offer? jurisdictions (excluding US Persons, and as permitted by the laws of such other jurisdictions).
What is the Applications for Shares must be for a minimum of 10,000 Shares (representing Section 4.11 minimum and Application Money of $2,000) and thereafter in multiples of 1,000 Shares maximum (representing Application Money of $200). Application size under the Offer?
How can I apply Applicants should complete the enclosed Application Form and submit it, Section 4.11 for Shares? together with the necessary Application Monies on or before 5pm AEST on 16 August 2013 to:
Computershare Investor Services Pty Limited GPO Box 52 Melbourne Victoria 8060
If my application Statements confirming successful Applicants’ allocations under the Offer are Section 4.11 is accepted, when expected to be despatched to Shareholders on or around 23 August 2013 . will I receive confirmation of my allocation?
How can I obtain If you are unclear in relation to any matter or are uncertain as to whether Section 4.11 more information? Fertoz is a suitable investment for you, you should seek professional guidance from your solicitor, stockbroker, accountant or other independent adviser before deciding whether to invest.
Can the Offer be Fertoz reserves the right not to proceed with the Offer at any time before the Section 4.15 withdrawn? issue of Shares to successful Applicants.
If the Offer does not proceed, Application Monies will be refunded. No interest will be paid on any Application Monies refunded as a result of the withdrawal of the Offer. 13 LTD REPLACEMENT PROSPECTUS 2013
Where to find Topic Summary more information 1.4 DIRECTORS AND MANAGEMENT Who are the The Directors are: Section 5.1 Directors and Key Management? James Chisholm (Non-Executive Chairman) ɒ qualified engineer
ɒ 28 years’ experience in the engineering, mining, oil, and gas sectors
ɒ co-founded The Chairmen1 Pty Ltd which sold its assets to Guildford Coal Ltd (ASX: GUF), becoming its largest shareholder
ɒ non-executive director of Ebony Coal Limited and non-executive Chairman of Atrum Coal NL (ASX: ATU)
Les Szonyi (Managing Director and Chief Executive Officer) ɒ over 30 years’ experience in the chemicals processing industry including 18 years at Orica (formerly ICI Australia) and five and a half years leading Queensland Nitrates (QNP) (an integrated manufacturer of ammonia, nitric acid and ammonium nitrate)
ɒ holds a Bachelor of Engineering and PhD in chemical engineering, is a graduate of the Australian Institute of Company Directors and is a member of the Institute of Chemical Engineers
Peter Bennetto (Non-Executive Director)
ɒ over 30 years’ experience in banking and investment
ɒ was a founding director of Anaconda Nickel Ltd and is currently the non- executive chairman of Ironbark Zinc Ltd (ASX: IBG)
ɒ has held company director positions in exploration, mining and manufacturing companies listed on the ASX since 1990
Adrian Byass (Non-Executive Director) ɒ over 18 years’ experience in the mining and minerals industry
ɒ a Competent Person for reporting to the ASX for certain minerals
ɒ a director of Ironbark Zinc Limited (ASX: IBG), Corazon Mining Limited (ASX: CZN) and Plymouth Minerals Limited (ASX: PLH). 1. INVESTMENT OVERVIEW 14
Where to find Topic Summary more information 1.4 DIRECTORS AND MANAGEMENT Directors and Key The Company’s Managers are Section 5.1 Management? (Continued) Julien McInally (Company Secretary and Chief Financial Officer)
ɒ over 15 years of resource industry experience with public listed companies on the TSXV, AIM and ASX stock exchanges
ɒ holds a CPA and MBA Jo Shearer (Chief Operating Officer, Canada)
ɒ over 35 years of experience in geology and exploration primarily in Canada, the US and parts of South America
ɒ fellow of the Geological Association of Canada, Geological Society of London, Canadian Institute of Mining & Metallurgy and the Society of Economic Geologists
ɒ identified the Wapiti project for Fertoz and has assisted in securing the Barnes Lake and Crows Nest exploration ground
ɒ currently reviewing other small, potentially near-term phosphate deposits in North and South America that could be developed by Fertoz
ɒ based in Vancouver, Jo oversees the Canadian operations of Fertoz including the management of all on-ground exploration and the Company’s future exploration projects in Canada
ɒ contracts his services through Homegold Resources Ltd
ɒ Jo has received benefits from the Company which are detailed in Section 5.5 For detailed biographies of the Company’s Directors and managers see Section 5.1.
What are the Fertoz is a party to a number of related party transactions which you should Sections significant consider prior to investing in the Company. 5.2, 5.4 and interests of 5.5 Directors and key Information relating to the Company's transactions with Jo Shearer, Fertoz’s management? Chief Operating Officer in Canada, and benefits received by Jo Shearer from the Company, are outlined in Section 5.5.
Information relating to Directors’ interests in Fertoz’s shares and options is outlined in Section 5.2 and details of related party transactions with Directors are outlined in Section 5.4. 15 LTD REPLACEMENT PROSPECTUS 2013
Where to find Topic Summary more information 1.5 SUBSTANTIAL SHAREHOLDERS Who are Those Shareholders holding 5% or more of the shares on issue as at the date Section 4.5 the Fertoz’s of this Prospectus and on Completion of the Offer are set out in the respective substantial tables below. shareholders?
As at date of the Prospectus NUMBER PERCENTAGE RANK NAME OF SHARES SHAREHOLDING 1 James Chisholm (Lenark Pty Ltd, Kifaco Pty Ltd, 5,214,380 20.85% Left Brain Strategies Pty Ltd) 2 Gary Gynn (Gynn Holdings Pty Ltd, Gary Gynn 1,888,749 7.55% Superannuation Fund, Michael Gynn, Julia Gynn, Andrea Gynn) 3 J P Morgan Nominees Australia Pty Ltd 1,704,782 6.82% 4 Gregory Francis Hogan 1,428,986 5.71%
On completion of the Offer1 PERCENTAGE SHAREHOLDING NUMBER OF MINIMUM MAXIMUM RANK NAME SHARES SUBSCRIPTION SUBSCRIPTION 1 James Chisholm2 (Lenark Pty 5,214,380 13.03% 11.59% Ltd, Kifaco Pty Ltd, Left Brain Strategies Pty Ltd)
1 Assuming no existing substantial shareholder is issued additional shares pursuant to the Offer and no new investors become substantial shareholders.
2 James Chisholm is a Director and the Non-executive Chairman of the Company.
1.6 INTERESTS OF DIRECTORS What interests do As at the date of this Prospectus, the Directors have a relevant interest in Section 5.2 Directors have in Shares and Options as set out in the Table below: Fertoz?
OPTIONS EXERCISE DIRECTOR SHARES OPTIONS1 PRICE TOTAL OPTIONS James Chisholm 5,214,380 615,385 25 cents 1,230,769 307,692 35 cents 307,692 45 cents Peter Bennetto 819,042 615,385 25 cents 1,230,769 307,692 35 cents 307,692 45 cents Adrian Byass 0 307,692 25 cents 923,076 307,692 35 cents 307,692 45 cents Leslie Szonyi 678,679 615,385 25 cents 2,461,540 615,385 35 cents 615,385 45 cents 615,385 55 cents
1 Options have a four year term from date of Listing. 1. INVESTMENT OVERVIEW 16
Where to find Topic Summary more information 1.6 INTERESTS OF DIRECTORS What The annual remuneration (inclusive of superannuation) which Fertoz has Section 5.3 remuneration do agreed to pay each of the Directors as at the date of this Prospectus is set Directors receive? out in the table below. The remuneration payable to James Chisholm, Peter Bennetto and Adrian Byass will not commence until Listing:
DIRECTOR ANNUAL REMUNERATION Mr James Chisholm $36,000 Mr Peter Bennetto $36,000 Mr Adrian Byass $36,000 Dr Les Szonyi (CEO) $330,000
What significant EXECUTIVE AGREEMENT – LES SZONYI Section 5.3 agreements does and 11.8 the Company have Fertoz entered into a binding Executive Agreement with Dr Les Szonyi on 21 with Directors or January 2011. Under the Executive Agreement, Dr Szonyi is appointed as the related parties? Chief Executive Officer of the Company. Dr Szonyi receives an annual salary of $330,000 including superannuation. Please refer to Section 11.8 for full details of the Executive Agreement. Dr Szonyi does not receive any additional remuneration in relation to his engagement as Managing Director of the Company. Please refer to Section 11.9 for a summary of the terms of Dr Szonyi’s engagement as Managing Director.
DIRECTOR PERFORMANCE OPTIONS Section 5.2 and 12.2 The Directors have been issued with performance Options as outlined in Section 5.2 and 12.2.
DIRECTORS’ LETTERS OF ENGAGEMENT Section 11.9, 11.10 The key terms of the Directors’ letters of engagement are outlined in Section 11.9 and Section 11.10. 17 LTD REPLACEMENT PROSPECTUS 2013
2. INDUSTRY OVERVIEW
2.1 WHAT ARE THE DRIVERS FOR INCREASING FERTILIZER DEMAND? Phosphorus, Nitrogen, and Potassium are the 3 primary nutrients required for plant growth. The depletion of these nutrients in soil is commonly replaced by the use of commercial fertilizers. The demand for fertilizers is closely linked to population growth and increasing agricultural output.
According to UN data, during the fifty year period between 1961 and 2009, agricultural land increased by 12% but total agricultural food output increased a remarkable 150%. This success was to a large degree a consequence of the introduction of new technologies, fertilizers, pesticides and high-yield crops.
Figure 3. Population & Fertilizers
Source: http://npk101.wordpress.com/2012/05/30/fertilizer-industry-fundamentals/
The world’s population has grown from 2.5 billion people in 1950 to 7.08 billion in May 2013, and in order to continue feeding an always growing population, expected to reach more than 9 billion in 2050, the fertilizer industry will have to continue its contribution to agricultural growth to meet rising demand for food.
The increasing world population, changes in dietary habits to increased meat and dairy products, the need for increased primary production yields and the increased demand for biofuels is driving the increased use of fertilizer around the world. In addition, arable land per capita has been decreasing and this trend is expected to continue. In 2008 with a world population of 6.7 billion the arable land per person was 0.51 acres. This is expected to fall to 0.38 arable acres per person by 2050 if the population reaches 9 billion. All of these factors contribute to an expanding fertilizer market. 2. INDUSTRY OVERVIEW 18
2.2 WHY IS PHOSPHATE LINKED TO FERTILIZER DEMAND? Phosphorus (P) is a macronutrient required by all crops, and is found in inorganic phosphate rock. Phosphorous is vital for root development and helps plants resist drought. It is also important for plant growth and development, such as the ripening of seeds and fruit.
There is no substitute for the element phosphorus in the growth of all living organisms. While other critical global resources, such as oil, can be replaced with renewable energy sources, such as wind or solar power, no other element can replace phosphorus in food production.
Phosphorus in all commercial fertilizers comes from phosphate rock, found in deposits originally laid down beneath the oceans and later lifted up with land masses. Phosphate rock is found in two types of deposits – sedimentary and igneous. The vast majority – over 90% – of deposits are sedimentary. Fertoz is targeting sedimentary phosphate deposits. Phosphate rock is mined to provide phosphorous for a variety of commercial fertilizer blends. Typically economic phosphate deposits are shallow and traditionally mined by open cut methods. Common Phosphate fertilizer products include:
ɒ Single superphosphate (SSP)
ɒ Triple superphosphate (TSP)
ɒ Diammonium phosphate (DAP)
ɒ Monoammonium phosphate (MAP)
ɒ Ground phosphate rock
2.3 WHAT IS THE WORLD SUPPLY AND DEMAND FOR PHOSPHATE ROCK? Phosphate rock production in 2010 was 182 million tonnes of approximately 30%-32% P2O5. It increased to approximately 200 million tonnes in 2011. A breakdown of production by country is shown in Figure 4 below.
Much of the growth in world phosphate rock output over the last decade has been in China and Morocco. China produces approximately 40% of the world’s phosphate rock but uses almost all of it for domestic production. Morocco and USA both produce approximately 14% of the world’s phosphate rock each. 19 LTD REPLACEMENT PROSPECTUS 2013
Figure 4. Phosphate Rock Production by Top 10 Producers (2010)
11% 2% 2% China 2% Morocco USA 3% 38% Russia 4% Tunisia Jordan 4% Brazil
6% Syria Egypt Israel 14% Other 14%
Source : Integer Research: Phosphate Cost and Profit Margin Service Issue 2, Vol1 2012
Approximately 30 million tonnes of 28% to 39% P₂O₅ grade phosphate rock are exported from producing countries each year. The three largest exporters in 2010 were Morocco (34%), Jordan (14%) and Syria (10%) as shown in Figure 5 below. Note also that approximately 79% of world phosphate rock exports are from Africa or the Middle East.
Figure 5. Phosphate Rock Exports by Top 10 Countries (2010)
2% 9% Morocco 3% Jordan 3% Syria 34% 3% Egypt Russia 5% Algeria China 7% Israel Togo 8% Tunisia 14% Other 10%
Source : Integer Research: Phosphate: Cost and Profit Margin Service Issue 2, Vol1 2012 2. INDUSTRY OVERVIEW 20
China and India account for almost half of global phosphate fertilizer consumption. The difference between the two countries is that China has vast phosphate resources, while India has barely any.
The top ten importers of phosphate rock in the world are shown in Figure 6 below. The largest, India, relies heavily on imports of phosphate rock (23%), phosphoric acid, and finished products.
Brazil holds only 0.4% of the world’s phosphate reserves but at present is the fourth largest consumer of fertilizer in the world and is a net importer. These needs are expected to increase as a result of the rapidly expanding agricultural sector of the Brazilian economy. Brazil is one of the world’s largest agricultural producers (Integer Research: Phosphate Cost and Profit Margin Service Issue 2, Vol2, 2012.
The USA has become the second largest importer of phosphate rock importing 8% of world rock phosphate production. Between 2008 and 2011, 88% of phosphate rock imports to the USA were from Morocco (USGS February 2013).
Canada has one operating phosphate mine in Ontario owned by Agrium Inc ( TSX : AGU ) . It is due to shut down in 2013, when Agrium is expected to import approximately 900,000 tpa of phosphate rock from Morocco and process it at its Redwater plant in Alberta.
Figure 6. Phosphate Rock Imports by Top 10 Countries (2011)
9% India 1% USA Belgium 2% 23% 2% Poland Lithuania 3% Indonesia Brazil 4% Korea Re Mexico 4% Spain
4% 8% Other 5%
Source : Integer Research: Phosphate Cost and Profit Margin Service Issue 2, Vol1 2012
Phosphate demand is projected to grow at 2.5% per annum through to 2021. This represents approximately an additional 50 million tonnes of phosphate rock or approximately 5 million tonnes per annum. (Integer Research: Phosphate Cost and Profit Margin Service Issue 2, Vol2 2012). 21 LTD REPLACEMENT PROSPECTUS 2013
2.4 WHAT ARE PHOSPHATE PRICING TRENDS? Figure 7 below charts the Phosphate rock price from 2007 to April 2013, indicating the spike in 2008, and gradual increase in 2010. In the last 3 months of 2012 it was stable at US$185/t FOB Morocco, dropped to $179/t in January 2013 and stabilised at $170/t in February / March 2013 before softening to US$167.50/t in April 2013.
The phosphate rock FOB Morocco price is forecast to be between US$140/t and US$175/t from 2013 to 2016. This assumes new phosphate rock capacity balances growth in demand and that major phosphate rock suppliers do not deliberately depress prices to stop new entrants into the market (Integer Research: Phosphate Cost and Profit Margin Service Issue 2, Vol2 2012).
Figure 7. Phosphate Rock Historical Commodity Price Trends
Source: Index Mundi
2.5 COMPETITIVE LANDSCAPE The United States and Canada are agricultural powerhouses - and as such, each is highly dependent on phosphate-laden fertilizer. Canada is the world’s leading supplier of rapeseed, from which canola oil is made, the fifth-largest producer of wheat and a top ten producer of turkey meat, soybeans and beef. The United States is the top producer of corn, soybeans, cow’s milk, beef, chicken and turkey meat and a top-three producer of tomatoes, lettuce, pig meat, oranges, cherries, eggs and wheat. The USA is the second leading producer of hops and the third largest grape grower. Corn and wheat are particularly phosphate-intensive crops.
The U.S. phosphate rock mining industry has not exported phosphate rock since 2003 and has imported an average 2.5 Mt each year since 2002 to meet U.S. demands. In 2011 this increased to 3.35 Mt and was estimated to be 2.85 Mt in 2012 (USGS Feb 2013). 2. INDUSTRY OVERVIEW 22
U.S. production of phosphate rock will likely remain the same or decrease slightly through 2015 (USGS, 2011). Domestic phosphate rock in the U.S. was mined by 6 firms in 2012 at 11 mines in 4 states. A twelfth mine located in Idaho is under review for permitting; this production is planned to replace an existing mine.
The strategy of existing phosphate companies in the USA is to open new mines to replace mines that are due to close. Mosaic Fertilizer LLC ( NYSE : MOS ) and CF Industries Holdings Inc ( NYSE : CF ) have applications in process to extend and open 4 new mines in Florida (Final AEIS CFPD April 2013 Chapter 1). Monsanto ( NYSE : MON) and Agrium Inc ( TSX : AGU ) are also working on new mine applications in Idaho. Two exploration companies currently actively working on establishing phosphate mines in North America are Stonegate Agricom (an underground mine in Idaho) ( TSX : ST ) and D’Arianne Resources (Quebec, Canada) ( TSX : DAN ).
As previously noted (Section 2.3), Canada has one operating phosphate mine in Ontario owned by Agrium. It is due to shut down in 2013, when Agrium is expected to import approximately 900,000 tpa of phosphate rock from Morocco and process it at its Redwater plant in Alberta.
Office Cherifien des Phosphates (OCP), which is 94% owned by the Moroccan government, holds a disproportionate share of global phosphate reserves (85%, or 50 billion metric tons) and has committed to investing upwards of US$5 billion over the next decade to develop the infrastructure for new mines and wash plants. Beyond expanding its phosphate rock output, the Moroccan government is making significant investments to shift the industry toward beneficiation and fertilizer production. Moroccan exports of phosphate rock are poised to decline by more than 10% by 2015 as OCP converts more of its rock phosphate to fertilizer products di-ammonium phosphate (DAP) and mono-ammonium phosphate (MAP).
North America is a net exporter of phosphate fertilizers. Hence the expected decline in phosphate rock exports from Morocco could put pressure on North American producers to find alternate sources of phosphate closer to home. The development of Fertoz’s phosphate projects in British Columbia gives the Company an excellent opportunity to take advantage of the ongoing shortfall of domestically produced phosphate rock in North America. 23 LTD REPLACEMENT PROSPECTUS 2013
3. COMPANY AND PROJECT OVERVIEW
3.1 COMPANY BACKGROUND
3.1.1 About Fertoz Fertoz Pty Ltd was incorporated in Victoria on 24th August 2010. It was converted to a public company on 5th July 2012. Fertoz is a phosphate exploration company. It quickly developed an extensive portfolio of Australian exploration licences and exploration licence applications in the Northern Territory and Queensland.
The Company expanded its holdings through acquisitions in Canada and created a 100% owned subsidiary, Fertoz International Inc., a Canadian registered company. Fertoz International acquired four projects in British Columbia, Canada – Wapiti East, Wapiti West (March 2012), Barnes Lake (July 2012) and Crows Nest (October 2012). Both Wapiti East and Wapiti West were expanded in 2013 with the acquisition of a further 22 tenements.
3.1.2 Company Structure The Company structure is illustrated below:
*,(1,
*,(1', *' ,"(' %' -+,* %" '
(*,! *' **",(*0 - '+% ' .'+( ,! .'+( ,! /)%(* ,"(' /)%(* ,"(' )","*(# , *' + $ *(# , ' *&",+ *&", /)%(* ,"(' *&",+ *(.+ +,*(# , /)%(* ,"(' *&",+
3.1.3 Business Model The Company’s aim is to become a fertilizer producer initially supplying Canadian / USA markets. The Company’s strategy is:
ɒ to undertake the evaluation of its exploration tenements at Wapiti, Barnes Lake and Crows Nest in Canada in order to identify any potential Direct Shipping Ore (DSO) project of 24% to 28% phosphate (P₂O₅) rock which is capable of generating early cash flow with relatively low capital cost;
ɒ to pursue the joint venture of its early stage Australian exploration projects with prospective joint venture partners to provide funding for exploration and development, in return for an equity interest in the relevant Australian project; and
ɒ to evaluate and identify low capital cost production strategies that would differentiate it from other phosphate companies. albeit there can be no guarantee this will occur. The Company’s two year exploration budget is focused on minimizing expenditure on large Australian exploration assets, while developing its smaller near term production assets, all of which are currently in Canada. The Directors believe that following Completion of the Offer and satisfaction of the Minimum Subscription, the Company will be able to meet the exploration and working capital commitments set out in this Prospectus. 3. Company & Project Overview 24
The Company intends to target acquiring exploration tenements that are prospective for phosphate, JORC compliant resources and near-production deposits in strategically located regions in low sovereign risk environments such as Canada, USA, Brazil and Australia. Currently, the Company does not have resources that comply with the JORC Code and there is no guarantee that the Company will ever have resources that comply with the JORC Code.
3.2 Canadian Projects overview Fertoz’s projects in order of priority are detailed below. The main areas of focus for exploration expenditure under this Offer are the four Canadian projects – Wapiti East and Wapiti West which constitute the Wapiti projects, Barnes Lake and Crows Nest. The Wapiti projects consist of 40 claims and cover an area of 15,838 hectares (158.38 km2). The claims are spread over a 125 km ridge line and form two projects. The Barnes Lake and Crows Nest projects consist of a total of two claims and cover an area of 2,081 hectares (20.8 km2).
Wapiti East is the Company’s flagship project. The project is supported by good logistics with it located approximately 75 km from Tumbler Ridge, a coal mining centre. The project’s proximity to good rail infrastructure (refer to Figure 8) and proximity to the US and Canadian markets is a strong advantage should the Company be able to delineate and ultimately mine a phosphate reserve.
Figure 8. Canadian Rail Network
• Fertoz assets • Agrium Processing Plant at Redwater
Source: bc_railmap www.airways.com
The table below shows the current status of the Canadian Mineral Claims by project. A detailed review of each project is given in Section 7 (Independent Geologist’s Report). 25 LTD REPLACEMENT PROSPECTUS 2013
Table 1: Status of the Canadian Mineral Claims TENEMENT APPROX. REGISTERED 2013 / 2014 PROJECT NAME NUMBER SUB BLOCKS AREA (HA) EXPIRY DATE HOLDER RENT CAN$ Wapiti East WK-1 851942 24 450.83 21/04/2017 Fertoz International N/A1 WK-2 851948 24 451.02 21/04/2017 Fertoz International N/A1 WK-3 851952 24 450.77 21/04/2017 Fertoz International N/A1 WK-4 851958 24 451.20 21/01/2017 Fertoz International N/A1 WK-5 941760 24 450.83 21/01/2017 Fertoz International N/A1 WK-6 941761 25 469.87 21/01/2017 Fertoz International N/A1 WK-7 941762 24 450.86 21/01/2017 Fertoz International N/A1 WK-8 941763 24 451.08 21/01/2017 Fertoz International N/A1 WK-9 941764 24 451.33 21/01/2017 Fertoz International N/A1 WK-10 941769 24 451.36 21/01/2017 Fertoz International N/A1 WK-11 955278 25 470.31 21/01/2017 Fertoz International N/A1 WK-12 956829 12 225.35 21/01/2017 Fertoz International N/A1 WK-ONE 982744 1 18.80 21/01/2017 Fertoz International N/A1 Wapiti NE 1015556 20 375.54 31/12/2013 Fertoz International $ 1,877.70 Wapiti Two 1015557 9 168.93 31/12/2013 Fertoz International $ 844.65 Wapiti S 1015558 20 376.35 31/12/2013 Fertoz International $ 1,881.75 WAP S2 1018104 24 451.82 27/03/2014 Fertoz International $ 2,259.10 WAP S3 1018106 24 451.75 27/03/2014 Fertoz International $ 2,258.75 WAP S4 1018107 24 451.93 27/03/2014 Fertoz International $ 2,259.65 WAP S5 1018108 24 452.09 27/03/2014 Fertoz International $ 2,260.45 WAP S6 1018109 24 452.30 27/03/2014 Fertoz International $ 2,261.50 Wapiti West Tunnel 1 942096 24 446.13 23/01/2014 Fertoz International $ 2,230.65 Tunnel 2 942097 24 445.97 23/01/2014 Fertoz International $ 2,229.85 Sukunka 1 851714 1 18.51 15/09/2014 Fertoz International $ 92.55 Sukunka 2 980302 24 444.23 15/09/2014 Fertoz International $ 2,221.15 PAL 1 942169 1 18.49 23/01/2014 Fertoz International $ 92.45 PAL 2 1018084 24 443.88 27/03/2014 Fertoz International $ 2,219.40 PAL 3 1018085 21 388.49 27/03/2014 Fertoz International $ 1,942.45 PAL 4 1018086 24 444.10 27/03/2014 Fertoz International $ 2,220.50 SUK 3 1018087 24 444.32 27/03/2014 Fertoz International $ 2,221.60 SUK 4 1018095 24 444.53 27/03/2014 Fertoz International $ 2,222.65 SUK 5 1018096 24 444.71 27/03/2014 Fertoz International $ 2,223.55 SUK 6 1018097 24 444.89 27/03/2014 Fertoz International $ 2,224.45 SUK 7 1018098 24 445.08 27/03/2014 Fertoz International $ 2,225.40 SUK 8 1018099 24 445.25 27/03/2014 Fertoz International $ 2,226.25 SUK 9 1018101 24 445.39 27/03/2014 Fertoz International $ 2,226.95 SUK 10 1018102 24 445.57 27/03/2014 Fertoz International $ 2,227.85 SUK 11 1018103 24 445.80 27/03/2014 Fertoz International $ 2,229.00 Tunnel 3 1018100 24 442.64 27/03/2014 Fertoz International $ 2,213.20 T11 1018128 17 316.18 27/03/2014 Fertoz International $ 1,580.90 Barnes Lake 1011319 29 608.98 19/07/2013 Fertoz International $ 3,044.90 Crows Nest 1013727 71 1,471.81 14/10/2013 Fertoz International $ 7,359.05 TOTAL 42 948 17,919.27 $63,378.30
1 N/A – Not Applicable – rent is only due at expiry of the tenement. Sufficient exploration was carried out in 2012 to extend “Good to Date” and avoid rent payment in 2013 or 2014. 3. COMPANY & PROJECT OVERVIEW 26
As referred to in Section 6.2.5, several of the Company’s mineral claims in Canada are due to expire within 12 months of the date of this Prospectus. These include the Barnes Lake project, the Crows Nest project and many mineral claims forming parts of the Wapiti East and Wapiti West projects. Within one year of completing exploration and development work on a claim, the Recorded Holder must file a report detailing that work with the Ministry. Filing of work on a tenement (or making payments in lieu of such work) automatically extends the Good To Date, for a period of at least 12 months. Note that the Good To Date can be extended further than 12 months by carrying out more than the minimum required exploration of CAN$5 per hectare.
In the event the claims are forfeited, and provided they have not been staked by a third-party in the meantime, the Fertoz may go back at a later date and re-stake the claims.
If any of the mineral claims are not renewed, the Company and its operations may be adversely affected through the loss of opportunity to discover, develop and mine any resources on these claims.
Refer to the Canadian Solicitor’s Tenement Report in Section 10.1 for further details about the process for renewing mineral claims in Canada.
The Company is mitigating the risk of these mineral claims not being renewed by providing for and commencing the requisite exploration and development work in its proposed exploration program and budget for the next 2 years for the Wapiti East, Wapiti West, Barnes Lake and Crows Nest projects. Fertoz considers that it will be able to complete the requisite exploration and development work (or make the required payments in lieu of such work) and thereby obtaining an extension of the terms of the respective tenements. Exploration work on Barnes Lake of approximately CAN$15,000 was completed in July and the report is being finalised. It will be submitted prior to 19 July and it is expected the Good to Date will be extended to 19 July 2016.
If the exploration work is delayed Fertoz intends to make a payment in lieu of exploration to retain the tenements before they expire. The maximum payment (from Table 1) required to extend the Good to Date a further 12 months for the tenements due to expire in 2013 / 2014 is approximately CAN$60,333 (It excludes Barnes Lake rent as exploration work has been completed and no payment in lieu will be required).
There is no requirement to reduce the area of a claim after a designated number of operational years (regardless of any maintenance or extension of the term of the tenement and Good To Date, and regardless of any forfeiture and re-staking of any claim). 27 LTD REPLACEMENT PROSPECTUS 2013
3.3 WAPITI EAST PROJECT
3.3.1 Wapiti East Project Overview The Wapiti East phosphate project is located approximately 145 km north-east from Prince George and 75 km south-east of the coal mining town of Tumbler Ridge. The Wapiti East project contains 21 adjacent claims extending over a distance of approximately 21 km and covers an area of 84.24 km2 as shown in Figure 9 below.
Sixteen of the 21 claims for Wapiti East project were acquired by Johan Thomas Shearer. They formed part of the Wapiti Option Agreement for which Fertoz made a payment of CAN$5,000 in March 2012. The full terms of the Agreement are outlined in Section 11.2. Fertoz International acquired 100% ownership of these tenements on 6 April 2013. The remaining five claims (WAP2 – WAP6) were acquired by Fertoz International in March 2013.
Figure 9. Wapiti East Project Tenement Location Map
3.3.2 Wapiti East Project History The Wapiti East phosphate project is an early stage exploration project, initiated in 2012, orientated toward defining and confirming historical field results documented by ESSO Resources Canada Limited (“ESSO”) in 1980 and Pacific Ridge Exploration Ltd ("Pacific Ridge") in 2008.
ESSO performed exploration work over the current area of Fertoz’s Wapiti East Project between 1978 and 1980 (Heffernan 1980). A reconnaissance program was completed during in the first two years and comprised geological mapping (at 1:10,000 and 1:25,000 scales), detailed trenching and a 12 hole diamond core drill program (including downhole gamma logging). Eight of the holes produced results of between 20.3% and 26.3% P₂O₅ over approximately 1 metre seam widths at depths ranging from 23 metres to 94 metres as detailed in Table 4.4 of the Independent Geologist’s report in Section 7. ESSO’s work straddles Fertoz’s Wapiti 3. COMPANY & PROJECT OVERVIEW 28
East claim block and the Wapiti Provincial Park, which borders the claims to the north.
Pacific Ridge conducted helicopter supported reconnaissance style rockchip sampling and follow-up hand trenching of the Wapiti East project in 2008 (Norman and Renning, 2009).
A total of 33 samples, including seven grab float samples and 26 rockchip trench samples, were collected from the Wapiti East claims. Impressive phosphate values over significant widths were located within the Wapiti East claims with hand trenched results of up to 34.7% P₂O₅ over 2 metre wide seams (Norman and Renning, 2009A).
No reported further work has been carried out on the project prior to Fertoz International Inc. acquiring it in March 2012. Fertoz has since spent over CAN$200,000 in exploration of Wapiti East project.
Fertoz fieldwork consisted of reconnaissance rock sampling conducted during the month of August 2012, followed up by a small diamond drilling program, which was completed in October 2012. The surface sampling program and subsequent core drilling in 2012 was able to produce encouraging results comparable to the historical work.
Grab samples in 2012 assayed up to 35.5% P₂O₅ and a section in Hole WF-12-03 returned a weighted average of 20.03 % P₂O₅ over a width of 1.45 metres at a depth of 12.66 metres.
This initial exploration phase of the Wapiti phosphorite project has given Fertoz a first-hand confirmation of the ESSO data. The geological mapping suggests that the phosphorite horizon can be subdivided into seven (7) segments with a total strike length of over 27 km: a. East Limb of Red Deer Syncline (south of Red Deer Creek) 5.5 km in length b. East Limb of Red Deer Syncline (north of Red Deer Creek) 3.5 km in length c. Multiple Subsidiary Folds Area, West Limb of Red Deer Syncline 2 km in length d. West Limb of Red Deer Syncline 10.5 km plus e. West Limb of Wapiti Syncline 1 km f. East Limb of Wapiti Syncline 1 km plus g. South Anticline (Permian) 3.5 km A detailed review of the Wapiti East project is given in Section 7 (Independent Geologist’s Report), including the history and exploration potential of the project.
3.3.3 Wapiti East Project Strategy Fertoz’s proposed exploration program over its Wapiti East project tenements is intended to involve geological mapping and further sampling to attempt to define additional targets that Fertoz considers capable of supporting a JORC Code compliant Mineral Resource and to be able to be developed by open pit mining. These targets will be prioritised according to strict geological criteria and receive further geological/structural mapping prior to drill assessment.
The strategy is to attempt to define a JORC Code compliant Mineral Resource at Wapiti East and to carry out metallurgical testing in order to identify phosphate rock, between 24% and 28% P₂O₅, which could be processed and then sold, without beneficiation.
Additionally the proposed 2013 work program is expected to require road reconstruction, road building, close spaced excavator trenching. Together these works are planned to support a detailed core drilling program to determine whether a JORC Code compliant Ore Reserve can be estimated in selected portions of the property in conjunction with the collection of a small bulk sample of 500 to 2,000 tonnes for market development and product trials. 29 LTD REPLACEMENT PROSPECTUS 2013
3.3.4 Wapiti East Exploration Budget and Proposed Programme The amounts the Company has allocated (based on the Minimum Subscription and Maximum Subscription) to its exploration activities at the Wapiti East project in Year 1 and Year 2, and how these funds are proposed to be applied is set out in the table below:
MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION WAPITI EAST YEAR 1 YEAR 2 YEAR 1 YEAR 2 Drilling $245,000 $200,000 $245,000 $294,000 Geological Field Work $40,000 $30,000 $40,000 $48,000 Geologists $95,000 $75,000 $95,000 $114,000 Helicopter $35,000 $25,000 $35,000 $42,000 Road Transport $27,000 $25,000 $27,000 $32,000 Camp Costs $84,000 $75,000 $84,000 $100,000 Laboratory Analysis $22,800 $20,000 $22,800 $27,000 Road Construction $220,000 $0 $220,000 $0 Miscellaneous $4,000 $5,000 $4,000 $4,000 Environmental & Feasibility studies $0 $0 $0 $110,000 Subtotal $772,800 $455,000 $772,800 $772,000 Contingency $77,200 $45,000 $77,200 $78,000 Total $850,000 $500,000 $850,000 $850,000
If the Minimum Subscription exploration work of $850,000 is carried out then the Good to Date of the 21 Wapiti East claims would be extended to 2021 / 2022. 3. COMPANY & PROJECT OVERVIEW 30
3.4 WAPITI WEST PROJECT
3.4.1 Wapiti West Project Overview The Wapiti West project lies approximately 65 km to the north-west of the Wapiti East project and consists of nineteen tenements and covers an area of 74.1 km2, spread over approximately 41 km as shown in Figure 10.
The project consists of the Palsson (4), Sukunka (11) and Tunnel (4) groups of tenements as detailed in Table 1 in Section 3.2.
Six of the 19 claims for Wapiti West project (Sukunka 1, Sukunka 2, PAL1, Tunnel 1, Tunnel 2, T11) were acquired by Johan Thomas Shearer. They formed part of the Wapiti Option Agreement for which Fertoz made a payment of CAN$5,000 in March 2012. The full terms of the Agreement are outlined in Section 11.2. Fertoz International acquired 100% ownership of these tenements on 6 April 2013. The remaining 13 claims were acquired by Fertoz International in March 2013.
Figure 10. Wapiti West Project Tenement Location Map
3.4.2 Wapiti West Project History
In 2008, Pacific Ridge conducted helicopter supported reconnaissance rockchip sampling (Phase I) and follow- up hand trenching (Phase II) of the Tunnel areas within the Wapiti West area (Norman and Renning, 2009b).
A total of 50 grab and float samples were collected during the Phase I Exploration Program and 33 chip 31 LTD REPLACEMENT PROSPECTUS 2013
samples from Phase II were taken from hand trenching and chip sampling of exposed bed rock of seven trench sites at the Tunnel Zone. Trench results ranged from 13.5% to 19.7% P₂O₅. No further work was carried out by Pacific Ridge.
Fertoz has undertaken air photo interpretation of the tenements (Air Photo Interpretation Assessment Report of Tunnel Project 15-03-2013, Air Photo Interpretation Assessment Report of the Sukunka Project 5-04-2013 – J T Shearer).
A detailed review of the Wapiti West project is given in Section 7 (Independent Geologist’s Report), including the history and exploration potential of the project.
3.4.3 Wapiti West Project Strategy In 2012, air photograph interpretation was conducted over the Sukunka and Tunnel areas of the Wapiti West project in order to provide further detail to the mapped location of the known phosphorite horizons and to guide future ground sampling.
Additional hand trenching and diamond drilling is planned for the Tunnel Zone going forward, while initial sampling is recommended for the Sukunka area prior to carrying out a drill programme.
The Wapiti West strategy is to attempt to define a JORC Code compliant Mineral Resource suitable for open pit mining.
3.4.4 Wapiti West Exploration Budget and Proposed Programme The amounts the Company has allocated (based on the Minimum Subscription and Maximum Subscription) to its exploration activities at the Wapiti West project in Year 1 and Year 2, and how these funds are proposed to be applied is set out in the table below:
MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION WAPITI WEST YEAR 1 YEAR 2 YEAR 1 YEAR 2 Drilling $0 $95,000 $45,000 $170,000 Geological Field Work $8,000 $10,000 $3,000 $30,000 Geologists $12,000 $30,000 $20,000 $70,000 Helicopter $10,000 $20,000 $0 $25,000 Road Transport $0 $5,000 $7,000 $23,000 Camp Costs $10,000 $15,000 $10,000 $70,000 Laboratory Analysis $5,000 $5,000 $5,000 $18,000 Miscellaneous $450 $1,800 $1,000 $4,000 Environmental & Feasibility studies $0 $0 $0 $0 Subtotal $45,450 $181,800 $91,000 $410,000 Contingency $4,550 $18,200 $9,000 $40,000 Total $50,000 $200,000 $100,000 $450,000
If the Minimum Subscription exploration work of $50,000 is carried out then the Good to Date of the 18 contiguous claims of Wapiti West would be extended to approximately 2015. 3. COMPANY & PROJECT OVERVIEW 32
3.5 BARNES LAKE PROJECT
3.5.1 Barnes Lake Project Overview The Barnes Lake project is located 32 km southeast of Sparwood (population 3,667) and 27 km east of Fernie (population 5,000) in south east British Columbia. Fernie is a regional centre and the coal mining industry dominates the regional economy.
The Barnes Lake project comprises a single granted Mineral Claim (1011319) covering an area of 608.98 hectares (6.09 km2) which lies immediately east of Barnes Lake in British Columbia.
3.5.2 Barnes Lake Project History With reference to the Barnes Lake area, four main phases of exploration have reportedly been undertaken in the late 1960s/70s, late 1980s, late 1990s and 2008.
In 1990, geological mapping, sampling, hand trenching and backhoe trenching carried out. Eight backhoe trenches and two hand trenches were dug along strike on the west side of Michel Creek (Figure 11). The trenching results confirmed the continuity of the phosphorites and the continuity of grade along strike. Results varied from 20.9% to 30.5% P₂O₅ over a width of approximately 1 metre as detailed in Table 4.11 of the Independent Geologist’s Report in Section 7.
In 2007, one hole was drilled but it was poorly positioned and did not encounter any layers of phosphate (Parent 2008).
A detailed review of the Barnes Lake project is given in Section 7 (Independent Geologist’s Report), including the history and exploration potential of the project.
Figure 11. Location of hand dug (BN series) and backhoe dug (BNT series) trenches within Fertoz’s Barnes Lake project
33 LTD REPLACEMENT PROSPECTUS 2013
3.5.3 Barnes Lake Project Strategy Fertoz’s exploration programme is planned initially to consist of further trenching and sampling and compilation of relevant technical, environmental and logistical information. It is proposed to follow up with diamond drilling on a small scale.
The strategy is to undertake initial exploration to identify the potential to define a JORC Code compliant Mineral Resource at Barnes Lake and to carry out metallurgical testing in order to identify phosphate rock, between 24% and 28% P₂O₅, which could be processed and then sold, without beneficiation.
3.5.4 Barnes Lake Exploration Budget and Proposed Programme The amounts the Company has allocated (based on the Minimum Subscription and Maximum Subscription) to its exploration activities at the Barnes Lake project in Year 1 and Year 2, and how these funds are proposed to be applied is set out in the table below:
MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION BARNES LAKE YEAR 1 YEAR 2 YEAR 1 YEAR 2 Drilling $0 $45,000 $45,000 $75,000 Geological Field Work $12,000 $3,000 $3,000 $5,000 Geologists $20,000 $20,000 $20,000 $25,000 Helicopter $0 $0 $0 $0 Road Transport $3,000 $7,000 $7,000 $10,000 Camp Costs $5,000 $10,000 $10,000 $13,000 Laboratory Analysis $5,000 $5,000 $5,000 $7,000 Miscellaneous $450 $1,000 $1,000 $2,000 Environmental & Feasibility studies $0 $0 $0 $0 Subtotal $45,450 $91,000 $91,000 $137,000 Contingency $4,550 $9,000 $9,000 $13,000 Total $50,000 $100,000 $100,000 $150,000
If the Minimum Subscription exploration work of $50,000 is carried out then the Good to Date of the Barnes Lake tenement would be extended to approximately 2020. 3. COMPANY & PROJECT OVERVIEW 34
3.6 CROWS NEST PROJECT
3.6.1 Crows Nest Project Overview The Crows Nest project comprises a single granted Mining Claim located 15 km east of Sparwood and 18 km north - northwest of Barnes Lake. An all-weather road, rail line and gas pipeline pass through the property providing easy access to infrastructure (Figure 12). The Canadian Pacific Railway which connects Vancouver to Calgary passes through the northern section of the project area.
The project lies near the mouth of Alexander Creek which occupies a broad valley east of the High Rock range. At elevations of 1,400 m and 1,800 m the project is located below the tree-line in an area of gentle topography.
Figure 12. Crows Nest Tenement Location Map
3.6.2 Crows Nest Project History
The Crows Nest project area has been subject to cursory exploration work to date despite the presence of small historical workings and regional showings. Within Fertoz’s current project area, Butrenchuck (1996) reports a 1.2 metre thick phosphorite bed which is exposed in a road cutting on Highway 3 near Alexander Creek. A second occurrence, comprising of a 1 metre thick phosphorite bed near the base of the Fernie Group, crops out along Alexander Creek south of the highway.
A detailed review of the Crows Nest project is given in Section 7 (Independent Geologist’s Report), including the history and exploration potential of the project.
3.6.3 Crows Nest Project Strategy The strategy is to undertake initial exploration to identify the potential to define a JORC Code compliant Mineral Resource at Crows Nest and to carry out metallurgical testing in order to identify phosphate rock, 35 LTD REPLACEMENT PROSPECTUS 2013
between 24% and 28% P₂O₅, which could be processed and then sold, without beneficiation.
Fertoz plans a limited work programme of geological mapping and reconnaissance rockchip sampling. This is proposed to be followed up with further trenching and diamond drilling.
3.6.4 Crows Nest Exploration Budget and Proposed Programme The amounts the Company has allocated (based on the Minimum Subscription and the Maximum Subscription) to its exploration activities at the Crows Nest project in Year 1 and Year 2, and how these funds are proposed to be applied is set out in the table below:
MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION CROWS NEST YEAR 1 YEAR 2 YEAR 1 YEAR 2 Drilling $0 $45,000 $45,000 $75,000 Geological Field Work $12,000 $3,000 $3,000 $5,000 Geologists $20,000 $20,000 $20,000 $25,000 Helicopter $0 $0 $0 $0 Road Transport $3,000 $7,000 $7,000 $10,000 Camp Costs $5,000 $10,000 $10,000 $13,000 Laboratory Analysis $5,000 $5,000 $5,000 $7,000 Miscellaneous $450 $1,000 $1,000 $2,000 Environmental & Feasibility studies $0 $0 $0 $0 Subtotal $45,450 $91,000 $91,000 $137,000 Contingency $4,550 $9,000 $9,000 $13,000 Total $50,000 $100,000 $100,000 $150,000
If the Minimum Subscription exploration work of $50,000 is carried out then the Good to Date of the Crows Nest tenement would be extended to approximately 2017. 3. COMPANY & PROJECT OVERVIEW 36
3.7 AUSTRALIAN PROJECTS
3.7.1 Australian Projects Overview Fertoz has amalgamated its Australian exploration tenements into four key project areas covering an area of 3,549 km2 – Sherrin North, Barrow Creek, Barkly, and Katherine as shown in Figure 2.
The Company’s list of Australian tenements, its equity entitlement and status, are listed below in Table 2 and detailed information on each project is provided in Section 7 (Independent Geologist’s Report), including the history and exploration potential of the projects.
Table 2: Status of Fertoz’s Australian Tenements TENEMENT AREA REDUCTION 2013 RENT PROJECT NUMBER EQUITY (%) APPROX. (KM2) GRANT DATE EXPIRY DATE DATE (AUD)⁵ Sherrin North EPM 19448 100 221 6/05/2013 5/05/2018 5/05/2016 8,243 Barrow Creek EL269151 1001 744 8/04/2009 7/04/2015 7/04/2015 0 Katherine EL 26995 100 584 3/09/2009 2/09/2015 2/09/2013 66382 EL 26997 100 269 3/09/2009 2/09/2015 2/09/2013 6,129 EL 27008 100 53 3/09/2009 2/09/2015 2/09/2013 8,929 Barkly EL 26054 100 526 5/09/2008 4/09/2014 4/09/2014 12,0932 EL 26055 100 7824 5/09/2008 4/09/2014 4/09/2014 17,9842 EL 27076 100 370 23/07/2009 22/07/2015 22/07/2013 8,820 Total 3,549 68,836 Hodgson3 EL26969 100 353 3/9/2009 2/9/2015 2/9/2013 0 Roper3 EL27026 100 63 3/9/2009 2/9/2015 2/9/2013 0 Winnecke4 EL26978 100 601 23/07/2009 22/07/2015 22/07/2013 0 EL26981 100 773 23/07/2009 22/07/2015 22/07/2013 0 ELA28642 100 489 N/A N/A N/A N/A ELA28643 100 1,068 N/A N/A N/A N/A EL28644 100 1,276 2/11/2011 1/11/2017 1/11/2013 0 ELA28645 100 666 N/A N/A N/A N/A ELA28476 100 1,628 N/A N/A N/A N/A ELA28478 100 1,628 N/A N/A N/A N/A ELA28479 100 1,503 N/A N/A N/A N/A ELA28480 100 1,238 N/A N/A N/A N/A ELA28482 100 1,353 N/A N/A N/A N/A ELA28483 100 1,626 N/A N/A N/A N/A ELA28484 100 1,584 N/A N/A N/A N/A Barkly4 EL 29193 100 29 30/07/2012 29/07/2018 29/07/2014 0 EL 29194 100 133 30/07/2012 29/07/2018 29/07/2014 0 EL 29195 100 36 30/07/2012 29/07/2018 29/07/2014 0 EL 29196 100 113 30/07/2012 29/07/2018 29/07/2014 0 EL 29197 100 94 30/07/2012 29/07/2018 29/07/2014 0 EL 29198 100 398 8/10/2012 7/10/2018 7/10/2014 0
1 NuPower Resources Limited (now known as Central Australian Phosphate Ltd) earning initial 10% interest under Barra Joint Venture – refer to Section 11.3 – Material Contracts 2 Planned 50% Reduction in Tenement Area in 2013 3 Tenements sold to Ebony Iron Pty Ltd – transaction in process of being finalised – refer to Section 11.4 4 Tenement sold to FSL Corporation Pty Ltd – transaction in process of being finalised. EL26055 will be reduced by approximately 48km2 with the split out and sale of 15 sub-blocks – refer to Sections 11.5, 11.6 37 LTD REPLACEMENT PROSPECTUS 2013
5 Rent payments are exclusive of GST N/A Not applicable
3.7.2 Australian Projects Exploration Budget
The Company proposes to allocate $150,000 per annum to continue exploration of its Australian assets. Details of how these funds are proposed to be spent are set out in the table below. The programme involves further data compilation, geological mapping and technical assessment.
MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION AUSTRALIAN PROJECTS YEAR 1 YEAR 2 YEAR 1 YEAR 2 Sherrin North $30,000 $30,000 $30,000 $30,000 Barrow Creek1 $0 $0 $0 $0 Barkly $50,000 $50,000 $50,000 $50,000 Katherine $70,000 $70,000 $70,000 $70,000 Total $150,000 $150,000 $150,000 $150,000
1 Exploration expenditure being funded by joint venture partner Central Australian Phosphate Ltd (ASX: CEN)
Fertoz proposes to seek out prospective joint venture partners, to provide funding for exploration and development, in return for an equity interest in the relevant Australian project. Fertoz has used this approach through a joint venture with Central Australian Phosphate Ltd (ASX : CEN) at Barrow Creek (Refer to Section 11.3 – Material contracts). 3. COMPANY & PROJECT OVERVIEW 38 39 LTD REPLACEMENT PROSPECTUS 2013
4. DETAILS OF THE OFFER
4.1 THE OFFER By this Prospectus the Company offers for subscription 15,000,000 Shares at 20 cents each to raise the Minimum Subscription of $3,000,000. Oversubscriptions of up to 5,000,000 Shares at an issue price of $0.20 may be accepted to raise up to an additional $1,000,000. The details of how to apply for Shares are set out below.
4.2 THE PURPOSE OF THE OFFER The Offer is being conducted to: a. fund a two year program to explore and develop the current Projects of the Company (primarily located in Canada); b. provide general working capital which may be applied in undertaking a review of any complementary near-term cash flow resource projects that the Board considers has the potential to add value for Shareholders; c. fund corporate administration costs; d. pay the costs of the Prospectus process; and e. allow access to equity markets in order to assist funding any future development of its existing projects and any complementary near-term cash flow resource opportunities.
4.3 USE OF PROCEEDS AND CASH AT BANK FUNDS The table below sets out the intended application of funds over a two year period based on the Company raising the Minimum Subscription and the Maximum Subscription under the Offer.
MINIMUM SUBSCRIPTION AUD MAXIMUM SUBSCRIPTION AUD USE OF PROCEEDS YEAR 1 YEAR 2 YEAR 1 YEAR 2 Estimated cash prior to the Offer1 $1,189,032 $1,189,032 Gross Proceeds of the Offer $3,000,000 $4,000,000 Total Cash Available $4,189,032 $2,029,032 $5,189,032 $2,809,032 Wapiti East Exploration $850,000 $500,000 $850,000 $850,000 Wapiti West Exploration $50,000 $200,000 $100,000 $450,000 Barnes Lake Exploration $50,000 $100,000 $100,000 $150,000 Crows Nest Exploration $50,000 $100,000 $100,000 $150,000 Australia Exploration $150,000 $150,000 $150,000 $150,000 Costs of Offer $410,000 $0 $480,000 $0 Working Capital and Administration $600,000 $600,000 $600,000 $600,000 Total $2,160,000 $1,650,000 $2,380,000 $2,350,000
1 Cash as at 31 March 2013 plus $250,000 tenement sales plus $500,000 capital raise – refer to Section 9.5.3.
Please refer to the Company and Project Overview in Section 3 for further details on the Company’s proposed exploration budget and programmes.
You should note that: a. As referred to in Section 6.2.5, several of the Company’s mineral claims in Canada are due to expire within 12 months of the date of this Prospectus. These include the Barnes Lake project, the Crows Nest project and many mineral claims forming parts of the Wapiti East and Wapiti West projects. If any of these mineral claims are not renewed (albeit the Company considers this is unlikely), the Company proposes to apply the funds that it otherwise would have applied to those mineral claims towards the exploration of the remaining Canadian tenements. 4. DETAILS OF THE OFFER 40
b. The above use of proceeds table does not include the costs of Fertoz acquiring the phosphate lease as proposed under the Sulfate Resources Exclusivity Deed (or any exploration costs associated with that lease, if acquired). Details of the Sulfate Resources Exclusivity Deed are set out in Section 11.7. Fertoz proposes to finance any proposed acquisition under the Sulfate Resources Exclusivity Deed by way of a combination of payment in cash and the issue of shares in the Company (in accordance with the Corporations Act and the ASX Listing Rules). The Company considers that any such acquisition will not constitute a significant change to the scale of the Company’s activities and will not trigger the requirements of ASX Listing Rules 11.1.2 or 11.1.3. You should be aware that if Fertoz issues additional equity to acquire the phosphate lease, existing holders of Shares in the Company would be diluted. c. Working capital may be used by the Company to identify and evaluate other small, near-term cash flow new phosphate rock opportunities in Canada, the USA, South America, Australia and other countries. d. If more than the Minimum Subscription is raised but less than the Maximum Subscription, the funds above the Minimum Subscription are intended to first be applied to fund the additional costs of the Offer and then approximately pro rata against the additional items of expenditure set out in the above tables. e. The above table is a statement of current intentions as at the date of lodgement of this Prospectus with the ASIC. As with any budget, intervening events (including exploration success or failure) and new circumstances have the potential to affect the ultimate way funds will be applied. The Board reserves the right to alter the way funds are applied on this basis.
4.4 CAPITAL STRUCTURE The capital structure of the Company following Completion of the Offer is summarised below:
CAPITAL STRUCTURE MINIMUM SUBSCRIPTION MAXIMUM SUBSCRIPTION Shares on issue at date of the Prospectus 25,009,595 25,009,595 New Shares issued under the Prospectus 15,000,000 20,000,000 Total Shares on Issue on Completion of the Offer 40,009,595 45,009,595
In addition there are 10,615,384 Options on issue with a minimum exercise price of 25 cents and a maximum of 55 cents as detailed in the table below. More details in relation to the Options are set out in Section 5.2 and Section 12.2 of the Prospectus. Options have a 4 year term from the date of listing on the ASX.
HOLDER OPTIONS EXERCISE PRICE Directors 2,153,847 25 cents 1,538,461 35 cents 1,538,461 45 cents 615,385 55 cents Subtotal 5,846,154 Lead Manager 4,000,000 25 cents Management and Advisers 769,230 25 cents Total 10,615,384
Capital raisings have taken place in the 6 months prior to the date of this Prospectus and are summarised in Section 12.3. In particular:
ɒ in February 2013 Fertoz raised $756,000 under a non-renounceable rights issue at approximately 9.75 cents per share (post share consolidation) which reflects a 51.25% discount to the issue price under the Offer; and
ɒ in May 2013 Fertoz raised $500,000 from certain sophisticated and professional investors. The pricing of this capital raising was the same as the completed Rights Issue, which reflects a 51.25% discount to the issue price under the Offer. 41 LTD REPLACEMENT PROSPECTUS 2013
Part of the proceeds received have been used and are to be used to fund scheduled works for June and July 2013 on Fertoz’s Canadian assets of approximately $300,000. To date approximately $145,000 of the proceeds has been expended on exploration, First Nation liaison, archaeological and environment studies on Fertoz’s Canadian assets.
Refer to Section 12.3 of the Prospectus for further details of the above capital raisings and how proceeds were and are to be applied.
4.5 SUBSTANTIAL SHAREHOLDERS Those Shareholders holding 5% or more of the shares on issue as at the date of this Prospectus and on Completion of the Offer are set out in the respective tables below.
As at Date of the Prospectus NUMBER PERCENTAGE RANK NAME OF SHARES SHAREHOLDING 1 James Chisholm (including Shares held by him and his associates Lenark Pty Ltd, 5,214,380 20.85% Kifaco Pty Ltd and Left Brain Strategies Pty Ltd) 2 Gary Gynn (including Shares held by him and his associates Gynn Holdings Pty 1,888,748 7.55% Ltd, Gary Gynn Superannuation Fund, Michael Gynn, Julia Gynn and Andrea Gynn) 3 JP Morgan Nominees Australia Pty Ltd 1,704,782 6.82% 4 Gregory Francis Hogan 1,428,986 5.71%
On Completion of the Offer1 PERCENTAGE SHAREHOLDING NUMBER MINIMUM MAXIMUM RANK NAME OF SHARES SUBSCRIPTION SUBSCRIPTION 1 James Chisholm2 (including Shares held by him and his 5,214,380 13.03% 11.56% associates Lenark Pty Ltd, Kifaco Pty Ltd, Left Brain Strategies Pty Ltd)
1 Assuming no existing substantial shareholder is issued additional shares pursuant to the Offer and no new investors become substantial shareholders. 2 James Chisholm is a Director and the Non-executive Chairman of the Company.
The Company understands that James Chisholm, Gary Gynn and Gregory Francis Hogan will not be participating in the Offer. The Company has not received any confirmation from JP Morgan Nominees Australia Pty Ltd as to whether or not it will participate in the Offer.
CONTROL IMPLICATIONS OF THE OFFER While at the date of this Prospectus, James Chisholm and his associated entities (‘Chisholm Entities’) hold 20.85% of the issued capital in the Company, its shareholding will be diluted as a consequence of the Offer and after the successful completion of the Offer the Chisholm Entities will hold approximately the percentage of issued capital as set out above. Accordingly, the Board of Fertoz considers that, after the successful completion of the Offer, the Chisholm Entities will not be in a control position. Further, the Company does not consider that any other single shareholder will be in a control position.
4.6 COSTS OF THE OFFER The cost of the Offer (including Lead Manager commission, expert’s fees, legal and accounting costs, ASIC fees and ASX fees) for the Minimum Subscription and Maximum Subscription are shown in the table below. It includes the payment of Lead Manager fees pursuant to the Offer of 6.5% plus GST. 4. DETAILS OF THE OFFER 42
ITEM OF EXPENDITURE MINIMUM SUBSCRIPTION AUD MAXIMUM SUBSCRIPTION AUD Legal Expenses $104,500 $104,500 Lead Manager Commission $195,000 $260,000 ASX & ASIC Fees $59,400 $64,400 Independent Geologist’s Report $10,000 $10,000 Investigating Accountant's Report $23,500 $23,500 Printing and Associated Costs $10,000 $10,000 Miscellaneous Expenses $7,600 $7,600 Total $410,000 $480,000
4.7 ARRANGEMENTS WITH LEAD MANAGER The Offer is not underwritten. The Company will pay the Lead Manager, Blackwood Capital Limited, a 6.5% commission on the total value of the amount of equity raised by Blackwood Capital Limited under the Offer. The Lead Manager Agreement is summarised in Section 11.1.
4.8 FUNDING As at the date of this Prospectus the Company has no income producing assets and will generate losses for the foreseeable future.
The Directors believe that following Completion of the Offer and satisfaction of the Minimum Subscription, the Company will be able to meet the exploration and working capital commitments set out in this Prospectus.
Further funding will be required to develop the Wapiti projects (if the Company’s exploration identifies a phosphate resource capable of being developed). This could take the form of debt and / or equity funding.
4.9 FINANCIAL INFORMATION Historical financial information regarding the Company is included in Section 9 (Financial Information) of this Prospectus and is considered in the Investigating Accountant’s Report contained within Section 8 of this Prospectus.
The Directors have considered the matters outlined in ASIC Regulatory Guide 170. Given that the Company is an early stage exploration company and given the highly speculative nature of exploration and any subsequent development and production, the Company considers that it is unable to provide potential investors with any reliable revenue, profit or cash flow projections or forecasts and accordingly has not included financial forecasts in this Prospectus.
4.10 DIVIDEND POLICY The Company’s focus in the next two years, as outlined in this Prospectus, will be on the evaluation and development of the Company’s exploration projects. Accordingly, the Company does not expect to declare any dividends during that period. 43 LTD REPLACEMENT PROSPECTUS 2013
4.11 TERMS AND CONDITIONS OF THE OFFER TOPIC SUMMARY What type of security is being offered? Shares being fully paid ordinary shares in Fertoz Ltd. What are the rights and liabilities attached A description of the Shares, including the rights and liabilities attaching to them is to the Shares? set out in Section 12.1 (Additional Information). What is the consideration payable for each The price of the Offer is $0.20 per Share Share being offered? What is the Offer period? The Offer is expected to open on 22 July 2013 and close on 16 August 2013. No Shares will be issued on the basis of this Prospectus later than 25 July 2014. What are the cash proceeds to be raised? A minimum of $3,000,000 and a maximum of $4,000,000 will be raised under the Offer. What is the minimum and maximum Applications for Shares must be for a minimum of 10,000 Shares (representing Application size under the Offer? Application Money of $2,000) and thereafter in multiples of 1,000 Shares (representing Application Money of $200). What is the allocation policy? The Company reserves the right to allocate Shares in full for any Application, or to allocate any lesser number, or to decline any Application. Allotment of Shares will be made as soon as possible after the Closing Date. Where no allotment is made to an Applicant, the Application Monies will be returned in full by cheque with the relevant Application Form within 14 days of the Closing Date. Where the number of Shares allotted is less than the number of Shares applied for, the surplus Application Monies will be returned by cheque to the Applicant within 14 days of the Closing Date. Interest will not be paid on refunded Application Monies. It is the responsibility of Applicants to determine their allotment prior to trading in Shares. Applicants who sell Shares before they receive their holding statements will do so at their own risk. Will the Shares be listed? The Company has applied to the ASX to be admitted to the official list of the ASX and for quotation of the Shares on the ASX. If the ASX does not grant permission for the quotation of the Shares offered under this Prospectus within 3 months after the date of this Prospectus, or such longer period as is permitted by the Corporations Act, none of the Shares offered by this Prospectus will be allotted or issued. In these circumstances, all Applications will be dealt with in accordance with the Corporations Act including the return of all Application Monies without interest.
A decision by ASX to grant Official Quotation of the Shares is not to be taken in any way as an indication of ASX's view as to the merits of the Company or of the Shares. The ASX and its Officers take no responsibility as to the contents of this Prospectus. Quotation, if granted, of the Shares offered by this Prospectus will commence as soon as practicable after statements of holdings of the Shares are dispatched. When are the Shares expected to It is expected that trading of Shares on the ASX will commence on or about 30 August commence trading? 2013. Is the Offer underwritten? No, the Offer is not underwritten. Is there a minimum subscription condition Yes, the minimum subscription to be raised under the Offer is $3,000,000. The under the Offer? Company will not issue any Shares pursuant to this Prospectus until the Minimum Subscription is satisfied. Should the Minimum Subscription not be reached within 4 months from the date of this Prospectus, the Company will either repay the Application Monies to the Applicants or issue a supplementary prospectus or replacement prospectus to allow Applicants one month’s notice to withdraw their Applications and be repaid their Application Monies. No interest will be paid on refunded Application Monies. Oversubscriptions of up to 5,000,000 Shares at an issue price of $0.20 each to raise an additional $1,000,000 may be accepted by the Company. Are there any escrow arrangements? Yes. There will be escrow arrangements for some existing Shareholders. Details are provided in Section 4.12 of this Prospecuts. Are there any taxation considerations? The acquisition and disposal of Shares will have taxation consequences which will differ depending on your individual circumstances. You should seek your own independent advice in relation to taxation matters before investing in the Company. Are there any brokerage, commission or No brokerage, commission or stamp duty is payable by Applicants on acquisition of stamp duty considerations? Shares under the Offer. See Section 11.1 for details of fees payable by Fertoz to the Lead Manager. 4. DETAILS OF THE OFFER 44
TOPIC SUMMARY How can I apply for Shares? Applicants should complete the enclosed Application Form and submit it, together with the necessary Application Monies on or before 5pm AEST on 16 August 2013.
Cheques are to be drawn in Australian dollars and made payable to “Fertoz Ltd – Share Offer Account” and crossed “Not Negotiable”. Payments by cheque will be deemed to have been made when the cheque is honoured by the bank on which it is drawn.
Completed Application Forms and accompanying cheques must be mailed or delivered to the Company’s Share Registry as relevant:
Computershare Investor Services Pty Limited GPO Box 52 Melbourne VIC 8060
Application Forms must reach the Share Registry by no later than the Closing Date. Lodgement of an Application Form constitutes an irrevocable offer made in accordance with the provisions of the guidelines to the Application Form. How can I obtain more information? Applicants with queries about the terms of the Offer or how to complete the Application Form or who require additional copies of the Prospectus should contact the Lead Manager, Blackwood Capital Ltd, on 02 9252 2647.
If you are unclear in relation to any matter or are uncertain as to whether Fertoz is a suitable investment for you, you should seek professional guidance from your solicitor, stockbroker, accountant or other independent adviser before deciding whether to invest. 45 LTD REPLACEMENT PROSPECTUS 2013
4.12 ESCROW ARRANGEMENTS
4.12.1 Mandatory Escrow Arrangements The ASX may classify certain securities as being subject to the restricted securities provisions of the Listing Rules. If so, prior to the Official Quotation of the Company’s Shares, the holders of the Restricted Securities will be required to enter into agreements (Restriction Agreements) with the Company under which they agree not to do, or omit to do, any act which would have the effect of transferring effective ownership and control of any Restricted Security for a period determined by the ASX, without first obtaining the prior written consent of the ASX. The Share Registry will be requested to provide a holding lock on the securities classified as restricted securities, and to not remove the holding lock without the written consent of the ASX.
A summary of the Shares and Options expected to be escrowed is as follows. The tables below are indicative only and subject to final confirmation from ASX.
Escrow arrangements for Shares SECURITY HOLDER ROLE/RELATIONSHIP NO. OF SHARES ESCROW PERIOD1 Various Seed Capitalists (not 3,386,233 12 months related parties or promoters) Gary Gynn and Barbara Gynn as trustee for the Gary Seed capitalist 367,657 12 months Gynn Superannuation Fund (and substantial shareholder) Gregory Francis Hogan Seed capitalist 285,797 12 months (and substantial shareholder) JP Morgan Nominees Australia Limited Seed capitalist 788,462 12 months (and substantial shareholder) Lenark Pty Ltd ACN 123 715 962 as trustee for the Related to Chairman, 919,145 24 months Lenark Investment Trust James Chisholm Les Szonyi Managing Director, fee 678,679 24 months for service Various Consultants, fee for 541,811 24 months service Boston First Capital Pty Ltd A.C.N. 007 308 849 Related to Blackwood 420,512 24 months Capital Ltd (Lead Manager) Six Degrees Corp Pty Ltd ACN 088 687 861 Related to non- 140,171 24 months executive director Peter Bennetto Francis Harper Related to Blackwood 131,410 24 months Capital Ltd (Lead Manager) Canonbar Investments PL ACN 009 482 713 Related to non- 23,638 24 months executive director Peter Bennetto
1 24 months from official quotation, 12 months from date of issue of securities
Escrow arrangements for Options ESCROW ARRANGEMENTS FOR OPTIONS HOLDER ROLE/RELATIONSHIP NO. OF OPTIONS ESCROW PERIOD Blackwood Capital Ltd A.C.N. 101 849 110 Lead Manager 4,000,000 24 months Les Szonyi Managing Director 2,461,540 24 months Lenark Pty Ltd ACN 123 715 962 as trustee for the Related to Chairman, 1,230,769 24 months Lenark Investment Trust James Chisholm Peter Bennetto Non-executive director 1,230,769 24 months 4. DETAILS OF THE OFFER 46
ESCROW ARRANGEMENTS FOR OPTIONS HOLDER ROLE/RELATIONSHIP NO. OF OPTIONS ESCROW PERIOD Valiant Equity Management Pty Ltd ATF Byass Family Related to non- 923,076 24 months Trust executive director Adrian Byass Australasian Capital Holdings Pty Ltd Controlled by Frank 307,692 24 months ACN 001 273 463 Favretto, former consultant Julien McInally Company Secretary 153,846 24 months Homegold Resources Ltd Controlled by Jo 153,846 24 months Shearer, Chief Operating Officer, Canada Joshua Bell Former consultant 153,846 24 months
4.12.2 Terms of Restriction Agreements Under the Restriction Agreements, the relevant Shareholders referred to above agree to not sell, dispose of or encumber any of the escrowed Shares and options for the relevant escrow period (set out in the tables above).
The escrowed Shares or options may be disposed of when a takeover offer is made to acquire all of the Shares or options or there is a merger by way of a scheme of arrangement.
4.12.3 Voluntary Escrow Arrangements In addition to the above, the Company has or proposes to enter into voluntary escrow agreements with certain Shareholders for the escrow of a total of 7,982,952 Shares (Escrow Shares). Under these agreements the relevant Escrow Shares are escrowed for a period of 12 months commencing on Official Quotation. Further detail in relation to these voluntary escrow agreements is contained in Section 11.11.
4.12.4 Total Restricted Securities The Company anticipates that, post-Completion of the Offer: a. based on the Minimum Subscription, approximately 19.20% of its Shares will be restricted securities pursuant to the Listing Rules and approximately 19.95% of its Shares will be subject to voluntary escrow agreements, as outlined above; and b. based on the Maximum Subscription, approximately 17.07% of its Shares will be restricted securities pursuant to the Listing Rules and approximately 17.74% of its Shares will be subject to voluntary escrow agreements, as outlined above.
4.13 APPLICATION MONIES HELD ON TRUST Pending the issue and allotment of Shares or payment of refunds pursuant to this Prospectus, all Application Money will be held by the Company in trust for the Applicants in a separate bank account as required by the Corporations Act. The Company, however, will be entitled to retain all interest that accrues on such bank account and each Applicant waives the right to claim any such interest.
4.14 APPLICANTS OUTSIDE OF AUSTRALIA This Prospectus does not, and is not intended to, constitute an Offer in any place or jurisdiction, or to any person to whom, it would not be lawful to make such an Offer to issue this Prospectus. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law. No action has been taken to register or qualify the Shares or otherwise permit a public offering of the Shares the subject of this Prospectus in any jurisdiction outside Australia. It is the responsibility of Applicants outside Australia to obtain all necessary approvals for the allotment and issue of Shares under this Prospectus. The return of a completed Application 47 LTD REPLACEMENT PROSPECTUS 2013
Form will be taken by the Company to constitute a representation and warranty by the Applicant that all relevant approvals have been obtained.
This document may not be released or distributed by you in the United States or to, or for the account or benefit of US Persons, and may only be distributed to persons to whom the Offer may lawfully be made in accordance with the laws of any applicable jurisdiction. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. The Shares have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in transaction exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws. Each Applicant will be taken to have represented, warranted and agreed that it understands that it is not in the United States or a US Person, and is not acting for the account or benefit of a US Person, and it has not and will not send the Prospectus to any such person.
4.15 DISCRETION REGARDING THE OFFER The Company reserves the right not to proceed with the Offer at any time before the issue of Shares to successful Applicants. If the Offer does not proceed, Application Monies will be refunded. No interest will be paid on any Application Monies refunded as a result of withdrawal of the Offer.
The Company also reserves the right to close the Offer or any part of it early, extend the Offer of any part of it, accept late Applications either generally or in particular cases, reject any Application or allocate to any Applicant fewer Shares than applied for.
4.16 CLEARING HOUSE ELECTRONIC SUB-REGISTER SYSTEM (CHESS) The Company will apply to participate in the Clearing House Electronic Sub-register System (CHESS). CHESS is operated by ASX Settlement Pty Ltd (ASXS), a wholly owned subsidiary of ASX, in accordance with the Listing Rules and the ASX Settlement Operating Rules.
Under CHESS, the Company will not issue certificates to investors. Instead, Share and Option holders will receive a statement of their holdings in the Company. If an investor is broker sponsored, ASX will send a CHESS statement.
4.17 ELECTRONIC PROSPECTUS This Prospectus may be viewed online at www.fertoz.com. Applicants using the Application Form attached to the electronic version of this Prospectus must be residents in Australia.
If you access the electronic version of this Prospectus you should ensure that you download and read the entire Prospectus. You can request a paper copy of this Prospectus from us free of charge by contacting the Lead Manager, Blackwood Capital Ltd, on 02 9252 2647. 44. DETAILSDETTAILSL OFO THETHEHE OFFEROFFFER 4848 49 LTD REPLACEMENT PROSPECTUS 2013
5. DIRECTORS & CORPORATE GOVERNANCE
5.1 DIRECTORS AND MANAGEMENT The Company has a skilled and experienced Board and management in exploration, development, project evaluation and project management.
JAMES CHISHOLM – NON EXECUTIVE CHAIRMAN AND DIRECTOR Mr Chisholm is a qualified engineer, having worked in the engineering, mining, oil, and gas sectors for the past 28 years. James has worked on numerous resource construction and maintenance projects around Australia, primarily covering coal, iron ore, and agricultural mining and processing. James co-founded The Chairmen1 Pty Ltd which sold its assets to Guildford Coal Ltd (ASX: GUF), becoming its largest shareholder. He is a non-executive director of Ebony Coal Limited and non-executive Chairman of Atrum Coal NL (ASX: ATU). James holds a Bachelor of Engineering and a Masters of Business Administration and is based in Sydney.
James is experienced in start-up exploration and development companies with the skills to provide this Board with leadership, clear direction and strategy.
PETER BENNETTO – NON EXECUTIVE DIRECTOR Mr Bennetto has over 30 years’ experience in banking and investment. He has had deep involvement in capital, currency and commodity markets with Societe Generale and Banque Indosuez. He has held company director positions in exploration, mining and manufacturing companies listed on the ASX since 1990, was a founding director of Anaconda Nickel Ltd and is currently the non-executive chairman of Ironbark Zinc Ltd (ASX: IBG). Peter is based in Sydney and has been involved with Fertoz since inception. Over the last three years, he has developed a comprehensive understanding of phosphate exploration and development in Australia and Canada.
ADRIAN BYASS – INDEPENDENT DIRECTOR Mr Byass has over 18 years’ experience in the mining and minerals industry. This experience has principally been gained through mining, resource estimation, and mine development and exploration roles for several gold, base metals and speciality metal mining and exploration companies worldwide. Mr Byass is a Competent Person for reporting to the ASX for certain minerals. My Byass has also gained experience in corporate finance and financial modeling during his employment with publicly listed mining companies. Adrian is based in Perth and is a director of Ironbark Zinc Limited (ASX: IBG), Corazon Mining Limited (ASX: CZN) and Plymouth Minerals Limited (ASX: PLH). Adrian has a solid working knowledge of the small-scale development mining that Fertoz intends to implement on high value small phosphate deposits. 5. DIRECTORS & CORPORATE GOVERNANCE 50
LES SZONYI – MANAGING DIRECTOR Dr Les Szonyi has over 30 years’ experience in the chemicals processing industry, including 18 years at Orica (formerly ICI Australia). He spent the five and a half years prior to joining Fertoz based in Central Queensland, leading Queensland Nitrates (QNP), an integrated manufacturer of ammonia, nitric acid and ammonium nitrate. He holds a Bachelor of Engineering and PhD in chemical engineering, is a graduate of the Australian Institute of Company Directors and is a member of the Institute of Chemical Engineers.
Les provides the Board with valuable executive leadership and management experience. He has a track record of increasing shareholder value through enhanced commercial performance, contract negotiation, technical excellence, project management and superior operations and safety performance. Les is based in Brisbane.
JULIEN MCINALLY – COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER Mr Julien McInally (CPA, MBA) is a CFO/Company Secretary with over 15 years of resource industry experience with public listed companies on the TSXV, AIM and ASX stock exchanges. He has expertise in capital raisings, mergers and acquisitions, project evaluation of complex mining projects, strategy, commercial agreements, statutory and management reporting and compliance and governance obligations of publicly listed companies. Julien is based in Brisbane.
JO SHEARER – CHIEF OPERATING OFFICER, CANADA Mr Jo Shearer has over thirty five years of experience in geology and exploration primarily in Canada, the US and parts of South America. Since 1986 he has contracted his services through Homegold Resources Ltd. He is a fellow of the Geological Association of Canada, Geological Society of London, Canadian Institute of Mining & Metallurgy and the Society of Economic Geologists. He has a thorough understanding of phosphate geology and small-scale production. Jo identified the Wapiti project for Fertoz and has assisted in securing the Barnes Lake and Crows Nest exploration ground. He is currently reviewing other small, potentially near-term phosphate deposits in North and South America that could be developed by Fertoz. He oversees the Canadian operations of Fertoz including the management of all on-ground exploration. Jo is based in Vancouver. 51 LTD REPLACEMENT PROSPECTUS 2013
5.2 INTERESTS OF DIRECTORS Other than as set out below or elsewhere in this Prospectus, no Director or proposed Director holds at the date of lodgement of this Prospectus with ASIC, or held at any time during the last two years before the date of lodgement of this Prospectus with ASIC, any interest in: a. the formation or promotion of the Company; or b. any property acquired or proposed to be acquired by the Company in connection with its formation or promotion, or in connection with the Offer; or c. the Offer; and no amount (whether in cash, Shares or otherwise) has been paid or agreed to be paid, nor has any benefit been given or agreed to be given, to any Director or proposed Director to induce him or her to become, or to qualify as, a Director or for services provided by a Director or proposed Director in connection with the formation or promotion of the Company or the Offer.
As at the date of this Prospectus, the Directors have a relevant interest in Shares and Options as set out in the Table below (“interest” includes those held directly or by related parties):
OPTIONS DIRECTOR SHARES OPTIONS1 EXERCISE PRICE James Chisholm 5,214,380 615,385 25 cents 307,692 35 cents 307,692 45 cents Peter Bennetto 819,042 615,385 25 cents 307,692 35 cents 307,692 45 cents Adrian Byass 0 307,692 25 cents 307,692 35 cents 307,692 45 cents Leslie Szonyi 678,679 615,385 25 cents 615,385 35 cents 615,385 45 cents 615,385 55 cents Total 6,712,101 5,846,154
1 Options have a four year term from date of Listing. The rights attached to the Options are summarized in Section 12.2.
5.3 REMUNERATION OF DIRECTORS The Constitution provides that the remuneration of Non-Executive Directors will not exceed the aggregate fixed sum determined by a general meeting of the Company. The aggregate remuneration for Non-Executive Directors has been set at an amount not to exceed $250,000 per annum.
The annual remuneration (inclusive of superannuation) which Fertoz has agreed to pay each of the Directors as at the date of this Prospectus is set out in the table below. The remuneration payable to James Chisholm, Peter Bennetto and Adrian Byass will not commence until Listing. Refer to Sections 11.8 to 11.10 of this Prospectus for a summary of the Directors’ terms of engagement with the Company.
DIRECTOR ANNUAL REMUNERATION Mr James Chisholm $36,000 Mr Peter Bennetto $36,000 Mr Adrian Byass $36,000 Dr Les Szonyi (CEO) $330,000 5. DIRECTORS & CORPORATE GOVERNANCE 52
5.4 AGREEMENTS WITH DIRECTORS OR RELATED PARTIES The Company’s policy in respect of related party arrangements is: a. a Director with a material personal interest in a matter is required to give notice to the other Directors before such a matter is considered by the Board; and b. for the Board to consider such a matter, the Director who has a material personal interest is not present while the matter is being considered at the meeting and does not vote on the matter.
The Company is not aware of any related party transactions requiring disclosure in the Prospectus, other than:
ɒ those agreements set out below and elsewhere in this Prospectus;
ɒ the remuneration and interests set out in this Section 5 and elsewhere in this Prospectus; and
ɒ that one or more of the Directors or their associates may apply for Shares under this Prospectus.
5.4.1 Deeds of Indemnity, Insurance and Access The Company has entered into a binding Deed of Access, Indemnity and Insurance with each Director. The material terms of each Deed are as follows: a. Indemnification: The Company must indemnify each Director to the full extent permitted by law against any liabilities, damages, costs or expenses (including legal costs on a full indemnity basis) each Director incurs:
i. in connection with any claim, demand, inquiry, investigation, action or proceeding, that is made, commenced or threatened against the Director as a direct or indirect result of, or in connection with, the Director being or having been a director of the Company or any subsidiary (Relevant Proceedings); or
ii. otherwise as an officer of the Company or any subsidiary. b. Funding and control of litigation: If the Company acknowledges that it is liable to indemnify the Director under the deed in respect of any Relevant Proceedings (and if the Company satisfies certain other conditions) then the Company may assume the conduct of the defence of the Relevant Proceedings. c. Access: The deed confirms each Director’s right of access to certain records of the Company for a period of 7 years after the Director ceases to hold office, for the purpose of any Relevant Proceedings. The 7 year period can be extended where certain proceedings commence before the 7 year period expires. d. Insurance: The Company must maintain a policy of insurance to insure the Director against liability as a director and officer of the Company and its subsidiaries.
5.4.2 Contract of Employment – Leslie Szonyi Fertoz entered into a binding Executive Agreement with Les Szonyi on 21 January 2011 for Les Szonyi to provide services as the Chief Executive Officer of the Company. Please refer to Section 11.8 for a summary of the material terms of the Executive Agreement.
5.4.3 Executive Director - Letter of Engagement Les Szonyi was appointed as the Managing Director of Fertoz on 29 May 2012. The terms of his appointment are governed by a Letter of Engagement. Please refer to Section 11.9 for a summary of the material terms of the Executive Director Letter of Engagement. 53 LTD REPLACEMENT PROSPECTUS 2013
5.4.4 Non-executive Directors - Letters of Engagement Each of Adrian Byass, James Chisholm and Peter Bennetto, have entered into separate Letters of Engagement (dated 31 May 2013). Please refer to Section 11.10 for a summary of the material terms of the Non-executive Directors’ Letters of Engagement.
5.4.5 Director Performance Options The Directors have been issued with performance Options as detailed in Section 5.2. The rights attached to the Options are summarized in Section 12.2.
5.5 AGREEMENTS AND BENEFITS WITH JO SHEARER
Jo Shearer is the Company’s Chief Operating Officer in Canada. He contracts his services to the Company through his company, Homegold Resources Ltd.
Jo Shearer has entered into certain transactions with, and received certain benefits from, the Company which are summarised below:
ɒ Wapiti Agreement: On 9 March 2012, Fertoz International and Jo Shearer entered into the Wapiti Agreement in relation to 22 mining claims forming part of the Wapiti project (“Wapiti Property”), which were transferred to Fertoz International under the Wapiti Agreement on or about April 2013. Under the Wapiti Agreement Jo Shearer:
ɒ received a cash payment of CAN$5,000; and
ɒ is entitled to receive a royalty of CAN$2.50 per tonne in respect of any ore shipped from the Wapiti Property after any beneficiation processes undertaken on site, provided that such royalty payments in any year shall not exceed 5% of Fertoz International’s earnings (before interest and taxes) with respect to ore mined at the Wapiti Property; and
ɒ is entitled to receive a cash payment in the amount of CAN$50,000 upon completion of a feasibility study and a determination by Fertoz International to proceed with commercial operations on the Wapiti Property. Please refer to Section 11.2 for further details about the terms of the Wapiti Agreement.
ɒ Remuneration: Jo’s services are being charged at CAN$700 per day since June 2013.
ɒ Options: Jo Shearer’s company Homegold Resources Ltd holds 153,846 Options in the Company with an exercise price of $0.25 per Share, exercisable on the Company becoming Listed on the ASX and will remain exercisable until the date that is 4 years after the Company becomes Listed. Jo received the Options in consideration for charging a reduced consulting rate of CAN$400 per day for the period from March 2012 to May 2013.
5.6 LEGAL OR DISCIPLINARY ACTION
None of the Directors, Julien McInally or Jo Shearer has: a. in the ten year period ending on the date of this Prospectus had any legal or disciplinary action against the person (or any company that the person was a director of at the relevant time) that is relevant to the person’s role in the Company and a potential investor’s decision to apply for Shares; or b. been an officer of a company that entered into a form of external administration because of insolvency while the person was an officer of the company or within twelve months of the person ceasing to be an officer of the company. 5. DIRECTORS & CORPORATE GOVERNANCE 54
5.7 CORPORATE GOVERNANCE This section explains how the Board will manage the Company’s business. The main policies and practices adopted by the Company which will take effect from Listing, are summarised below.
5.7.1 Responsibility and Scope of the Board of Directors The primary responsibility of the Board is to represent and advance Shareholders’ interests and to protect the interests of all stakeholders. To fulfil this role the Board is responsible for the overall corporate governance of the Company including its strategic direction, establishing goals for management and monitoring the achievement of these goals.
The responsibilities of the Board include: a. the appointment of the chairperson, company secretary and the composition of the Board; b. the appointment of the chief executive officer/managing director, senior management team and key staff (if any), the determination of the terms of such appointment (including remuneration and termination) and the review of their performance; c. the formulation, review and approval of the Company’s direction, strategies, business objectives and targets; d. the review, approval and monitoring significant business transactions, including capital expenditure, acquisitions, divestments and organisational restructures; e. the monitoring of the Company’s financial performance by reviewing and approving budgets, assessing the Company’s performance against budgets and monitoring the adequacy and integrity of financial and other reporting procedures; f. the approval of annual, half yearly and quarterly accounts; g. recommendation to shareholders on the appointment of the external auditor as and when their appointment or re-appointment is required to be approved by them; h. the approval of the issue of any shares, options or other securities in the Company (subject to compliance with any applicable ASX Listing Rules); i. ensuring that adequate internal control systems, procedures and standards, including risk management systems, codes of conduct and legal compliance and ethical standards, are in place and complied with; and j. ensuring corporate accountability to shareholders primarily through adopting an effective shareholder communications strategy.
5.7.2 Composition of the Board The Board is comprised of three non-executive Directors, two of which are considered independent Directors, and one executive Director.
The Board consists of:
ɒ James Chisholm – Non-Executive Chairman
ɒ Les Szonyi – Managing Director and Chief Executive Officer
ɒ Peter Bennetto – Independent Non-Executive Director
ɒ Adrian Byass – Independent Non-Executive Director Detailed biographies are provided in Section 5.1. 55 LTD REPLACEMENT PROSPECTUS 2013
Each Director has confirmed to Fertoz that they anticipate being available to perform their duties as a non- executive Director or executive Director (and employee) of Fertoz without constraint from other commitments.
The Board considers an independent Director to be a non-executive Director who is not a member of Fertoz’s management and who is free of any business or other relationship that could materially interfere with or reasonably be perceived to interfere with the independent exercise of their judgement. The Board will consider the materiality of any given relationship on a case by case basis, and has adopted guidelines to assist in this regard. The Board reviews the independence of each Director in light of interests disclosed to the Board from time to time.
The Board considers thresholds of materiality for the purpose of determining ‘independence’ on a case by case basis, having regard to both quantitative and qualitative principles. The Board believes a Director holding more than 10% of the Shares in Fertoz is not independent.
The Board will review suitability of other candidates to join the Board. The Board does not consider its current size and structure or the operations of the Company of a sufficient magnitude to establish a separate Nominations Committee.
The Board will appoint an independent advisor annually, at the Company’s expense, to review the remuneration of the Board and its Directors. The Board will provide this report to shareholders at each Annual General Meeting.
5.7.3 Remuneration Arrangements The remuneration of the Managing Director will be decided by the Board. Other Executives’ remuneration will be determined by the Managing Director and approved by the Board, without the relevant affected Executive participating in that decision-making process. The Board may award additional remuneration to Non- Executive Directors called upon to perform extra services or make special exertions on behalf of the Company. The Board does not consider its current size and structure or the operations of the Company of a sufficient magnitude to establish a separate Remuneration Committee. However it has a Remuneration Committee Charter which the Board will follow. Total Board remuneration will be subject to shareholder approval at each Annual General Meeting.
5.7.4 External Audit The Company, in general meetings, is responsible for the appointment of the external auditors of the Company, and the Board from time to time will review the scope, performance and fees of those external auditors.
5.7.5 Audit Committee The Board does not consider its current size and structure or the operations of the Company of a sufficient magnitude to establish a separate Audit Committee. However it has an Audit Committee Charter which the Board will follow.
5.7.6 Identification and Management of Risk The Board’s collective experience will enable accurate identification of the principal risks that may affect the Company’s business. Key operational risks and their management will be recurring items for deliberation at Board meetings.
5.7.7 Ethical Standards The Board is committed to the establishment and maintenance of appropriate ethical standards.
5.7.8 Access to Information and Advice All directors have unrestricted access to Group company records and information, management and employees for the purpose of discharging their director’s duties. 5. DIRECTORS & CORPORATE GOVERNANCE 56
The Board, Committees or individual directors may (at the Company’s expense) seek independent external professional advice as considered reasonably necessary, subject to prior approval of the chairperson (which cannot be unreasonably withheld or delayed). A copy of any such advice is to be made available to all members of the Board.
5.7.9 Disclosure Policy The Board has agreed on guidelines for assessing materiality of matters that need to be brought to the attention of the chairperson.
5.7.10 Corporate Code of Conduct
The Company is committed to operating with integrity and a duty of care to its stakeholders (shareholders, employees, customers, suppliers etc.) and the broader community in which it operates. This corporate code of conduct (Code) outlines the framework for ensuring that the Company’s decision making and actions are undertaken in an ethical and accountable manner. All Company directors and employees are required to comply with this Code.
5.7.11 Continuous Disclosure Policy
For so long as Fertoz is listed on the ASX, Fertoz will comply with the continuous disclosure requirements of the ASX Listing Rules, the Corporations Act and any other applicable legislation.
Fertoz will disclose to the ASX any information relating to the Company which a reasonable person would expect to have a material effect on Fertoz’s share price as soon as Fertoz becomes aware of that information.
All relevant information provided to the ASX will be posted on the Fertoz website after the ASX confirms the announcement has been made.
The Fertoz Board will implement an effective Continuous Disclosure Policy which outlines directors’ and management’s responsibility in relation to disclosing information to the market and shareholders to ensure Fertoz complies with its ASX requirements in relation to disclosure.
5.7.12 Risk Management Policy
The Company’s risk management system covers risks in the Company (and its subsidiary’s) operations, financial reporting and legal/regulatory compliance. The primary goals of the risk management system are to ensure that: a. all major sources of actual and potential opportunity for and harm to the Group are identified, monitored, analysed and treated appropriately; b. business decisions of the Group appropriately balance benefits and risk trade-offs; c. regulatory compliance and integrity in financial and other reporting; and d. Senior management, the Board and investors understand the Group’s risk profile. Arrangements put in place by the Board to monitor risk management include: a. monthly reporting by senior management to the Board in respect of operations and the financial position and performance of the Group; b. preparation of quarterly rolling forecasts by senior management for the Board; c. circulation to the Board of minutes of each Committee meeting and reports (at least once a year) of each Committee’s chairperson; and 57 LTD REPLACEMENT PROSPECTUS 2013
d. the development of a risk register which provides a framework for systematically understanding, identifying and analysing the types of business risks to the Group (as a whole or to specific business activities) and forming an action plan in respect of those risks.
5.8 DEPARTURES FROM CORPORATE GOVERNANCE The Directors of Fertoz monitor the business affairs of the Company on behalf of Shareholders and intend to formally adopt policies consistent with the ASX Corporate Governance Principles and Recommendations (2nd Edition) as published by ASX Corporate Governance Council (Recommendations) to the extent that they are suitable and applicable to the Company.
In cases where the Company determines it would be inappropriate to follow the Recommendations because of its circumstances, the Company will provide reasons for not doing so in its Annual Report and any prospectus.
The Company’s approach to corporate governance is designed to encourage Directors to focus their attention on accountability, risk management and ethical conduct. The Directors are committed to the highest standards of corporate governance in the performance of their duties.
The Company’s compliance and departures from the Recommendations as of the date of this Prospectus are set out on the following pages.
PRINCIPLES AND RECOMMENDATIONS COMMENT 1 Lay solid foundations for management and oversight 1.1 Companies should establish the functions reserved to the The Company’s Corporate Governance Plan includes a Board Board and those delegated to senior executives and disclose Charter, which discloses the specific responsibilities of the those functions Board.
1.2 Companies should disclose the process for evaluating the The Company’s Corporate Governance Plan includes a performance of senior executives section on performance evaluation practices adopted by the Company.
The Chair will monitor the Board and the Board will monitor the performance of any senior executives who are not Directors, including measuring actual performance against planned performance.
1.3 Companies should provide the information indicated in the Explanation of departures from Principles and Guide to reporting on Principle 1. Recommendations 1.1 and 1.2 (if any) are set out above. The Company will also explain any departures from Principles and Recommendations 1.1 and 1.2 (if any) in its future annual reports.
No formal performance evaluation of senior executives has taken place to date. Future annual reports will disclose whether such a performance has taken place in the relevant reporting period and whether it was in accordance with the process disclosed.
The Corporate Governance Plan which includes the Board Charter, is posted on the Company’s website.
2 Structure the board to add value 2.1 A majority of the Board should be independent directors. The Company is currently not in compliance with this recommendation as only two of the four directors are independent.
2.2 The chair should be an independent director. The Company is currently not in compliance with this recommendation as Mr James Chisholm is a substantial shareholder of the Company. 5. DIRECTORS & CORPORATE GOVERNANCE 58
PRINCIPLES AND RECOMMENDATIONS COMMENT 2.3 The roles of the chair and chief executive officer should not The role of the chief executive officer is exercised by a be exercised by the same individual. separate individual to the chair.
2.4 The Board should establish a nomination committee. The Board considers the Company is not currently of a size, or its affairs of such complexity, to justify the establishment of a nomination committee. The Board as a whole undertakes the process of reviewing the skill base and experience of existing Directors to enable identification or attributes required in new Directors. Where appropriate, independent consultants will be engaged to identify possible new candidates for the Board.
2.5 Companies should disclose the process for evaluating the The Company’s Corporate Governance Plan includes a performance of the Board, its committees and individual section on performance evaluation practices adopted by the directors. Company.
The chair will review the performance of the Board, its committees (if any) and individual Directors to ensure that the Company continues to have a mix of skills and experience necessary for the conduct of its activities.
2.6 Companies should provide the information indicated in the The Company has provided details of each Director, such Guide to reporting on Principle 2. as their skills, experience and expertise relevant to their position in this Prospectus and on its website and will also provide it in future annual reports.
Explanation of departures from Principles and Recommendations 2.1, 2.2, 2.3, 2.4, and 2.5 (if any) are set out above. The Company will also explain any departures from Principles and Recommendations 2.1, 2.2, 2.3, 2.4, and 2.5 (if any) in its future annual reports.
No performance evaluation of the Board, its committees and individual Directors has taken place to date as this process is conducted annually and the first year of evaluation has not been completed. Future annual reports will disclose whether such a performance evaluation has taken place in the relevant reporting period and whether it was in accordance with the process disclosed.
3 Promote ethical and responsible decision making. 3.1 Companies should establish a code of conduct and disclose The Company’s Corporate Governance Plan includes a the code or a summary of the code as to: ‘Corporate Code of Conduct’, which provides a framework for decisions and actions in relation to ethical conduct in ɒ The practices necessary to maintain confidence in the employment. Company’s integrity
ɒ The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders
ɒ The responsibility and accountability of individuals for reporting and investigating reports of unethical practices 3.2 Companies should establish a policy concerning diversity The Company’s Corporate Governance Plan includes and disclose the policy or a summary of that policy. The a ‘Diversity Policy’, which provides a framework for policy should include requirements for the Board to establish establishing measurable objectives for achieving gender measurable objectives for achieving gender diversity and diversity and for the Board to assess annually both the for the Board to assess annually both the objectives and the objectives and the progress in achieving them. progress in achieving them.
3.3 Companies should disclose in each annual report the The disclosure has not yet been made as the first year as measurable objectives for achieving gender diversity set a listed company has not been completed. Future annual by the Board in accordance with the diversity policy and reports will disclose the measurable objectives for achieving progress in achieving them. gender diversity set by the Board in accordance with the diversity policy and progress in achieving them. 59 LTD REPLACEMENT PROSPECTUS 2013
PRINCIPLES AND RECOMMENDATIONS COMMENT 3.4 Companies should disclose in each annual report the The disclosure has not yet been made as the first year as proportion of women employees in the whole organisation, a listed company has not been completed. Future annual women in senior executive positions and women on the reports will disclose the proportion of women employees in Board. the whole organisation, women in senior executive positions and women on the Board.
3.5 Companies should provide the information indicated in the Explanation of departures from Principles and Guide to reporting on Principle 3. Recommendations 3.1, 3.2, 3.3, and 3.4 (if any) are set out above. The Company will also explain any departures from Principles and Recommendations 3.1, 3.2, 3.3, and 3.4 (if any) in its future annual reports.
The Corporate Governance Plan, which includes the Diversity Policy, is posted on the Company’s website.
4 Safeguard integrity in financial reporting 4.1 The Board should establish an audit committee. The Board considers the Company is not currently of a size, or its financial affairs of such complexity, to justify the establishment of an audit committee. The Board as a whole is responsible for the selection and proper application of accounting policies, the integrity of financial reporting, the identification and management of risk and review of operation of the internal control systems.
Once the Board deems that the Company warrants an audit committee, one will be formed in compliance with this Recommendation.
4.2 The audit committee should be structured so that it: Whilst the Board is not structured in the manner set out in the Principles and Recommendations, the Board is of the ɒ Consists only of non-executive Directors view that the experience and professionalism of the persons on the Board is sufficient to ensure that all significant matters are appropriately addressed and actioned. Further ɒ Consists of a majority of independent Directors the Board does not consider that the Company is of sufficient size to justify the appointment of additional Directors for the ɒ Is chaired by an independent chair who is not chair of sole purpose of satisfying the Recommendations as it would the Board be cost prohibitive.
ɒ Has at least three members. As the operations of the Company develop the Board will reassess the formation of the Audit Committee.
4.3 The audit committee should have a formal charter. The Company’s Corporate Governance Plan includes an Audit and Risk Committee Charter which discloses its specific responsibilities.
4.4 Companies should provide the information indicated in the Explanation of departures from Principles and Guide to reporting on Principle 4. Recommendations 4.1, 4.2, and 4.3 (if any) are set out above. The Company will also explain any departures from Principles and Recommendations 4.1, 4.2, and 4.3 (if any) in its future annual reports.
The Company’s Corporate Governance Plan which includes the Audit and Risk Committee Charter is posted on the Company’s website.
5 Make timely and balanced disclosure 5.1 Companies should establish written policies designed The Company has a continuous disclosure programme in to ensure compliance with ASX Listing Rule disclosure place designed to ensure compliance with ASX Listing Rule requirements and to ensure accountability at a senior disclosure requirements and to ensure accountability at a executive level for that compliance and disclose those senior executive level for that compliance and disclose those policies or a summary of those policies. policies or a summary of those policies. 5. DIRECTORS & CORPORATE GOVERNANCE 60
PRINCIPLES AND RECOMMENDATIONS COMMENT 5.2 Companies should provide the information indicated in the The Company has not currently departed from Principle Guide to reporting on Principle 5. and Recommendation 5.1. The Company will provide an explanation of any departures from Principle and Recommendation 5.1 (if any) in its future annual reports.
The Company’s Corporate Governance Plan which includes a continuous disclosure programme is posted on the Company’s website.
6 Respect the rights of shareholders 6.1 Companies should design a communications policy for The Company’s Corporate Governance Plan includes a promoting effective communication with shareholders and shareholders communication strategy, which aims to encouraging their participation at general meetings and ensure that the shareholders are informed of all major disclose their policy or a summary of that policy. developments affecting the Company’s state of affairs.
6.2 Companies should provide the information indicated in the The Company has not currently departed from Principle Guide to reporting on Principle 6. and Recommendation 6.1. The Company will provide an explanation of any departures from Principle and Recommendation 6.1 (if any) in its future annual reports.
The Company’s Corporate Governance Plan which includes a shareholders communication strategy is posted on the Company’s website.
7 Recognise and manage risk 7.1 Companies should establish policies for the oversight and The Company’s Corporate Governance Plan includes a risk management of material business risks and disclose a management policy. summary of those policies. The Board determines the Company’s “risk profile” and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. 7.2 The Board should require management to design and The Company’s Corporate Governance Plan includes a implement the risk management and internal control system risk management policy. The Board will require the chief to manage the Company’s material business risks and report executive officer to provide a report at the relevant time. to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks.
7.3 The Board should disclose whether it has received assurance The Company has not yet been required to lodge financial from the chief executive officer (or equivalent) and the chief statements in Australia and as a result no declaration has financial officer (or equivalent) that the declaration provided been requested. in accordance with Section 295A of the Corporations Act is founded on a sound system of risk management and internal The Board will seek the relevant assurance from the chief control and that the system is operating effectively in all executive officer or the chief financial officer at the relevant material respects in relation to financial reporting risks. time.
7.4 Companies should provide the information indicated in the Explanation of departures from Principles and Guide to reporting on Principle 7. Recommendations 7.1, 7.2, and 7.3 (if any) are set out above. The Company will also explain any departures from Principles and Recommendations 7.1, 7.2, and 7.3 (if any) in its future annual reports.
The Company’s Corporate Governance Plan which includes a risk management policy is posted on the Company’s website. 61 LTD REPLACEMENT PROSPECTUS 2013
PRINCIPLES AND RECOMMENDATIONS COMMENT 8 Remunerate fairly and responsibly 8.1 The Board should establish a remuneration committee. The Board considers the Company is not currently of a size, or its financial affairs of such complexity, to justify the establishment of a remuneration committee. The Board as a whole is responsible for the remuneration arrangements for the Directors and executives of the Company and considers it more appropriate to set aside time at Board meetings each
year to specifically address matters that would ordinarily fall to a Remuneration Committee.
The Company’s Corporate Governance Plan includes a Remuneration Committee Charter which discloses its specific responsibilities.
Remuneration to the executive directors is by way of salary and performance options and to the non-executive directors by way of director fees and performance options, with the level of salary, fees or options as the context requires, having been set by the Board to an amount it considers to be commensurate for a company of its size and level of activity.
The Company will assess the relationship between performance and remuneration, once the Company commences operations. Further there are no schemes for retirement benefits in existence.
8.2 The remuneration committee should be structured so that it: Although no formal Remuneration Committee has been established, the Board currently serves as the Remuneration ɒ Consists of a majority of independent Directors Committee.
ɒ Is chaired by an independent director The composition of the Board is such that the Company does not currently comply with this recommendation. ɒ Has at least three members
8.3 Companies should clearly distinguish the structure of non- The Board has distinguished the structure of non-executive executive director’s remuneration from that of executive director’s remuneration from that of executive directors and directors and senior executives. senior executives.
The Company’s Constitution provides that the remuneration of non-executive directors will not be more than the aggregate fixed sum approved at a general meeting of shareholders.
The Board is responsible for determining the remuneration of executive directors and senior executives (without the participation of the affected director). It is the Board’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating executive directors and senior executives fairly and appropriately with reference to relevant employment market conditions and by linking the nature and amount of executive directors’ and senior executives’ emoluments to the Company’s financial and operational performance.
8.4 Companies should provide the information indicated in the Explanation of departures from Principles and Guide to reporting on Principle 8. Recommendations 8.1, 8.2, and 8.3 (if any) are set out above. The Company will also explain any departures from Principles and Recommendations 8.1, 8.2, and 8.3 (if any) in its future annual reports.
The Company’s Corporate Governance Plan which includes the Remuneration Committee Charter is posted on the Company’s website. 5. DIRECTORS & CORPORATE GOVERNANCE 62 63 LTD REPLACEMENT PROSPECTUS 2013
6. RISK FACTORS
6.1 OVERVIEW Phosphate rock exploration, development and mining are high risk enterprises and only occasionally provide high rewards. You should consider an investment in the Company as speculative. The Company aims to manage these risks by carefully planning its activities and implementing risk control measures. Some of the risks are, however, highly unpredictable and the extent to which the Company can effectively manage them is limited. Risks that the Directors believe are key risks associated with an investment in the Company are summarised in Section 6.2 below. This list of risks is not intended to be exhaustive of the risks faced by the Company or by investors in the Company. The occurrence of any of the risks or events outlined below could have a materially adverse effect on the Company’s operations and, in turn, the price at which its Shares trade on the ASX.
Before applying for Shares, you should satisfy yourself that you have a sufficient understanding of the risks described in Section 6.2 and should consider whether the Shares are a suitable investment for you, having regard to your own investment objectives, financial circumstances and taxation position. If you are unclear in relation to any matter or are uncertain as to whether Fertoz is a suitable investment for you, you should seek professional guidance from your solicitor, stockbroker, accountant or other independent adviser before deciding whether to invest.
You should note that the Shares to be issued pursuant to this Prospectus carry no guarantee with respect to the payment of dividends, return of capital or the market value of those Shares.
6.2 RISKS SPECIFIC TO AN INVESTMENT IN THE COMPANY
6.2.1 Achievement of Objectives The ability for the Company to meet its stated objectives will be heavily dependent on the outcome of the current and future drilling and exploration programs associated with existing tenements held by Fertoz, together with the ability to identify, explore and develop other tenements.
The Directors are unable to provide information as to the ultimate size and scale of any potential fertilizer- related resource base and accordingly, you must make your decision to invest on the basis of the skills of the Directors and management.
6.2.2 Limited Operational History While the Company’s management has significant experience and have previously carried out or been exposed to exploration and production activities while employed or engaged by other companies, the Company was not incorporated until 24 August 2010. Accordingly, the Company has limited historical, financial or operating information. The Company’s ability to achieve its objectives depends on the ability of its Directors and officers to implement current plans and to respond to any unforeseen circumstances that require changes to those plans.
6.2.3 Exploration Risk The Company is an early stage explorer. As such, the future success of the Company and the value of its shares will depend on the results of exploration for, and development of, phosphate resources. The Phosphate mineral claims and exploration licences are at various stages of exploration, and you should understand that phosphate exploration and development are high-risk undertakings. Notwithstanding the experience, knowledge and careful evaluation the Company brings to exploration of the mineral claims and exploration licences, there is no assurance that the money spent on these activities will result in the discovery of recoverable phosphate resources. Even if identified, other factors such as technical difficulties, geological conditions, adverse changes in government policy or legislation or lack of access to sufficient funding may mean that the resource is not economically recoverable or may otherwise preclude the Company from successfully exploiting the resource.
6.2.4 Resource Risks At this point, the Company does not have any resources that comply with the JORC Code and there is no guarantee that the Company will ever have resources that comply with the JORC Code. 6. RISK FACTORS 64
Any estimates in this Prospectus, including in relation to exploration targets, are expressions of judgment based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates are likely to change. This may result in alterations to development and mining plans which may, in turn, adversely affect the Company’s operations.
Any data in this Prospectus in relation to exploration, including exploration targets, represents estimates only. In general, estimates are based upon a number of variable factors and assumptions which may vary considerably from actual results.
There has been insufficient exploration to define a Mineral Resource, and it is uncertain if further exploration will result in the determination of a Mineral Resource. No assurance can be given that any Mineral Resource will be discovered, that any particular level of recovery from reserves will in fact be realised or that a Mineral Resource will ever qualify as commercially viable which can be legally and economically exploited.
6.2.5 Risk of Mineral Claims in Canada Not Being Renewed Many of the Company’s mineral claims in Canada are due to expire within 12 months of the date of this Prospectus. These include the Barnes Lake project, the Crows Nest project and many mineral claims forming parts of the Wapiti East and Wapiti West projects. Please refer to Schedule B of the Canadian Solicitor’s Tenement Report in Section 10.1 of this Prospectus for a list of the Company’s Canadian Tenements and their respective expiry dates.
Within one year of completing exploration and development work on a claim, the Recorded Holder must file a report detailing that work with the Ministry. Filing of work on a tenement (or making payments in lieu of such work) automatically extends the Good To Date, for a period of at least 12 months. Note that the Good To Date can be extended further than 12 months by carrying out more than the minimum required exploration of $5 per hectare.
Refer to the Canadian Solicitor’s Tenement Report in Section 10.1 for further details about the process for renewing mineral claims in Canada.
There is a risk that Fertoz may not be successful in renewing the mineral claims forming the Barnes Lake project, the Crows Nest project and part of the Wapiti project, which are due to expire within 12 months of the date of this Prospectus. The Company is mitigating the risk of these mineral claims not being renewed by providing for and commencing the requisite exploration and development work in its budget for the next 2 years. The requisite exploration and development work has been included in the proposed work program for each of the Wapiti East and Wapiti West, Barnes Lake, Crows Nest project. Refer to the detailed work programs for these projects in Sections 3.3.4, 3.4.4, 3.5.4 and 3.6.4 (or the summary of the proposed use of proceeds of this Offer in Section 4.3). Exploration work on Barnes Lake of approximately CAN$15,000 was completed in July and the report is being finalised. It will be submitted prior to 19 July and it is expected the Good to Date will be extended to 19 July 2016.
If the exploration work is delayed Fertoz intends to make a payment in lieu of exploration to retain the tenements before they expire. The maximum payment required to extend the Good to Date a further 12 months for the tenements due to expire in 2013 / 2014 is approximately CAN$60,333 (It excludes Barnes Lake rent as exploration work has been completed and no payment in lieu will be required).
In the event the claims are forfeited, and provided they have not been staked by a third-party in the meantime, the Fertoz may go back at a later date and re-stake the claims
If any of the mineral claims due for renewal within the next 12 months are not renewed, the Company proposes to apply the funds that it otherwise had applied to those mineral claims towards the exploration of the remaining Canadian tenements.
The Company cannot guarantee that any of its mineral claims in Canada will be successfully renewed. If any of the mineral claims are not renewed, the Company and its operations may be adversely affected through the loss of opportunity to discover, develop and mine any resources on those claims. 65 LTD REPLACEMENT PROSPECTUS 2013
There is no requirement to reduce the area of a claim after a designated number of operational years (regardless of any maintenance or extension of the term of the tenement and Good To Date, and regardless of any forfeiture and re-staking of any claim).
6.2.6 Development and Mining Risk Possible future development of a mining operation at any of the Company’s projects is dependent on, and may be adversely affected by, a number of factors including, but not limited to, failure to acquire and/or delineate economically recoverable ore bodies, unfavourable geological conditions, failing to receive the necessary approvals from all relevant authorities and parties, unseasonal weather patterns, unanticipated technical and operational difficulties encountered in extraction and production activities, mechanical failure of operating plant and equipment, unexpected shortages or increases in the price of consumables, spare parts and plant and equipment, cost overruns, risk of access to the required level of funding and contracting risk from any third parties providing essential services.
In the event that the Company commences production, its operations may be disrupted by a variety of risks and hazards which are beyond its control, including environmental hazards, industrial accidents, technical failures, labour disputes, lack of skilled labour, unusual or unexpected rock formations, flooding and extended interruptions due to inclement or hazardous weather conditions and fires, explosions and other accidents.
The occurrence of any of these risks could result in substantial financial losses to the Company. Damages occurring to third parties as a result of such risks may give rise to claims against the Company which may not be covered fully by insurance or at all. The Directors of the Company (in conjunction with management) aim to avoid and mitigate the impact of these risks, however, their ability to do so may be affected by matters outside their control and no assurance can be given that they will be successful in these endeavours.
6.2.7 Exploration and Operating Costs The estimated exploration costs of the Company (including as set out in the proposed budgets and programmes in Section 3 of this Prospectus) are based on certain assumptions with respect to the method and timing of exploration. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs may materially differ from these estimates and assumptions. Therefore, no assurance can be given that the cost estimates and the underlying assumptions will be realised in practice, which may materially and adversely affect the Company’s viability.
6.2.8 Phosphate Rock Prices The Company intends to derive its revenue from the extraction and sale of phosphate rock. The price which the Company may receive for any phosphate rock it is able to extract depends on numerous factors that are beyond the Company’s control and are inherently unpredictable. These factors include worldwide and regional supply and demand for phosphate, general world economic conditions and the outlook for interest rates, inflation and other economic factors on both regional and global basis, increases of supply by competitors, shipping costs and alternative product development. These factors may have a positive or negative effect on the Company’s exploration, project development and production plans and activities, together with the ability to fund those plans and activities.
6.2.9 Phosphate Rock Quality The mineralogical composition of phosphate bearing rocks is subject to natural variability resulting in differences in physical properties, levels of impurities and available phosphorus content. Fertilizer manufacturers and farmers require phosphate rock to be delivered which meet specified tolerances on elemental impurities and quantity of available phosphorus.
The Company has conducted limited testing of phosphate rock from the Wapiti East project. These tests are necessarily conducted on discrete samples of rock taken from drill holes or excavations. Unforseen changes in phosphate rock properties may result in the product failing to meet the required specifications of potential consumers, and accordingly the Company can make no assurance that the product will meet required specifications at this time. This may have a material adverse impact on the prospects and financial position of the Company. 6. RISK FACTORS 66
6.2.10 Environmental Risk The Company’s projects are subject to rules and regulations regarding environmental matters and the discharge of hazardous wastes and materials. As with all mineral projects, the Company’s projects are expected to have a variety of environmental impacts should the developments be granted. Development of any of the Company’s projects will be dependent on the Company satisfying environmental guidelines and, where required, being approved by government authorities. The Company intends to conduct its activities in an environmentally responsible manner and in accordance with all applicable laws, but may still be subject to accidents or other unforeseen events which may compromise its environmental performance and which may have adverse financial implications.
6.2.11 Commercialisation Risks Should Fertoz delineate a mineable phosphate resource and complete positive bankable feasibility studies there is no assurance that ultimately project development costs and production costs will result in the economic exploitation of the resource. Furthermore, market prices for phosphate could cause the project to become non-economic.
6.2.12 Reliance on Key Personnel The Company’s success largely depends on the core competencies of its Directors and management and their familiarisation with, and ability to operate in, the phosphate and mining industry and the Company’s ability to retain its key executives. The loss of services of the Directors may have an adverse effect on the proposed operations and financial performance of the Company.
A shortage of skilled labour in the Australian mining industry could result in the Company having to pay significantly more for employees or contractors to operate its business, which could adversely affect the Company’s business, results of operations and financial condition.
6.2.13 Future Capital Needs and Future Funding The funds raised by the Offer will be used to carry out the Company’s objectives as detailed in this Prospectus. The successful development of the Company’s projects will require significant additional capital and there is no guarantee that this will be available when required.
The Company’s ability to raise further capital (equity or debt) within an acceptable time, of a sufficient amount and on terms acceptable to the Company will vary according to a number of factors, including the potential of projects (existing and future), the results of exploration, subsequent feasibility studies, development and mining, stock market and industry conditions and the price of relevant commodities and exchange rates. No assurance can be given that future funding will be available to the Company on favourable terms (or at all). If adequate funds are not available on acceptable terms the Company may not be able to further develop its projects and it may impact on the Company’s ability to continue as a going concern.
If the Company issues additional equity in the future, existing Shareholders may have their interest diluted. Debt financing, if available, may involve onerous restrictions on financing and operating activities and will add an additional overhead cost to the business.
6.2.14 Competition Risk The industry in which the Company will be involved is subject to domestic and global competition. Although the Company will undertake all reasonable due diligence in its business decisions and operations, the Company will have no influence or control over the activities or actions of its competitors, which activities or actions may, positively or negatively, affect the operating and financial performance of the Company’s projects and business.
6.2.15 Infrastructure Access Risk Phosphate produced from the Company’s proposed mining operations is intended to be transported to customers by rail. The Company would need to secure rail capacity on the rail systems from existing operators or these systems would need to be increased in order for the Company to secure sufficient capacity to meet its potential transport requirements. There is possibility that the Company may not secure capacity 67 LTD REPLACEMENT PROSPECTUS 2013
from existing operators or that a capacity increase may not occur on the rail system.
To date, no definitive agreements have been entered into for rail access and there is a risk that the Company will not enter into arrangements with existing rail providers for use of services or will not be able to enter into arrangements on terms acceptable to the Company. If the Company cannot gain access to such infrastructure, it would have a material negative impact on the value of the Company.
Even if the Company is able to gain access to transport infrastructure, a number of factors outside of the Company’s control, including natural disasters or extreme weather events could disrupt these transport routes.
6.2.16 Contracted Labour The Company may in the future depend on a large number of contracted personnel. There is a risk that contracted personnel fail to perform their contractual obligations and that the Company is unable to find suitable replacement contractors.
Through the potential use of contractors and other third parties for exploration, mining and other services, the Company is reliant on a number of third parties for development of the Wapiti projects. While this situation is normal in the mining and exploration industry, problems caused by third parties may arise which have the potential to impact on the Company. Should contractor personnel fail to perform their contractual obligations, this may have the effect of delaying any exploration or development timetable, increasing operating costs and negatively impacting the economics of the Wapiti projects.
6.2.17 Joint Venture Risk The Company’s exploration strategy for its Australian assets is to engage joint venture partners to carry out exploration in return for equity in the projects. Any failure to engage suitable joint venture partners will lead to delays in exploration and may lead to the Australian tenements being reduced in size or relinquished.
6.2.18 Tenement Rights All of the tenements held by the Company in Australia are granted. Tenements that are granted are subject to applications for renewal or grant (as the case may be). The renewal or grant of the terms of each licence is usually at the discretion of the relevant government authority. Additionally, licences are subject to a number of specific legislative conditions. The inability to meet these conditions could affect the standing of a licence or restrict its ability to be renewed. If a licence is not renewed or granted, the Company may suffer significant damage through the loss of opportunity to develop and discover and mine resources on that licence. Investors are referred to the Solicitor’s Tenement Report in Section 10 of this Prospectus for information generally on the licences.
6.2.19 First Nations Native Title British Columbia In 1982, existing aboriginal and treaty rights were recognized and affirmed in Section 35(1) of the Constitution Act, 1982 (“Section 35 rights”) The courts continue to clarify the nature of existing aboriginal and treaty rights and, as a consequence, define the legal relationship between the British Columbia Province and First Nations. Provincial decision-makers have legal obligations to consider and potentially accommodate claimed aboriginal rights and title which might be impacted by decisions.
“Aboriginal rights” are practices, customs or traditions integral to the distinctive culture of the First Nation claiming the right. A practice undertaken for survival purposes can be considered integral to a First Nation’s culture. Some examples of aboriginal rights are hunting, fishing, and gathering plants for traditional medicines and spiritual ceremonies. Aboriginal rights may be connected to a particular piece of land, and are generally not exclusive.
“Aboriginal title” is a subcategory of aboriginal rights that has its own test for proof. It is a unique interest in land that encompasses a right to exclusive use and occupation of the land for a variety of purposes. Those uses must not be inconsistent with the nature of First Nation’s historical attachment to the land. A claimant must prove exclusive occupation of land prior to sovereignty.
“Treaty rights” are rights held by a First Nation in accordance with the terms of a historic or modern treaty 6. RISK FACTORS 68
agreement with the Crown. Treaties may also identify obligations held by a First Nation and the Crown.
In British Columbia, few treaties have been entered into with Aboriginal groups and Aboriginal groups continue to hold Aboriginal interests both as treaty rights but also as claimed, but unproven, Aboriginal rights or title. As a result, the duty to consult with Aboriginal peoples arises wherever the Crown knows of the potential existence of an Aboriginal right, title or other interest, whether proven or unproven, and contemplates an activity or decision that may adversely affect such interest. The duty to consult will require that the Crown and its respective agencies negotiate with Aboriginal people who they are aware may have either treaty rights or simply claimed Aboriginal rights in a particular area before fundamental exploration and development decisions are made.
The degree of consultation required varies with the circumstances. Where there is a strong claim or a proven right, or where the potential adverse effect of the proposed decision on the Aboriginal interest is severe, the requisite consultation will be more comprehensive than where there a weaker claim or the potential adverse effect is minor. In some cases, this more comprehensive duty may require the Crown to amend plans or decisions to address the concerns of Aboriginal groups.
The duty to consult applies only to the Crown, it does not extend to third parties. In practice, however, elements of the duty are often delegated by the Crown to the Recorded Holder. For example, the Crown may delegate information gathering on potential claims or the potential impacts of a proposed mining project on Aboriginal or treaty rights. As a result, a Recorded Holder will be expected to engage with local Aboriginal groups who have claimed Aboriginal rights in respect of each activity or decision that may adversely affect such interest. The result is that many mine developers in Canada enter into formal agreements with Aboriginal groups relating to matters of importance to the particular Aboriginal community.
The legal nature of aboriginal land claims is a matter of considerable complexity. The impact of any such claim on the Company's ownership interest in the Canadian projects cannot be predicted with any degree of certainty and no assurance can be given that a broad recognition of aboriginal rights in the area in which the Canadian projects are located, by way of a negotiated settlement or judicial pronouncement, would not have an adverse effect on the Company's activities. Even in the absence of such recognition, the Company will at some point be required to negotiate with first nations in order to facilitate exploration and development work in respect of the Canadian projects, and there is no assurance that the Company will be able to establish a practical working relationship with the first nations in the area which would allow it to ultimately develop the Property.
The Wapiti project is on lands which overlap the interests of the following Aboriginal groups: the McLeod Lake First Nation, the West Moberly First Nation and the Saulteau First Nation. Fertoz’s representative is currently in negotiations with all three tribes. The status of these negotiations at the date of this Prospectus is as follows:
ɒ the Company has received a letter of support for the proposed 2013 exploration program for the Wapiti Project from the McLeod First Nation, which states it has no concerns with the present proposal of Fertoz to conduct exploration and investigative activities on the Wapiti West and Wapiti East projects. This correspondence is not binding on the band, and does not in any way mitigate the rights the band, or any other aboriginal group, may adversely affect Fertoz’s ability to explore the tenements in a timely manner.
ɒ Fertoz has initiated on-the-ground archaeological studies at the request of the West Moberly First Nation to identify the existence of any sacred sites. The existence of sacred sites may restrict access to parts of the tenements.
ɒ Fertoz is planning to meet with the Saulteau First Nation in the next few weeks. All three First Nations are signatories to Treaty 8 which was signed in 1899. This forms the basis of future negotiations concerning their Aboriginal Rights over the Wapiti tenements. The Akisqnuk First Nation, the Lower Kootenay Band, St. Mary's Indian Band, the Tobacco Plains Indian Band, the Shuswap Indian Band, and the Ktunaxa Nation Council are active in the vicinity of the Barnes Lake and Crows Nest projects. Consultation with these tribes is yet to commence.
While discussions with First Nation groups are proceeding to plan there is no guarantee that the Company’s ability to progress from the exploration phase to the development and mining phase of operation (provided a JORC Code compliant Mineral Resource suitable for open pit mining is found) will not be adversely affected if Fertoz cannot obtain the support and agreement of the relevant First Nation tribes. This, may adversely affect 69 LTD REPLACEMENT PROSPECTUS 2013
the Company’s operations or ability to access, explore or develop tenements.
6.2.20 Native Title and Land Access Australia The Native Title Act 1993 (Cth) (NTA) recognises and protects the rights and interests in Australia of Aboriginal and Torres Strait Islander people in land and waters, according to their traditional laws and customs. There is a significant uncertainty associated with native title in Australia and this may impact upon the Company’s operations and future plans. Native title can be either totally or partially extinguished by valid grants of certain titles by the Crown prior to 23 December 1996 and freehold land and certain exclusive possession leases (listed in Schedule 1 of the NTA). Native title is not necessarily extinguished by the grant of mining licences In order for the Company to secure the right to explore and thereafter mine any land in Queensland it must satisfy the requirements of the NTA. If native title rights do exist, the ability of the Company to gain access to tenements (through obtaining consent of any relevant landowner) or to progress from the exploration phase to the development and mining phases of operations may be adversely affected.
In order for the Company to secure the right to explore and potentially develop any of its tenements in Queensland and the Northern Territory it must satisfy the requirements of the NTA to the extent the tenements are affected by native title claims or interests.
The Sherrin North project in Queensland is subject to a native title claim made by the Indjalandji – Dhidhanu people. In accordance with Section 31(1)(b) of the NTA, a Native Title “Deed Regarding the Grant of EPM 19448” was entered into by the Indjalandji-Dhidhanu People, Fertoz and the State of Queensland on 2 December 2012 (EPM 19448 Section 31 Agreement). Under the EPM 19448 Section 31 Agreement, the Indjalandji-Dhidhanu People agree to allow Fertoz to exercise its rights and discharge its obligations under EPM 19448 in accordance with the relevant legislation. Fertoz has also entered into an Ancillary Agreement with Colin Saltmere and Hazel Windsor (on their own behalf and on behalf of the Indjalandji-Dhidhanu People) on 16 October 2012. The Ancillary Agreement operates in conjunction with the EPM 19448 Section 31 Agreement and contains the terms and conditions upon which Fertoz and its successors may access EPM 19448 to conduct exploration activities.
The following native title claims overlap Fertoz’s tenements in the Northern Territory:
ɒ Sandover River NTD6069/01 is a claim made by the Alyawarr & Kaytetye People that was registered with the NNTT on 18 January 2002. It overlaps the NT Tenement: EL 26915;
ɒ Dry River NTD6009/02 is a claim made by Wardaman, Jalalabayin Wubalawun & Ors that was registered with the NNTT on 19 June 2002. It overlaps the NT Tenements: EL 26995 and EL 26997; and
ɒ Willeroo Delamere NTD6011/02 is a claim made by the Wardaman Group that was registered with the NNTT on 19 July 2002. It overlaps the NT Tenement: EL 26997. Each registered claim attracts rights and interest (for example possession, occupation, use and enjoyment rights) specific to the individual claim. Fertoz has not entered into any native title agreements with the native title parties to these claims.
There are also several native title applications that have been made (but have not yet been accepted for registration) by native title parties in respect of areas that overlap Fertoz’s tenements in the Northern Territory. Please refer to the Solicitor’s Tenement Report in Section 10 of this Prospectus for details of these native title applications. Fertoz has not entered into any native title negotiations with any party in relation to these native title applications.
Independently of the NTA, the Company must also comply with other legislation relating to Aboriginal rights, including:
ɒ the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth), the Aboriginal Cultural Heritage Act 2003 (Qld), the Northern Territory Aboriginal Sacred Sites Act 1989 (NT) and the Heritage Act 2011 (NT) which relate to the protection of Aboriginal sacred sites, heritage places and objects; and
ɒ the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) (ALRA) which deals with Aboriginal freehold land (i.e. land for which Indigenous people hold an inalienable freehold title through a land trust) in the Northern Territory. 6. RISK FACTORS 70
The requirements under NTA and the above Acts may adversely affect the Company’s operations or ability to access, explore or develop its Australian tenements. If any of the above native title claims or applications are successful it may mean that Fertoz be prevented from commencing drilling in any restricted areas. In order to mitigate the risk of the above, Fertoz intends to continue to consult with the relevant Aboriginal Groups to address any concerns they may have.
Please refer to the Solicitor’s Tenement Report in Section 10 of this Prospectus for more information on Native Title and Aboriginal Cultural Heritage and how they affect Fertoz.
6.2.21 Potential Acquisitions As part of its business strategy, the Company may make acquisitions of or significant investments in other resource projects. Any such transactions would be accompanied by risks commonly encountered in making such acquisitions.
6.2.22 Foreign Exchange Risk Any revenue received by the Company would likely be in US dollars derived from the sale of phosphate rock and the Company’s operating expenses would be incurred principally in Canadian Dollars. Phosphate is sold throughout the world based principally on a US dollar price, however domestically within Canada, the phosphate rock price is set in Canadian Dollars. Furthermore the income and expenditure accounts will be initially prepared in Australian dollars (AUD). Therefore, Australian dollar reported revenue will be directly impacted by movements in the US dollar phosphate rock price, the Canadian Dollar phosphate rock price and the USD/AUD and CAD/AUD exchange rates. Movements in the USD/AUD or CAD/AUD exchange rates and/ or the US dollar phosphate rock price or Canadian Dollar phosphate rock price may adversely or beneficially affect the Company’s results or operations and cash flows.
6.2.23 Dilution Risk On Completion of the Offer (assuming $3.0 million is raised), there will be 40,009,595 fully paid ordinary shares on issue together with 10,615,384 Options. If the Options are converted into Shares existing Shareholders will be diluted and hold 79.0% of the issued Shares. The Options exercise prices comprise 6,923,077 at $0.25 exercise price; 1,538,461 at $0.35 exercise price, 1,538,461 at $0.45 exercise price; and 615,385 at $0.55 exercise price. All Options have a term to expiry of 4 years.
Shareholders that do not participate in this Offer will have their interest diluted on the Completion of the Offer. If the Company issues additional equity in the future, existing Shareholders may have their interest diluted.
6.2.24 Approvals, Permits, Licences and Consents Mining exploration and development companies must obtain numerous permits issued by various governmental agencies and regulatory bodies that impose strict regulations on various environmental and safety matters. The permitting rules are complex and may change over time, making the Company’s ability to comply with the applicable requirements more difficult or even impossible. This may hinder future development or mining operations. An inability to conduct the Company’s exploration or development pursuant to applicable permits could prevent the Company from realising its objectives.
6.2.25 Water and Power Infrastructure In the event that the Company does discover a resource which it intends to develop, the Company will need to secure access to a source of water and power sufficient to permit the conduct of the Company’s activities. The Company’s ability to secure water and power infrastructure may be outside of the Company’s control and the costs of such procurement are unknown.
6.2.26 Losses Expected to Continue into the Future The Company does not have a material source of revenue. In the near term, the Company does not intend to undertake any revenue generating business activity. Until the Wapiti project is fully operational the Company will have no means of generating income or cash flows. 71 LTD REPLACEMENT PROSPECTUS 2013
6.2.27 Wild Rivers The Wild Rivers legislation in Queensland prescribes certain restrictions in certain areas for activities that can adversely affect declared “wild rivers”, waterways and catchments. One of the Company’s exploration licence tenements (EPM19448) is located within a Wild River area. The wild river status of the area may affect the Company’s future operations in that area and any future application for a mining lease.
6.2.28 Availability of Equipment and Personnel The Company’s exploration and future development activities are dependent on the availability of relevant equipment and appropriately qualified and experienced personnel in the area of its exploration permits. If the Company is unable to secure such equipment or personnel in the future, or is unable to secure it on acceptable terms, this may have a material adverse effect on the financial position and prospects of the Company.
6.3 GENERAL INVESTMENT RISKS
6.3.1 Securities Investments and Share Market Conditions There are risks associated with any securities investment. The prices at which securities are traded may fluctuate in response to a number of factors beyond the Company’s control. Such factors include, but are not limited to, the demand for and availability of Shares, movements in domestic interest rates, exchange rates, fluctuations in Australian and international stock markets and general domestic and economic activity. Furthermore, the stock market, and in particular the market for exploration and mining companies may experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of such companies. These factors may materially adversely affect the market price of the securities of the Company.
The Shares issued under this Prospectus carry no guarantee in respect of profitability, dividends or the price at which they may trade on ASX. There can be no guarantee that an active market in the Shares will develop or that the market price of the Shares will not decline below the Offer Price. Neither the Company nor the Directors warrant the future performance of the Company, or any return of an investment in the Company.
6.3.2 Economic Risk Changes in Canada, Australia and world economic conditions may adversely affect the financial performance of the Company. Factors such as inflation, currency fluctuations, interest rates, industrial disruption and economic growth may impact on future operations and earnings of the Company.
6.3.3 Legislative Risk Changes in relevant taxes, legal and administration regimes, trade restrictions, accounting practice and government policies in Australia or Canada may adversely affect the financial and operational performance of the Company.
The mining industry is subject to strict regulation with respect to matters such as land use, employee health and safety, mine permitting and licence requirements, reclamation and restoration of mining projects, air quality standards, water pollution, protection of human health, plant and wildlife, and the discharge of materials into the environment. The possibility exists that new legislation and/or regulations may be adopted that may materially adversely affect the Company’s exploration and planned development and mining operations. New legislation may also require the Company to change operations significantly or incur additional costs.
Changes to taxation laws, monetary and regulatory policy and exportation laws in Australia and in the jurisdiction of the Company’s proposed customers may also impact on the Company’s business.
6. RISK FACTORS 72
6.3.4 Insurance Risk
The Company, where economically feasible, may insure its operations in accordance with industry practice. However, even if insurance is taken out, in certain circumstances, the Company’s insurance may not be of a nature or level to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of the Company. Insurance of all risks associated with mineral exploration and production is not always available and where available the costs can be prohibitive.
6.3.5 International Operations Risk Any potential future international operations of the Company are subject to a number of risks, including: a. potential difficulties in enforcing agreements and collecting receivables through foreign local systems; b. potential difficulties in protecting rights and interests in assets; c. increases in costs for transportation and shipping; and d. restrictive government actions, such as imposition of trade quotas, tariffs and other taxes. Any of these factors could materially and adversely affect the Company’s business, results of operations and financial condition.
6.3.6 Changes in Government Policy Adverse changes in Canadian and / or Australian government policies or legislation may affect ownership of mineral interests, taxation, royalties, land access, labour relations, and mining and exploration activities of the Company. It is possible that the current system of exploration and mine permitting in Canada may change, resulting in impairment of rights and possibly expropriation of the Company’s properties without adequate compensation. In addition, there is a possibility that the Company’s agreements with governments or joint venture partners may be unenforceable against such parties. This could have a material adverse effect on the operations and financial position of the Company.
The Company is conducting the majority of its activities in Canada. The Directors believe that the Government of Canada supports the development of natural resources by foreign investors. However, there is no assurance that future political and economic conditions in Canada will not result in the Government of Canada adopting different policies regarding foreign development and ownership of mineral resources. Any changes in policy may result in legislative changes affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, repatriation of income and return on capital, all of which may affect the Company’s ability to develop the phosphate licences in Canada.
6.3.7 Carbon Pricing Legislation A carbon pricing scheme in Australia, commonly referred to as a carbon tax, was introduced by the Government on 1 July 2012.
Initially the price of a permit for one tonne of carbon is fixed at AUD$23 for the 2012–13 financial year, with unlimited permits being available from the Government. The fixed price will then rise by 2.5% a year, until a transition to an emissions trading scheme in 2015–16, where the available permits will be limited in line with a pollution cap.
The introduction of this legislation may adversely impact on the operating costs of the Company’s Australian projects by increasing the cost of fuel (and hence transport and mining costs) and electricity used in the projects. 73 LTD REPLACEMENT PROSPECTUS 2013
7. INDEPENDENT GEOLOGIST’S REPORT
Canadian and Australian Phosphate Projects
Independent Geologist’s Report
Prepared for: Fertoz Limited Effective Date: June 2013
XstractGroup.com Xstract - Excellence from the outset
GEOLOGY GEOTECHNICAL MINING PROCESSING VALUATION/RISK TECHNOLOGIES ENVIRONMENT TRAINING
7. INDEPENDENT GEOLOGIST’S REPORT 74
Project Manager:
Jeames McKibben BSc (Hons), MBA MAusIMM (CP), MAIG General Manager & Principal Consultant – Corporate Advisory Xstract Mining Consultants, Brisbane
Contributing authors: 1 2 A Egana , M Readford
Peer review of technical work by: 3 S Mujdrica
Report reviewed by: 4 R Jasen
Xstract Mining Consultants Pty Ltd has prepared this report on behalf of Fertoz Limited. Public disclosure, publication, or presentation of any information contained in this document must be accompanied by written consent from Xstract Mining Consultants Pty Ltd.
© Xstract Mining Consultants Pty Ltd 19/06/2013
Document information:
Project reference: P1893 Reporting standard/s: JORC Code 2004, VALMIN Code 2005 Effective date: June 2013 Status: Published File: P1893_Fertoz_ASX_IGR_20130619
1 Associate Consultant – Corporate Advisory, Xstract Mining Consultants, Brisbane 2 Manager (Brisbane) & Principal Consultant – Geology, Xstract Mining Consultants, Brisbane 3 General Manager & Principal Consultant – Geology & Technologies, Xstract Mining Consultants, Brisbane 4 Technical Editor, Xstract Mining Consultants, Brisbane
Xstract Mining Consultants Pty Ltd XstractGroup.com ABN: 62 129 791 279 Xstract - Excellence from the outset
Brisbane, Australia Perth, Australia Adelaide, Australia London, United Kingdom Level 20, 333 Ann Street Level 11, 140 St Georges Terrace T +61 8 7087 2152 T +44 207 002 1012 BRSBANE QLD 4000 PERTH WA 6000 Newcastle, Australia PO Box 10312 PO Box Z5426 T +61 61 7 3221 2366 Internet BRISBANE ADELAIDE STREET QLD 4000 PERTH WA 6831 Ulaanbaatar, Mongolia www.xstractgroup.com T +61 7 3221 2366 | F +61 7 3221 2235 T +61 8 9327 9500 | F +61 8 9481 8700 [email protected] T +976 7744 0000
75 LTD REPLACEMENT PROSPECTUS 2013
Canadian and Australian Phosphate Projects | Contents
Contents
1 Executive summary ______1
1.1 Wapiti Project – Canada 1
1.2 Barnes Lake Project – Canada 2
1.3 Crow’s Nest Project – Canada 2
1.4 Sherrin North Project – Queensland 3
1.5 Barrow Creek Project – Northern Territory 3
1.6 Barkly Project – Northern Territory 4
1.7 Katherine Project – Northern Territory 4
1.8 Overall recommendation 4
2 Introduction ______6
2.1 Scope 7
2.2 Reporting standard 7
2.3 Sources of information 7
2.4 Competent Person 7
2.5 Reliance on other experts 8
2.6 Units and currency 8
2.7 Disclaimer and warranty 8
2.8 Declarations 9
3 Sedimentary phosphate deposits ______9
4 Canadian Projects ______11
4.1 Overview 11
4.2 Wapiti Project, British Columbia 13
4.3 Barnes Lake, British Columbia 32
4.4 Crow’s Nest, British Columbia 39
5 Australian Projects ______41
5.1 Overview 41
5.2 Sherrin North Project, Queensland 46
5.3 Northern Territory Projects 55
6 Exploration budget ______67
7 Conclusions ______68
7.1 Australian Projects 69
8 Bibliography ______69
Tables
Table 1.1: Fertoz’s two-year exploration budget 6
Preamble i 7. INDEPENDENT GEOLOGIST’S REPORT 76
Fertoz Limited | Contents
Table 3.1: Summary of factors supporting phosphate formation 10
Table 4.1: Status of Fertoz’s Canadian Mineral Claims 12
Table 4.2: Stratigraphy of the phosphate bearing formations of the Rocky Mountains of northeastern British Columbia 17
Table 4.3: Historic trench assays 21
Table 4.4: Historic drillhole assays 22
Table 4.5: Results of Pacific Ridge’s 2008 grab and rock chip sample program 24
Table 4.6: Pacific Ridge’s 2008 trench results at Wapiti 25
Table 4.7: Drill collar summary for 2012 Wapiti drilling program 26
Table 4.8: Significant intercepts from the 2012 diamond drilling at Wapiti East 26
Table 4.9: Pacific Ridge’s 2008 trench results at the Tunnel Zone 30
Table 4.10: Poorly documented exploration programs in the Barnes Lake area during the period 1968 to 1972 36
Table 4.11: Historic trench assays 37
Table 5.1: Location of Fertoz's projects relative to Darwin and major urban centres 42
Table 5.2: Status of Fertoz’s Australian tenements 42
Table 5.3: Land Council, landholding types and map sheet details for each project area 43
Table 5.4: Holders and tenements related to EPM19448 50
Table 5.5: Summary of historical drilling assay results within the Sherrin North Project 51
Table 5.6: Summary of historical drilling assay results within the Barkly Project tenements 60
Table 5.7: Description of Katherine Project geology 65
Table 5.8: Anomalous XRF Results from EL27008 Water Bore Chip Analysis 67
Table 6.1: Fertoz’s proposed two-year exploration expenditures 68
Figures
Figure 3.1: Conceptual model for the formation of upwelling phosphate deposits 10
Figure 4.1: Location of Fertoz’s Canadian Projects including the Wapiti Sub-project areas 11
Figure 4.2: Location of Fertoz’s Wapiti East Sub-project 15
Figure 4.3: Location of Fertoz’s Wapiti West Sub-project 16
Figure 4.4: Distribution of the Triassic strata in northeastern British Columbia 18
Figure 4.5: Geology of the Wapiti Lake area 20
Figure 4.6: Location and assay results from Pacific Ridge’s 2008 samples 23
Figure 4.7: Wapiti East 2012 drillhole location map 27
Figure 4.8: Wapiti East Drilling – Cross-section WF-12-01 and 02 28
Figure 4.9: Wapiti East Drilling – Cross-section WF-12-03 and 04 29
Figure 4.10: Location of 2008 trench samples from the Tunnel prospect 31
Figure 4.11: Distribution of the Jurassic Fernie Formation in southeastern British Columbia 34
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Canadian and Australian Phosphate Projects | Contents
Figure 4.12: Location of hand dug (BN series) and backhoe dug (BNT series) trenches within Fertoz’s Barnes Lake project 38
Figure 4.13: Location of Fertoz’s Crow’s Nest Project 39
Figure 5.1: Fertoz's Australian tenements 41
Figure 5.2: Location of Fertoz’s projects and phosphate prospectivity of northern Australia 45
Figure 5.3: Location of Fertoz’s Sherrin North Project 46
Figure 5.4: Cambrian stratigraphic correlation – Undilla Basin 48
Figure 5.5: Location of Fertoz’s Sherrin North project relative to other known phosphate occurrences in the eastern Georgina Basin (Undilla Basin) 49
Figure 5.6: Geological summary and historical drillhole and intercepts location 51
Figure 5.7: Barrow Creek Project 55
Figure 5.8: Location of the Barkly Project tenements 58
Figure 5.9: Barkly Project – historic drillhole collar positions 61
Figure 5.10: Key target areas in Barkly Project 62
Figure 5.11: Katherine Project 64
Preamble iii 7. INDEPENDENT GEOLOGIST’S REPORT 78
Fertoz Limited | Contents
Key abbreviations
% Percent, percentage
°C Degrees Celsius
Aeolian Deposits form by the wind
Aeromagnetic A common type of geophysical survey carried out using a magnetometer aboard or survey towed behind an aircraft
AIG Australian Institute of Geoscientists
Aircore drilling A method of obtaining rock-chips by a reverse circulation technique whereby sample material is carried to the surface from an open face drill bit outside of the drill tube
Alluvial Sediment deposited by flowing water, as in a riverbed, flood plain, or delta
Anhydrite CaSO4, an evaporate mineral
ASIC Australian Securities and Investments Commission
ASL Above sea level
ASX Australian Securities Exchange
AUD Australian dollars
AusIMM Australasian Institute of Mining and Metallurgy
B Billion
Basalt A dark, fine grained mafic extrusive rock
Basement high A zone in which the rock complex that underlies the rocks of interest is raised
Basin A depressed area with no surface outlet
Bauxite A yellow to red-brown rock composed of various aluminium oxides and hydroxides
Beneficiation Improvement of the grade of ore by milling, flotation, sintering, gravity concentration or other processes
Brine Subsurface water with a high content of dissolved salts
Bt Billion tonne(s)
Cainozoic A geologic period of time from the beginning of the Tertiary to the present
Calcareous Mostly or partly composed of calcium carbonate or containing lime or being chalky
Cambrian period A geological time period spanning from 542 to about 500 million years ago
Carbonate Minerals and rocks made chiefly of carbonate minerals and dominated by the
carbonate ion, CO3
Carboniferous A geological time period spanning from 345 to 285 million years ago
CEN Central Australian Phosphate Limited
Chert A crystalline form of quartz occurring in bands in sedimentary rocks
Clastic A sedimentary rock composed of broken fragments of pre-existing rocks
Loose and incoherent deposits usually at the foot of a slope that are transported there Colluvium by gravity
Company Fertoz Limited
Complete Tenement Management, the tenement management company used by Complete Fertoz
Conglomerate A rock consisting of individual clasts within a finer-grained matrix that have become cemented together
Craton An old and stable part of the continental lithosphere
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Canadian and Australian Phosphate Projects | Contents
Cretaceous A geological time period ranging from 65 to 135 million years ago
CSA Canadian Securities Administrators
Devonian A geological time period spanning from 416 to 360 million years ago
Diamond drilling A method of exploratory drilling to extract core samples using a diamond encrusted drill bit
Dolostone A sedimentary carbonate rock that contains a high percentage of the mineral dolomite
EL Exploration Licence
EL(A) Exploration Licence application
EPM Exploration permit for minerals
Evaporite A non-clastic sedimentary rock composed of minerals derived from evaporation of a saline solution
Fault Fracture in a rock along which there has been an observable amount of displacement
Fe Iron
Felsic Comprising silicate minerals, magma, and rocks which are enriched in the lighter elements such as silicon, oxygen, aluminium, sodium and potassium
Fertoz Fertoz Limited
Fluorite A halide mineral composed of calcium fluoride, CaF2
Fluvial A deposit formed by river action
Fold A substantial bend in rock strata
Francolite Carbonate-rich variety of the mineral apatite which is present in most sedimentary phosphorites. It has a variable chemical composition which can be represented by
(Ca, Mg, Sr, Na)10(PO4, SO4, CO3)6F2−3
FSL FSL Holdings Pty Ltd, the previous holder to many of the tenements now held by Fertoz
Gabbro A large group of dark, coarse-grained, intrusive mafic igneous rocks chemically equivalent to basalt
Glacial A deposit formed through the action of ice
Granite A common and widely occurring type of intrusive, felsic, igneous rock
Granitoids Suite of felsic plutonic rocks
Granodiorite An intrusive igneous rock similar to granite, but containing more plagioclase than potassium feldspar
Gypsum Calcium sulfate dihydrate, CaSO4·2H2O associated with evaporite deposits
ha Hectare(s)
hrltesting hrltesting Pty Ltd
ICI ICI Australia
ICP Inductively coupled plasma, a geochemical analytical technique
Intrusive Body of rock formed under the surface of the earth as magma which pushes up into the existing country rock
Iron ore Rocks and minerals from which metallic iron can be economically extracted.
JORC Code 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
Jurassic period A geological time period spanning from 199.6 to 145.5 million years ago
Karst Landscape shaped by the dissolution of a layer or layers of soluble bedrock, usually
Preamble v 7. INDEPENDENT GEOLOGIST’S REPORT 80
Fertoz Limited | Contents
carbonate rock such as limestone or dolomite
Kimberlite Potassic volcanic rock best known for sometimes containing diamonds
km Kilometre(s)
km2 Square kilometre(s)
Lacustrine Deposits formed in a lake environment
Lenticular Relating to lenses or lensoid in shape
Limestone A sedimentary rock consisting mainly of calcium that was deposited by the remains of marine animals
Lineament A linear feature in a landscape, which is an expression of an underlying geological structure such as a fault
Lithology Rock type
Loam A rich soil consisting of a mixture of sand and clay and decaying organic materials
M Million(s)
m Metre(s)
m3 Cubic metre(s)
Ma Million years
Mafic A rock rich in magnesium and iron, usually dark in colour
Magnetite A ferromagnetic mineral with chemical formula Fe3O4
mASL Metres above sea level
Mesozoic era Geological time period from 251 to 65.5 million years ago. The Mesozoic era includes the Triassic, Jurassic and Cretaceous periods.
Meta-andesite Metamorphosed andesite
Metamorphism The solid-state recrystallisation of pre-existing rocks due to changes in physical and chemical conditions, primarily heat, pressure, and the introduction of chemically active fluids
Metasomatic Chemical alteration of a rock by hydrothermal and other fluids
mm Millimetre(s)
Mt Million tonne(s)
Mtpa Million tonnes per annum
Neoproterozoic A geological era spanning from 1,000 to 542 million years ago era
NI43-101 Canadian National Instrument 43-101 relating to disclosure of mineral projects
NTGS Northern Territory Geological Survey
NuPower NuPower Resources Ltd (now Central Australian Phosphate or “CEN”)
Oligocene epoch A geological time period within the Paleogene period, spanning from 23 million to 33 million years ago
Ordovician A geological time period from 443 to 488 million years ago period
Orogenic belt Long tracts of highly deformed rock formed as a result of forces and events leading to a severe structural deformation of the earth's crust due to the engagement of tectonic plates
Palaeogene A geological time period spanning from 65 to 23 million years ago period
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Palaeozoic era A geological era spanning from 542 to 251 million years ago
Peritidal The zone extending from above the level of the highest tide to below that exposed at the lowest tide. A belt somewhat wider than the intertidal zone.
Permian period A geological time period spanning from 299 to 251 million years ago
Phosphate Phosphates are the naturally occurring form of the element phosphorus, found in many phosphate minerals. In mineralogy and geology, phosphate refers to a rock or ore containing phosphate ions.
Phosphorite A sedimentary rock which contains high amounts of phosphate bearing minerals
Phyllite A type of foliated metamorphic rock primarily composed of quartz, sericite mica, and chlorite. The rock represents a gradation in the degree of metamorphism between slate and mica schist.
Pliocene epoch A geological time period spanning from 5.3 million to 2.6 million years ago
Plutonic An intrusive igneous rock (called a plutonic rock) body that crystallised from magma slowly cooling below the surface of the Earth
Potash Potash refers to potassium compounds and potassium-bearing materials, the most common being potassium chloride (KCl)
Precambrian eon A geological eon spanning from 4,500 to 542 million years ago
Proterozoic eon A geological eon spanning from 2,500 to 542 million years ago
Psilomelane A hydrous manganese oxide
Pyrite An iron sulfide with the formula FeS2
Pyritised Containing pyrite
Pyrolusite A mineral consisting essentially of manganese dioxide (MnO2)
Quaternary A geological period dating from about 2.5 million years ago to present period
Quicklime Calcium oxide (CaO)
RC drilling A drilling technique employing a rotating or hammering action on a drill bit which returns samples to the surface inside the rod string by compressed air
RD Relative density. Density relative to water (1,000 kg/m3).
Reduction – A coupled pair of reactions, in which one compound becomes oxidised, while another oxidation front becomes reduced
REE Rare earth elements
Regolith A general term for the layer of loose, incoherent or coherent material that forms the surface of the land about the bedrock
Rhyodacite An extrusive volcanic rock intermediate in composition between dacite and rhyolite
Rhyolite A fine-grained volcanic rock which has the same composition as granite
Rum Jungle Rum Jungle Resources Limited
Sandstone A sedimentary rock consisting of sand consolidated with some cement (clay or quartz etc.)
Schist A group of medium-grade metamorphic rocks, chiefly notable for the preponderance of lamellar minerals such as micas, chlorite, talc, hornblende, graphite, and others
Sedimentary Formed by sedimentation of material at the earth's surface and within bodies of water. The collective name for processes that cause mineral and/or organic particles (detritus) to settle and accumulate or minerals to precipitate from a solution.
Siliciclastic Clastic non-carbonate sedimentary rocks that are almost exclusively silica-bearing,
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either as forms of quartz or other silicate minerals
Siltstone A rock composed chiefly of silt hardened by heat, pressure, or cementation
Silurian period A geological time period spanning from 440 to 416 million years ago
Sub-aerial Events or structures that are located at the earth's surface
t tonne(s)
Terrestrial Derived on land as opposed to the marine environment
Tertiary period A geological period spanning from 65 million to 2.6 million years ago
Tholeiitic basalt Type of basalt (an igneous rock) which includes very little sodium as compared with other basalts
TIS Title Information System, an online database of the Northern Territory Government
Triassic period A geological time period spanning from 251 to 199 million years ago
TSX-V Toronto Venture Exchange
Tuff Rock continuing fragments of other rocks and minerals sourced from eruptive volcanic action
Turbidites Geological formations have their origins in turbidity current deposits, which are deposits from a form of underwater avalanche that are responsible for distributing vast amounts of clastic sediment into the deep ocean
Ultramafic Igneous and meta-igneous rocks with very low silica content (less than 45%)
Unconformable A descriptive term to indicate a buried erosion surface separating two rock masses or strata of different ages
USD United States Dollars
VALMIN Code 2005 edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports
Volcanic Rocks formed from the solidification of lava extruded on or erupted at the earth’s surface
Volcaniclastic Sedimentary rocks containing material of volcanic origin
Xstract Xstract Mining Consultants Pty Ltd
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Canadian and Australian Phosphate Projects | Executive summary
1 Executive summary
Xstract Mining Consultants Pty Ltd (“Xstract”) has been engaged by Fertoz Limited (“Fertoz” or “the Company”) to prepare an Independent Geologist’s Report on its Canadian and Australian phosphate assets for inclusion in a Prospectus to be lodged with the Australian Securities and Investments Commission (“ASIC”) for a proposed listing of Fertoz on the Australian Securities Exchange (“ASX”). The purpose of the Prospectus is to offer for subscription up to 15 M ordinary shares at an issue price of AUD0.20 per share to raise AUD3.0 M (with capacity for oversubscriptions of up to AUD4.0 M) before costs of the issue to fund the future assessment of Fertoz’s projects.
Fertoz is an Australian-based, unlisted, mineral exploration company established in 2010 to assess Australia’s phosphate prospectivity. Fertoz has now acquired an extensive portfolio of tenements in British Columbia, Canada that offer considerable prospects of phosphate and other fertiliser component minerals. While the Company’s key focus is towards its phosphate assets in British Columbia, Canada, it retains a residual portfolio of phosphate assets in northern Australia, for which it is actively seeking joint venture partners.
Fertoz is targeting sedimentary phosphorite mineralisation in a number of areas including the Western Canada Basin along the eastern flank of the Rocky Mountains and the Daly and Georgina Basins of northern Australia. Fertoz’s exploration model is based on the geological criteria considered important to the development of commercial quantities of phosphate. Specifically, the model target’s organic-rich carbonate rocks on depositional basin margins where upwelling and favourable palaeogeography have bought cold phosphate-rich waters onto the continental shelf.
Fertoz’s project areas were selected based on historical phosphate exploration results and ongoing data compilation targeting enriched phosphorite sedimentary units within the Australian, and more recently Canadian, context.
In attempting to capitalise on the rising importance of phosphate as a global commodity, Fertoz has acquired the following mineral interests:
A 100% interest in the Wapiti Project in northeastern British Columbia, Canada A 100% interest in the Barnes Lake and Crows Nest Projects in southeastern British Columbia, Canada A 100% interest in the Sherrin North exploration permit for minerals (“EPM”) located northwest of Mount Isa in Queensland Various interests in the Northern Territory, which in order of priority are:
o A 100% interest in the Barrow Creek Project centrally located between Tennant Creek and Alice Springs. Importantly, Central Australian Phosphate Limited (“CEN”) (formerly known as NuPower Resources Ltd) is currently earning up to a 50% interest in Exploration Licence (“EL”) 26915 o A 100% interest in the Barkly Project lying some 220 km east of the township of Tennant Creek o A 100% interest in three granted ELs located 20 km south of Katherine
Based on its review, Xstract considers the Wapiti and Sherrin North Projects to be the most advanced of Fertoz’s exploration assets. Fertoz’s projects are discussed below.
1.1 Wapiti Project – Canada
The Wapiti Project area (covering 158.4 km2) comprises 40 Mineral Claims that lie within the Triassic Spray River Group along the eastern margin of the Rocky Mountains in northeastern British Columbia, Canada. To date, the Wapiti area has received widespread
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geochemical sampling, trenching and limited drilling which has demonstrated the potential for laterally continuous phosphate-bearing horizons of variable thickness and grade. Exploration by Fertoz in 2012 has confirmed the results of previous campaigns and demonstrated the thickness and lateral continuity of the phosphorite horizon within the Wapiti area.
Fertoz’s primary objective at Wapiti is to define drill targets capable of supporting a JORC Code compliant Mineral Resource, which will then provide the basis for future assessment. Upon listing, Fertoz plans to undertake geological mapping, geochemical sampling, trenching and follow-up drilling. The purpose of these activities is to quantify the continuity, lateral and depth extents of the phosphate layer with a view towards defining a JORC Code compliant resource in the near future.
Xstract considers Fertoz’s Wapiti Project to be an advanced exploration play providing the Company with the opportunity to rapidly define laterally continuous phosphorite layers at attractive grades and which, with further studies, may prove amenable for open pit mining. Thereafter the project’s location relative to an established coal mining centre and associated transport infrastructure will facilitate future development, should studies prove positive.
Fertoz has proposed a two-year exploration budget of AUD1.6 M for the Wapiti Project (with AUD1.35 M allocated to Wapiti East and AUD250,000 to Wapiti West), which will undertake resource and mining studies designed to advance the project towards development. Xstract is of the opinion that the project is of merit and worthy of exploration to the extent being proposed by Fertoz.
1.2 Barnes Lake Project – Canada
Fertoz’s Barnes Lake Project consists of a single granted Mineral Claim covering an area of 608.98 ha (6.09 km2) in the Fernie Basin of southeastern British Columbia. Previous intermittent exploration of the Barnes Lake area has highlighted the presence of widespread, shallow phosphate-bearing sediments associated with the base of the Jurassic
aged Fernie Formation and grades in excess of 30% P2O5 and 1,000 ppm Yttrium.
Adding to its geological prospectivity, the project is well supported by:
its proximity to the East Kootenay Coalfields, with the established mining communities of Fernie and Sparwood located less than 30 km away, providing a ready source of labour and business/government facilities numerous coal mines in the surrounding district providing local mining expertise strong transportation (road and rail) links to ports on Canada’s west coast, as well as regional centres in Alberta and the northwestern United States.
Fertoz proposes to initially focus on compiling the historic data, prior to undertaking a program of geological mapping, trenching and limited diamond drilling to establish the extent, structure and geological continuity of the phosphate-bearing layers. Furthermore, as beneficiation is likely to be key to any future project development, bulk sample testing may be warranted in preparation for the estimation of a JORC Code compliant Mineral Resource. Xstract concurs with Fertoz that further work is required at Barnes Lake and considers the Company’s budget of AUD50,000 in the first year, and should results prove positive, AUD100,000 in the second year, to be warranted.
1.3 Crows Nest Project – Canada
Fertoz’s Crows Nest Project consists of a single granted Mineral Claim covering an area of 1,471.81 ha (14.72 km2) located approximately 18 km north-northwest of the Company’s
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Barnes Lake Project in southwestern British Columbia. Phosphate-bearing sediments of the Fernie Group are recorded in and surrounding the project area. To date, only cursory exploration has been conducted over the Crows Nest property, despite its location immediately south and along strike of a third-party held claim with recorded production of small tonnages of phosphorite.
Fertoz has proposed a staged work program going forward comprising initial data compilation, prior to undertaking a program of geological mapping and reconnaissance rock chip geochemical sampling. Further geological mapping, trenching and diamond drilling will be carried out should initial results prove positive. Given the potential to jointly assess and develop the Crows Nest and nearby Barnes Lake Projects, Xstract concurs with Fertoz that further work is required at Crows Nest. Furthermore, Xstract considers the Company’s budget of AUD50,000 in the first year, and should results prove positive, AUD100,000 in the second year, to be warranted.
1.4 Sherrin North Project – Queensland
Located only 70 km from Mount Isa, the Sherrin North Project area (covering 228 km2) comprises a single EPM application that lies along the margin of the Undilla Sub-basin within the eastern Georgina Basin. The Sherrin North project area has previously been the subject of significant exploration dating back to the 1960s, culminating in grade tonnage estimates, beneficiation studies and techno-economic studies. More recent third-party exploration has been focussed on Legend Holdings International’s Sherrin Creek and Lily Creek phosphate deposits, which lie immediately south of Fertoz’s project area.
Based on the results of historical studies, Fertoz considers there is potential for some 50 to
60 Mt of mineralised material grading between 12% to 13% P2O5 as an open pit exploration target5 in the context of Section 18 of the JORC Code. Xstract has reviewed and carried out high-level verification of this exploration target and concurs with Fertoz regarding the potential of this phosphorite. A detailed explanation of this exploration target is provided in Section 5.2.3 of this report. Upon attracting a joint venture partner, Fertoz proposes to re-evaluate the sources of this target phosphate with a view towards upgrading its status in accordance with JORC Code reporting guidelines.
Xstract considers Fertoz’s Sherrin North Project to be an advanced exploration asset capable of being rapidly upgraded to a Mineral Resource. Xstract cautions, however, that due to the limited tonnage potential of Sherrin North, its future development is likely to be contingent on other third parties in the surrounding region – namely Incitec Pivot (operator of the Phosphate Hill mine) and Legend Holdings International (developer of the proposed Paradise North and South and D-Tree deposits) – and the development of a viable process
route to treat lower grade (approximately 15% P2O5) phosphate.
1.5 Barrow Creek Project – Northern Territory
Fertoz’s Barrow Creek Project consists of a single granted licence, EL26915, covering an area of 744 km2 and located 220 km south of Tennant Creek. The project lies in proximity to Rum Jungle Resources Limited’s (Rum Jungle) Ammaroo and CEN’s Arganara phosphate projects.
In January 2013, Rum Jungle announced an updated (Measured, Indicated and Inferred) resource estimate for its Barrow Creek 1 deposit (contained within its Ammaroo project) of
238 Mt grading 14.6% P2O5 at a 10% P2O5 cut-off (Rum Jungle ASX announcement 21
5 This exploration target remains conceptual in nature. There has not been sufficient exploration to define a Mineral Resource and there is no guarantee that future exploration or economic studies will result in the determination of a Mineral Resource in accordance with the 2004 JORC Code.
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January 2013). At a 15% P2O5 cut-off, Rum Jungle’s total resource (Measured, Indicated
and Inferred) at Barrow Creek 1 is 93 Mt at an average grade of 18.2% P 2O5.
In August 2012, NuPower (now CEN) announced a maiden Inferred Resource of 310 Mt
grading 15% P2O5 at a 10% P2O5 cut-off (NuPower ASX announcement 15 August 2012) at
Arganara. At a 15% P2O5 cut-off, CEN’s Inferred Resource at Arganara is 120 Mt at an
average grade of 18% P2O5.
Rum Jungle’s Barrow Creek 1 and CEN’s Arganara deposits lie immediately east and along strike of Fertoz’s EL26915.
In February 2012, NuPower (now CEN) announced an earn-in joint venture with Fertoz, which was finalised in May 2012, to explore EL26915. Xstract understands that, under the terms of this joint venture, CEN is to fund exploration over the next 36 months in order to earn up to a 50% interest in EL26915.
1.6 Barkly Project – Northern Territory
Located 220 km east of Tennant Creek, Fertoz’s Barkly Project consists of three granted ELs totalling approximately 1,678 km2. The Barkly Project lies within and along the western margin of the Georgina Basin. The northern part of the Barkly project is dominated by sedimentary units of the South Georgina Basin. It lies to the south of the Highland Plains phosphate deposit. The central tenements are situated over the Alexandria-Wonarah Basement High, where the phosphate prospective Wonarah Formation outcrops. The central tenements are surrounded by the third-party held Wonarah, Arruwurra, Alexandria and Alroy phosphate deposits and the Six Mile Waterhole deposit to the south which are interpreted to have formed in a shallow marine environment during the Cambrian period. The southernmost tenement also covers the Alexandria-Wonarah Basement High, and contains prospective limestone units of the basal Wonarah Formation.
In addition to its geological attractiveness, the Barkly Project presents an ideal exploration play due to its accessibility via the Barkly Highway, and proximity to the Barkly Highway and proposed infrastructure associated with Minemaker’s Wonarah phosphate project. Fertoz’s proposed strategy is to seek a joint venture partner to help fund its exploration efforts at Barkly.
1.7 Katherine Project – Northern Territory
Located 20 km south of Katherine, Fertoz’s Katherine Project comprises three granted exploration licences (“EL”) covering a combined area of 906 km2 and is located in the southwest of the Daly Basin. Cambrian-aged Tindal Limestone dominates the south and eastern parts of the project, and represents the target unit for phosphate mineralisation. Additionally, limestone presents as a secondary target, given the proximity of EL26995 to the Elsey Lime quarry. The geological prospectivity of the area is supported by a significant
history of limestone mining and phosphate-bearing (less than 2% P2O5) intervals in the surrounding region.
Further adding to the project’s exploration attractiveness is its proximity to social and transport infrastructure. However, because of its location within the Daly River catchment, a major agricultural area, the project will be subject to complex environmental and landholder negotiations.
1.8 Overall recommendation
Fertoz has acquired a sizeable landholding within British Columbia, Canada and throughout northern Australia, where it proposes to explore for potentially commercially viable
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phosphate and other fertiliser component minerals. The acquired tenements host a myriad of early to advanced stage exploration properties.
Fertoz is now seeking to list on the ASX with the aim of rapidly advancing its projects towards production with a view to generating cash flow to fund the exploration of other longer term assets. Currently, the Company’s priority is towards its Canadian projects where previous studies have outlined near surface phosphate occurrences in proximity to established mining and transportation infrastructure. Fertoz will also seek strategic partners and seek other near term phosphate assets to complement its current Australian exploration assets.
Xstract has concluded from its review of Fertoz’s Canadian and Australian project areas that they are of merit and worthy of further exploration. Fertoz has proposed a two-year exploration program to evaluate numerous targets within its project areas with a budgeted exploration expenditure of AUD2.20 M. Xstract understands Fertoz is seeking joint venture partners to fund the exploration of the Australian assets and is focussing the majority of its exploration expenditure on the Canadian assets as shown in the table below.
Should the maximum subscription of AUD4 M be achieved, then Fertoz will increase its exploration budget accordingly to AUD3.05 M with further funding allocated to target generation and follow-up activities such as drilling across Fertoz’s Canadian projects.
The challenge confronting Fertoz is to meet the threshold of discovering phosphate and other fertiliser component mineral deposits within the constraints of its proposed budget. In Xstract’s opinion, the best opportunity for success in the short to medium term lies at the Wapiti, Barnes Lake and Crows Nest, where phosphate mineralisation have previously been delineated and subject to beneficiation and techno-economic studies.
The Sherrin North Project offers the potential for the delineation of a small, shallow, modest-grade phosphate resource in the near term, however this project is unlikely to be developed on a standalone basis. Fertoz proposes to investigate opportunities for the joint development of the project along with other parties holding phosphate resources in the surrounding region. As such, Fertoz plans to delay extensive exploration of the project until either a joint venture partner can be found or a viable process for the treatment of lower
grade (15% P2O5) is developed.
Outside of these advanced projects, Xstract considers the early stage Barrow Creek Project is prospective for the along strike continuation of phosphate bearing sedimentary outlined by Rum Jungle at its Barrow Creek 1 prospect and CEN’s Arganara project. Similarly, the Barkly Project offers the potential to define high-grade intervals along the northern extensions to Minemaker’s Wonarah deposit. Additional targets may be established in the Katherine Project areas given the presence of known phosphate mineralisation within the surrounding area.
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Table 1.1: Fertoz’s two-year exploration budget
Minimum Subscription Maximum subscription
Project Year 1 Year 2 Total Year 1 Year 2 Total (AUD) (AUD) (AUD) (AUD) (AUD) (AUD)
Wapiti East 850,000 500,000 1,350,000 850,000 850,000 1,700,000
Wapiti West 50,000 200,000 250,000 100,000 450,000 550,000
Barnes Lake 50,000 100,000 150,000 100,000 150,000 250,000
Crows Nest 50,000 100,000 150,000 100,000 150,000 250,000
Australia 150,000 150,000 300,000 150,000 150,000 300,000
1,150,000 1,050,000 2,200,000 1,300,000 1,750,000 3,050,000
In addition to an effective exploration strategy, Fertoz’s ultimate success will be largely dependent on the skill of its exploration team. Fertoz has an established relationship with Joe Shearer (Canada) to assist in achieving its objective of discovering and developing phosphate deposits in Canada.
In Xstract’s opinion, the conceptual exploration strategy outlined by Fertoz with its Canadian and Australian Projects has merit and Xstract is satisfied that the proposed exploration programs designed by Fertoz to evaluate these are appropriate. We are also confident that Fertoz will effectively adopt a prudent approach to the management of its exploration expenditures as it endeavours to meet is stated corporate objectives.
However, as is often the case with projects of this nature, there is an element of project implementation risk involved. While this risk is manageable, future investigative and analytical work may highlight technical and/or economic issues, which could adversely affect the successful development of a particular deposit. Xstract, however, is not currently aware of any issues that might materially detract from Fertoz’s current objectives. 2 Introduction
Fertoz is an unlisted public resources company, established in August 2010 with the objective of identifying underexplored phosphate projects offering genuine upside potential and commercial prospects. While the Company’s key focus is towards phosphate for fertiliser applications, deposits of potash, limestone and manganese provide secondary targets.
To this end, Fertoz has identified and consolidated a diverse portfolio of exploration interests in western Canada and over northern Australia. Fertoz is now seeking to list with the Australian Securities Exchange (“ASX”) in order to raise working capital to fund the future assessment of its projects. Upon achieving admission to the ASX, Fertoz intends to create value for its shareholders through the discovery, evaluation and rapid development of high quality phosphate deposits.
Fertoz’s principal assets comprise the Wapiti, Barnes Lake and Crows Nest phosphate projects in British Columbia, Canada. In addition, Fertoz holds a residual interest in several phosphate exploration projects in the Georgina Basin, which extends from western Queensland into the Northern Territory.
The Company’s initial priority will be towards its Canadian projects where previous studies have outlined near surface phosphate occurrences in proximity to established mining and transportation infrastructure. Fertoz will also seek strategic partners for its current Australian exploration assets.
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2.1 Scope
Fertoz has commissioned Xstract to review the available information on the Company’s projects and provide an opinion on the rationale for the future exploration activities over these areas. The objectives of this report are to provide a review and independent assessment of the geology and exploration potential of Fertoz’s Canadian and Australian projects, namely:
Provide an overview of the geological setting and associated mineralisation Outline the historic and recent exploration work undertaken on each of the project areas and document the current status of these projects Express Xstract’s opinion on the exploration potential of Fertoz’s project areas
Consider the appropriateness of Fertoz’s budgeted work programs.
2.2 Reporting standard
This report has been prepared in accordance with the following codes:
The 2005 edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (“VALMIN Code”) The 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”).
2.3 Sources of information
Xstract has based its report on a site visit to the Barkly and Barrow Creek projects, technical studies and data compiled by Fertoz or technical personnel of associated in- country consultants and independent research into publically available reports and documentation on Canada, the Canadian mining industry and the Canadian phosphate sector.
In the execution of our mandate, Xstract reviewed all relevant technical and corporate information made available to us by Fertoz’s management and other consultants, which we have accepted having made due enquiry and various validation checks, including reviews of published technical and various other reports in the public domain. In particular, we have consulted technical literature produced by the Northern Territory, Queensland and British Columbian Geological Surveys and other government departments and agencies such as Geoscience Australia and Natural Resources Canada. The material includes internal project memorandums, technical reports and location plans. Key sources are outlined in Section 8.
2.4 Competent Person
Information relating to the Sherrin North exploration target outlined in this report is based on compiled information, which has been reviewed and analysed by Xstract consultants under the supervision of Mr Stefan Mujdrica. Mr Mujdrica is a full time employee of Xstract and a Chartered Professional member of the AusIMM. Mr Mujdrica has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the JORC Code.
Information pertaining to exploration results in all remaining tenements is based on compiled information, which has been reviewed by Mr Jeames McKibben. Mr McKibben is a full time employee of Xstract, a Chartered Professional member of the AusIMM and a member of the AIG. Mr McKibben has sufficient experience, relevant to the style of
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mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the JORC Code.
2.5 Reliance on other experts
This report contains statements attributable to third persons. These statements are made in, or based on, previous geological reports that are publicly available from either government agencies or the ASX. The authors of these previous reports have not consented to the statement’s use in this report and these statements are included in accordance with ASIC Class Order 07/428 – Consent to quote: Citing trading data and geological reports in disclosure documents and Product Disclosure Statements.
Xstract has assumed and relied on the fact that all information and existing technical documents listed in Section 8 of this report are accurate and complete in all their material aspects. While Xstract carefully reviewed all the available information presented, Xstract cannot guarantee the accuracy and completeness of this report.
Xstract has accepted all information provided, after making due enquiry and various validation checks including reviews of published technical and various other reports in the public domain.
Thus, the quality of information, conclusions and estimates contained herein were based on:
information available at the time of preparation data available from external sources the assumptions, conditions and qualifications set forth in this report
2.6 Units and currency
Unless otherwise stated, all units used in this report are metric. Grades are reported as
percent phosphate (% P2O5), unless otherwise stated.
All currency amounts used in this report are in Australian Dollars (“AUD”) unless otherwise stated.
2.7 Disclaimer and warranty
Xstract has made due enquiries to the relevant government agencies in Australia and Canada in order to validate information provided by Fertoz and its tenement advisors, Complete Tenement Management (Complete). Neither, Xstract or the authors of this report are qualified to make legal representations in regard to the status of the tenements or their ownership. Xstract understands that this is covered in Section 11 of this prospectus.
A draft version of this report was provided to the directors of Fertoz for comment in respect of omissions and factual accuracy. Fertoz has represented that full disclosure has been made of all material information and that, to the best of its knowledge and understanding, such information is complete, accurate and true.
As recommended in Section 39 of the VALMIN Code, Fertoz has provided Xstract with an indemnity under which Xstract is to be compensated for any liability and/or any additional work or expenditure resulting from any additional work required which:
results from Xstract’s reliance on information provided by Fertoz and/or Independent consultants that is materially inaccurate or incomplete, or relates to any consequential extension of workload through queries, questions or public hearings arising from this report.
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Canadian and Australian Phosphate Projects | Sedimentary phosphate deposits
This report may contain or refer to forward-looking information based on current expectations, including but not limited to, timing of mineral resource estimates, future exploration or project development programs and the impact of these events on Fertoz’s projects. Forward-looking information is subject to significant risks and uncertainties, as actual results may differ materially from forecasted results. Forward-looking information is provided as of the date hereof and Xstract assumes no responsibility to update or revise them to reflect new events or circumstances.
The conclusions expressed in this report are appropriate as at 19 June 2013. The opinions contained within this report are only appropriate for this date and may change in time in response to variations in economic, market, legal or political factors, in addition to ongoing exploration results.
2.8 Declarations
Xstract’s opinion is based on information collected by Xstract throughout the course of its investigations, which in turn reflect various technical and economic assumptions at the time of writing. Given the nature of the mining business, these conditions may change significantly over a relatively short period of time. Consequently, actual results may become significantly more or less favourable to what this report indicates.
This report includes technical information that requires subsequent calculations to derive sub-totals, totals and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these errors may occur, Xstract does not consider these to be material.
Xstract is not an insider, associate, or affiliate of Fertoz. The results of this report are not dependent on any prior agreements concerning the conclusions to be reached, nor are there any undisclosed understandings concerning any future business dealings.
Neither Xstract nor the authors of this report hold any interest in Fertoz, related parties, or in any of the mineral properties or interested parties, which are the subject of this report. In mid-2011, Xstract completed a Canadian National Instrument 43-101 report on Fertoz’s Northern Territory assets, during which time a site visit was undertaken to the Barkly and Barrow Creek projects. This was followed in 2012, by the preparation of a draft Independent Geologist Report which was subsequently suspended pending an improvement in market conditions.
Fees for the preparation of this updated report were charged at a fixed fee totalling approximately AUD10,000. Payment of fees and expenses was in no way contingent on the conclusions drawn in this report. 3 Sedimentary phosphate deposits
Phosphates are known to be deposited within a wide range of depositional environments, occurring worldwide and throughout geological time. Typically the depositional setting is in very shallow, near-shore marine or low energy environments located between 40˚ north or south of the equator. The most common occurrence of phosphorites (sedimentary phosphate deposits) are related to strong marine upwelling of sediments caused by cold water currents interacting with warm surface water along continental shelf environments (Figure 3.1).
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Figure 3.1: Conceptual model for the formation of upwelling phosphate deposits
Compiled by J A J McKibben from Figure 5 in McCrow (2008)
This results in laterally extensive accumulations of marine biomass debris and inorganic apatite. Phosphate may precipitate at or near the seafloor in muddy organic-rich sediments which is then reworked and winnowed to concentrate these precipitates into phosphorite beds. The resulting phosphorites comprise fossiliferous, oolitic, pelletal, nodular or micritic phosphate sediments with impurities of calcite, quartz and clay.
Economic deposits typically contained a minimum of 15% P2O5. Phosphorite is found in the form of pellets, nodules, phosphate cement, phosphatic fragments or clasts and phosphatised fossil debris.
The generalised characteristics of the upwelling phosphate deposit model are summarised in Table 3.1 below.
Table 3.1: Summary of factors supporting phosphate formation
Upwelling type phosphate deposit model
Description: Phosphorite sediments from a major stratigraphic unit within a sequence of marine sediments in upwelling areas in basins with good connection to the open sea.
Geological environment:
o Rock Types: Phosphorite, marl, shale, chert, limestone, dolomite, and volcanic materials. o Age Range: Precambrian through Miocene. o Depositional Environment: Marine sedimentary basins with good connection to the open sea and upwelling, areas highly productive of plankton. Deposition occurs mostly in warm latitudes, mostly between the 40th parallels. o Tectonic Setting(s): Intra-plate shelf, platform, miogeosynclines, and eugeosynclines. o Mineralogy: Apatite + fluorapatite + dolomite + calcite + quartz + clays (montmorillonite or illite) ± halite ± gypsum ± iron oxides ± siderite ± pyrite ± carnotite. o Texture/Structure: Pellets, nodules, phosphatized shell and bone material. o Alteration: None related to ore.
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Upwelling type phosphate deposit model o Controls on Mineralisation: Basins, or parts of basins, favourable for the accumulation of organic- rich sediments and for their evolution into phosphates. Individual beds may be a meter thick or more and may extend over hundreds of square kilometres. o Weathering: Limonite and goethite. o Geochemical Signature: phosphorus, nitrogen, fluorine, carbon and uranium. Anomalously radioactive Source: USGS Deposit Models -
4 Canadian Projects
4.1 Overview
4.1.1 Introduction
Fertoz’s Canadian project tenements are located in the Rocky Mountains region of British Columbia, Canada between latitudes 49° and 54°, and longitudes 114° and 120°, as shown in Figure 4.1.
Figure 4.1: Location of Fertoz’s Canadian Projects including the Wapiti Sub-project areas
Compiled by J A J McKibben based on British Columbian Ministry of Energy and Mines - Mines Titles Online, March 2013
4.1.2 Tenement status
Fertoz’s Canadian tenements cover a combined area of 17919 ha (179.19 km2). The Company’s project groupings, as well as the status of the individual tenements within the projects are detailed in Table 4.1.
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Table 4.1: Status of Fertoz’s Canadian Mineral Claims
Project Tenement Sub Area (ha) Expiry Date Registered Holder Name Number Blocks
Wapiti East
WK-1 851942 24 450.83 21/04/2017 Fertoz International
WK-2 851948 24 451.02 21/04/2017 Fertoz International
WK-3 851952 24 450.77 21/04/2017 Fertoz International
WK-4 851958 24 451.20 21/01/2017 Fertoz International
WK-5 941760 24 450.83 21/01/2017 Fertoz International
WK-6 941761 25 469.87 21/01/2017 Fertoz International
WK-7 941762 24 450.86 21/01/2017 Fertoz International
WK-8 941763 24 451.08 21/01/2017 Fertoz International
WK-9 941764 24 451.33 21/01/2017 Fertoz International
WK-10 941769 24 451.36 21/01/2017 Fertoz International
WK-11 955278 25 470.31 21/01/2017 Fertoz International
WK-12 956829 12 225.35 21/01/2017 Fertoz International
WK-ONE 982744 1 18.80 27/04/2017 Fertoz International
Wapiti NE 1015556 20 375.54 31/12/2013 Fertoz International
Wapiti Two 1015557 9 168.93 31/12/2013 Fertoz International
Wapiti S 1015558 20 376.35 31/12/2013 Fertoz International
WAP S2 1018104 24 451.82 27/03/2014 Fertoz International
WAP S3 1018106 24 451.75 27/03/2014 Fertoz International
WAP S4 1018107 24 451.93 27/03/2014 Fertoz International
WAP S5 1018108 24 452.09 27/03/2014 Fertoz International
WAP S6 1018109 24 452.30 27/03/2014 Fertoz International
Wapiti West
Tunnel 1 942096 24 446.13 23/01/2014 Fertoz International
Tunnel 2 942097 24 445.97 23/01/2014 Fertoz International
Sukunka 1 851714 1 18.51 14/03/2014 Fertoz International
Sukunka 2 980302 24 444.23 15/04/2013 Fertoz International
PAL 1 942169 1 18.49 23/01/2014 Fertoz International
PAL 2 1018084 24 443.88 27/03/2014 Fertoz International
PAL 3 1018085 21 388.49 27/03/2014 Fertoz International
PAL 4 1018086 24 444.10 27/03/2014 Fertoz International
SUK 3 1018087 24 444.32 27/03/2014 Fertoz International
SUK 4 1018095 24 444.53 27/03/2014 Fertoz International
SUK 5 1018096 24 444.71 27/03/2014 Fertoz International
SUK 6 1018097 24 444.89 27/03/2014 Fertoz International
SUK 7 1018098 24 445.08 27/03/2014 Fertoz International
SUK 8 1018099 24 445.25 27/03/2014 Fertoz International
SUK 9 1018101 24 445.39 27/03/2014 Fertoz International
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Project Tenement Sub Area (ha) Expiry Date Registered Holder Name Number Blocks
SUK 10 1018102 24 445.57 27/03/2014 Fertoz International
SUK 11 1018103 24 445.80 27/03/2014 Fertoz International
Tunnel 3 1018100 24 442.64 27/03/2014 Fertoz International
T11 1018128 17 316.18 27/03/2014 Fertoz International
Barnes Lake
Barnes Lake 1011319 29 608.98 19/07/2013 Fertoz International
Crows Nest
Crows Nest 1013727 71 1,471.81 14/10/2013 Fertoz International
In British Columbia, any consideration of industrial minerals requires careful designation of the product’s end use. As defined under the Mineral Tenure Act, an industrial mineral is “a rock or naturally occurring substance that can be mined and processed for its unique qualities and used for industrial purposes”. It does not include “Quarry Resources” which comprise earth, soil, marl, peat, sand and gravel, and rock, rip-rap and stone products that are used for construction purposes (as defined in the Land Act).
Cash may be paid in lieu if no work is performed. Following revisions to the Mineral Tenures Act on July 1, 2012, during each of the first two years of title, mineral claims require an exploration expenditure of CND5 per hectare, CND10 per hectare in year three and four, CND15 per hectare for year five and six and CND20 per hectare each year thereafter.
4.2 Wapiti Project, British Columbia
4.2.1 Overview
Fertoz’s Wapiti Project is located within the Liard Mining Division in north-central British Columbia, Canada. The project is remote relative to population centres, situated approximately 145 km northeast of Prince George and 40 km south of the coal mining town of Tumbler Ridge. The project is located about 130 km southwest of the city of Grande Prairie (Alberta) and the smaller cities of Fort St John and Dawson Creek are located approximately 180 km and 130 km to the north respectively. These cities are serviced by regular flights from major western Canadian cities such as Vancouver, Edmonton and Calgary.
Road access is south from Tumbler Ridge via paved secondary roads connecting with the unpaved Wapiti Forest Service Road. The northern and central portions of the Wapiti Project can be accessed by a poorly maintained, gravel road built to provide access to a former oil/gas exploration site. The western and southern parts of the project are best accessed by helicopter. Helicopters are available for charter from Prince George, Chetwynd and, during the summer, from Tumbler Ridge.
The nearest railhead is the CN Rail Tumbler Subdivision, which terminates 12 km south of Tumbler Ridge and the Quintette Rail load-out. This is approximately 1,000 km by rail from the coastal centre of Prince Rupert.
The climate of the project is characterised by long, cold winters and short, cool summers. Average annual summer and winter temperatures are about 10°C and -15°C respectively. Frost can occur throughout the year, and the snowpack often persists from October to June. The prevailing wind direction is from the southwest, and extended periods of high
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winds in excess of 20 km/h are common on ridge tops. Precipitation ranges between 800 to 1,100 mm annually. Snow covers much of the area from October generally until mid-June during which time vehicular access is restricted at elevations greater than 1,600 m above sea level.
The project lies along the Hart Range and extends easterly towards the Rocky Mountain foothills. The topography of the surrounding region varies from rolling hills to a series of moderate to steep sided massifs that break to gently sloping plateau, culminating in steep sided ridges. Elevations range from 1,200 to 2,000 m above sea level. These ridges are cut by drainages that generally flow towards the east to northeast. The principal watercourses in the area are the Wapiti River and Red Deer Creek.
Vegetation in the area is predominantly boreal to sub-alpine coniferous forests. These are typically dense and extensive below the tree line, which varies between 1,700 and 1,800 m. Above these elevations the alpine vegetation consists of stunted and/or dwarf varieties of spruce and fir, juniper, moss, heather and other alpine tundra flora, and occasional sub- alpine meadows. The area is heavily forested at elevations below about 500 m. The forest consists mostly of sub-alpine spruce, fir, and pine. Douglas fir, balsam poplar, aspen, willow and alder are also found. Bogs and black spruce stands over some lower areas. The timber on most of the project is reportedly of little if any economic interest, but merchantable stands of timber are present in areas of lower elevation. Recent logging, evidenced by large cut-blocks, has taken place in various parts of this area. Wild fires have cleared extensive areas making prospecting more accessible near Doig Lake.
Mountain goats, caribou, elk, deer, moose, foxes, grizzly bears, black bears, wolves, marmots and martin are the most common wildlife in the area.
Industrial activities within the general area include gas exploration and development, and limited forestry. Other current land use includes tourism, trapping and recreational activities such as snowmobiling and 4WD touring.
4.2.2 Mineral tenure
The Wapiti project consists of 40 Mineral Claims, which cover a combined area of 15,838 ha (158.38 km2) located immediately south of the Wapiti Lake Park. The Wapiti claims are centred at approximately 54° 26' north latitude and 120° 37’ west longitude within NTS sheets 93I 038, 93I 047, 93I 048 and 93I 057. The claims are subdivided into two sub-projects; Wapiti East and Wapiti West (Figure 4.2 and Figure 4.3).
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Figure 4.2: Location of Fertoz’s Wapiti East Sub-project
Compiled by J A J McKibben based on BC Ministry of Energy and Mines - Mines Titles Online, April 2013
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Figure 4.3: Location of Fertoz’s Wapiti West Sub-project
Compiled by J A J McKibben based on BC Ministry of Energy and Mines - Mines Titles Online, April 2013
The Wapiti Project falls within the overlap of the McLeod Lake First Nation as described in First Nation Statement of Intent to negotiate treaties which have been submitted to and accepted by the British Columbia Treaty Commission. The final boundaries have not been agreed to by the First Nations, the Province of British Columbia or the Canadian Government at this time. A permit to conduct exploration has been issued in the past by the Ministry of Mines and letter of Support have been received from the McLeod Lake First Nation. Further support for the McLeod Lake First Nation will be required as future exploration work progresses. Early engagement of local First Nation by Fertoz’s representatives has commenced.
Xstract is not aware of any other environmental or social issues.
4.2.3 Geology
Phosphate deposits in the Rocky Mountains of northeastern British Columbia occur in a sequence of marine strata ranging in age from Cambrian to Jurassic (Butrenchuk, 1987;
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Table 4.2). These sediments were deposited along the western margin of a stable craton, the Canadian Shield (Douglas et al, 1970), with deposition of phosphate occurring within platformal or shelf-edge facies environments.
The stratigraphic sequence of the region is summarised in Table 4.2. Broadly, Cambrian to Early Carboniferous (Mississippian) strata consists of shallow marine carbonate assemblages that pass into basinal limestone, shale and siltstone facies. These are unconformably overlain by chert and fine-grained clastic rocks of Carboniferous to Permian age. Mesozoic strata, consisting of predominantly fine-grained clastic sedimentary units, in turn overlie these sequences.
While phosphate occurs at several stratigraphic levels, only Triassic occurrences are considered to be of economic significance.
Table 4.2: Stratigraphy of the phosphate bearing formations of the Rocky Mountains of northeastern British Columbia
Source: Butrenchuk, (1987) BC Geological Survey Geological Fieldwork Jan 1987
Figure 4.4 presents the distribution of the Triassic strata in northeastern British Columbia.
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Figure 4.4: Distribution of the Triassic strata in northeastern British Columbia
Source: Butrenchuk, (1988) BC Geological Survey Geological Fieldwork January 1988
These strata were uplifted during the Laramide Orogeny and now form portions of the eastern flank of the Rocky Mountains. Thrust faulting and intense folding strongly affected the strata during the mountain-building phase. Structurally, the Wapiti region is characterised by broad open to concentric folds and westerly to southwesterly dipping thrust faults. Thrust faults are generally concave upward and imbricate. There is also a general thinning of stratigraphic units towards the east.
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The stratigraphic succession exposed in the Wapiti area ranges in age from Upper Devonian to late Triassic. Of economic importance is the Triassic Spray River Group, which comprises the Whitehorse and Sulphur Mountain Formations.
The Whitehorse Formation is composed of interbedded silty dolostone, sandstone, siltstone, sandy limestone, intra-formational conglomerate, solution breccias, anhydrite, limestone and cherty dolostone. The Sulphur Mountain Formation consists of a brown-weathering sequence (100 to 500 m thick) of medium-bedded siltstones, calcareous and dolomitic siltstones, silty dolomite, limestone and minor shale. The Sulphur Mountain Formation is divided into Vega-Phroso, Whistler and Llama Members.
o The Vega-Phroso Member is typically a flaggy, brown weathering unit comprising grey siltstone and calcareous siltstone with minor shale and limestone. Thin phosphatic beds (10 to 20 cm) occur locally in the upper part of the member. The unit varies from 80 to 270 m in thickness. o The Whistler Member disconformably overlies the Vega-Phroso member, is 20 to 85 m thick and consists of grey-weathering, dark grey siltstone, shale and limestone. Its lower contact is marked by a thin phosphorite bed that may contain a thin basal phosphatic conglomerate. o The Llama Member consists of dolomitic, quartzitic siltstone and limestone with minor sandstone and dolostone conformably overlying the Whistler Member. It varies from 60 to 360 m in thickness. Elsewhere in the Rocky Mountains, phosphate is reported in the lower part of this unit.
The Permian Belcourt and Mowich Formations underlie the Sulphur Mountain Formation. Lower Carboniferous limestone, chert nodules and dolostone of the Rundle Group and Upper Devonian Exshaw and Banff Formations in turn underlie these Permian formations.
The majority of the known phosphate and phosphatic sediments occur in the Whistler Member. Phosphate is present in the Vega-Phroso and Llama Members only in very minor amounts. Phosphorite ranges in thickness from 0.8 to 3.2 m in thickness, with assays
varying from 11.9 to 23.7% P2O5 (Heffernan, 1980 and A. Legun, 1987, BC Geological Survey Branch, Bulletin 98). It is present in a variety of forms that include pelletal phosphorite, nodules, together with a few oolites and nodules, in a carbonate-quartz matrix.
These units are folded about a series of northwest-southeast trending tight anticlines and relatively broad synclines. In general, the northeast limbs of the synclines are gently dipping to the southwest and the southwest limbs are steeply dipping to the northeast. Many valley floors trace major synclinal axes. The structural features of the Wapiti area have been assigned names including Wapiti Syncline, North Anticline, South Anticline, Middle Syncline and Red Deer Syncline. Significant thrust features include the Becker Thrust and the North Thrust (Figure 4.5).
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Figure 4.5: Geology of the Wapiti Lake area
Source: Modified after Heffernan (1980) and Legun and Elkins (1986)
4.2.4 History
Coal was discovered in the surrounding area to Fertoz’s Wapiti claim block in 1793 and was exploited for limited local needs and as steam coal for railroad requirements.
Global expansion of steel production in the mid-1960s stimulated worldwide exploration for metallurgical (or coking) coal. Around this time, the British Columbia Geological Survey
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Branch completed geological mapping and structural/stratigraphic investigations in the area. This led to greater commercial exploration of the region culminating in the development of the Quintette and Bullmoose coalmines in the early 1980s. Project development included building the town of Tumbler Ridge, 129 km of rail line, 95 km of highway, 127 km of high voltage transmission line, a new port at Ridley Island and upgrading the 752 km of existing rail line from Prince George to the port at Prince Rupert.
Gibson (1972, 1975) produced a comprehensive account of the Triassic strata of the area, although spent little time mapping the phosphorite within the Sulphur Mountain Member.
According to Heffernan (1980), from 1978 to 1980, Esso Resources Canada Limited (“Esso”) performed exploration work over the current area of Fertoz’s Wapiti East Project. A reconnaissance program was completed during in the first two years and comprised geological mapping (at 1:10,000 and 1:25,000 scales), detailed trenching and a 12 hole diamond core drill program (including downhole gamma logging). Esso’s work straddles Fertoz’s Wapiti East claim block and the Wapiti Provincial Park, which borders the claims to the north. Table 4.3 presents the trench results obtained by Esso, whilst Table 4.4 summarises the best assay results from Esso’s drilling program.
Table 4.3: Historic trench assays
Trench Location From – To (m) Length (m) P2O5%
TE – 05 648,400E 0.95 – 2.51 1.56 18.6 6,039,750N 0.95 – 2.15 1.2 21.96
TE – 06 647,550E 0.40 – 4.29 3.89 10.29 6,040,250N 1.29 – 4.06 2.77 13.29 1.21 – 1.69 0.48 22.29 3.41 – 4.06 0.65 22.70
TG – 01 650,225E 0.60 – 1.51 0.91 6.4 6,041,300N 1.51 – 2.44 0.93 22.34
TG – 02 650,500E 0.4 – 1.13 0.73 7.02 6,040,925N 1.13 – 2.12 0.99 23.59 2.12 – 3.57 1.45 2.83
TR – 03 650,850E 1.26 – 3.2 1.94 16.25 6,040,450N 2.12 – 3.2 1.08 21.16
TR – 04 650,950E 0.91 – 2.44 1.53 15.46 6,040,350N 1.54 – 2.44 0.90 20.72 Source: Heffernan (1980) BC Ministry of Energy and Mines Assessment report 8407
From 1985 to 1990, the British Columbia Geological Survey carried out a study of the phosphate deposits within the province. The results of this work were published in 1996 in the Bulletin 98 under the title “Phosphate Deposits in British Columbia” authored by S. Butrenchuk. The report includes a general geology revision and an overview of the phosphate occurrences in the Tumbler Ridge Project study area.
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Table 4.4: Historic drillhole assays
Drillhole Location Azimuth Dip From – To (m) Length P2O5% (Lat/Long)
DDH 1 – 1 54°30’15” 065° 45° 52.72 – 58.28 0.56 8.22 120°41’21” 59.47 – 60.65 1.18 13.7 59.46 – 59.88 0.42 22.72
DDH 1 - 2 54°30’15” 065° 75° 89.89 – 91.90 2.01 14.82 120°41’21” 89.89 – 90.74 0.85 24.26
DDH 2 - 3 54°30’02” 051° 60° 21.88 – 25.20 3.32 11.04 120°40’52” 23.22 – 24.36 1.14 22.71
DDH 2 – 4 54°30’02” 051° 90° 37.75 – 38.41 0.66 9.15 120°40’31” 40.30 – 43.68 3.38 15.38 40.30 – 42.03 1.73 26.31
DDH 3 - 5 54°29’43” 032° 60° 39.85 – 42.93 3.08 10.2 120°40’31” 41.17 – 42.93 1.76 15.87 41.17 – 42.68 1.51 18.09 41.17 – 42.25 1.08 22.01
DDH 3 – 6 54°29’43” 032° 90° 34.02 – 36.15 2.13 14.7 120°40’31” 34.50 – 35.85 1.35 19.0 34.50 – 35.41 0.91 25.5
DDH 6 – 11 54°29’43” 061° 75° 66.39 – 67.25 0.86 7.78 120°40’31” 69.54 – 71.00 1.46 13.8 69.98 – 70.69 0.71 22.32
DDH 6 – 12 54°28’00” 061° 75° 88.16 – 91.47 3.31 5.56 120°38’05” 93.84 – 95.16 1.32 18.68 94.09 – 95.16 1.07 20.29 Source: Heffernan (1980) BC Ministry of Energy and Mines Assessment report 8407
Wapiti East
Norman and Renning (2009) reported that Pacific Ridge Exploration Ltd (“Pacific Ridge”) conducted helicopter supported reconnaissance style rockchip sampling and follow-up hand trenching of the Whistler Member of the Sulphur Mountain Formation in 2008. The Whistler Member was hand trenched in several locations over an approximate 700 m strike length. A total of 33 samples, including seven grab float samples and 26 rockchip trench samples, were collected from the Wapiti East claims (Figure 4.6). Rock samples were either collected as a continuous chip sample, a grab sample from outcrops or as float samples and stored in 6 mm plastic bags. Samples were then transported to ACME Analytical Laboratories Ltd’s (“ACME”, ISO 9002 registered and accredited) laboratory in Vancouver, where they were analysed by Inductively Coupled Plasma (“ICP”) emission spectrography for phosphate
(reported as %P2O5) and 34 elements (including yttrium (“Y”), lanthanum (“La”), cerium (“Ce”) and uranium (“U”)). A total of eight phosphorite samples were analysed by whole rock analysis for rare earth minerals.
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Figure 4.6: Location and assay results from Pacific Ridge’s 2008 samples
Compiled by J A J McKibben from Norman and Renning (2009) BC Ministry of Energy and Mines Assessment Report 30717
Table 4.5 summarises the results of Pacific Ridge’s 2008 sampling program.
In general, grab and rock chip samples collected by Pacific Ridge in 2008 correlated very well with Esso’s previous drilling results and confirmed that the phosphorite-bearing zone extends discontinuously over a 12 km strike length and up to 3 m in width within Fertoz’s Wapiti Project tenements. The main coherent zone of higher-grade phosphate is located immediately east of Red Deer Creek in Mineral Claims 851948 and 851958 (refer Figure 4.6).
Sampling within Mineral Claim 851948 returned six high-grade phosphate (+22% P2O5)
values from crumbly rock/soil with a best result of 36.09% P2O5 from sample 48536.
Sample GN-08 PH-09 is described as a phosphatic pelletoid and assayed 22.62% P2O5. Trench samples in this region generally returned anomalous to low-grade phosphate levels
(0.4 to 6.18% P2O5).
Approximately 250 m to the southeast and within Mineral Claim 851958, there is a general
increase in the phosphate grade encountered sub-surface, with three trenches returning
one or more samples with values in excess of 30% P2O5 (refer to Figure 4.6 and Table 4.6). Over 2 to 3 m interval widths, these three trenches returned average values
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exceeding 20% P2O5. Samples from these trenches were described as being of sandy, oolitic to nodular appearance.
Table 4.5: Results of Pacific Ridge’s 2008 grab and rock chip sample program
Sample Easting Northing (m) Width (m) CaO% P2O5% U ppm Y ppm La Ce Number (m) ppm ppm
48136 652,614.74 6,037,898.48 1.0 48.75 24.27 - - - -
48137 652,615.77 6,037,899.06 1.0 39.68 29.73 - - - - -
48138 652,613.72 6,037,897.97 1.0 45.06 32.92 139.8 583.8 271 110.8
48139 652,677.8 6,037,823.31 1.0 48.26 17.77 - - - -
48140 652,678.87 6,037,823.82 1.0 49.68 36.6 164.4 567.6 277 128.4
48141 652,676.78 6,037,822.75 1.0 45.75 32.85 - - - -
48142 652,852.01 6,037,595.99 1.0 39.95 30.45 182.2 541.3 262.7 130.8
48143 652,852.81 6,037,596.83 1.0 14.57 10.48 - - - -
48144 652,844 6,037,588 1.0 12.32 8.63 - - - -
48475 651,267.75 6,040,195.88 0.3 35.11 25.46 - - - -
48476 651,268.83 6,040,196.26 1.0 0.51 0.64 - - - -
48477 651,319.89 6,040,070.57 0.3 37.25 28.9 - - - -
48479 651,492 6,039,753 - 34.24 24.98 - - - -
48480 651,644 6,039,470 2.0 35.19 25.39 119.3 76 47.5 45.8
48534 652,311 6,038,213 - 7.9 5.39 - - - -
48535 652,174 6,038,373 - 46.93 28.62 - - - -
48536 652,134 6,038,412 - 48.21 36.09 182.3 752.9 359.6 173
48651 655,777 6,034,554 - 18.15 11.93 - - - -
48652 655,776.12 6,034,535.9 1.0 2.88 1.95 - - - -
48653 655,775.14 655,775.14 1.0 6.48 4.92 - - - -
48654 655,773.99 6,034,534.02 1.0 0.36 0.41 - - - -
48655 655,775 6,034,532 0.5 0.58 0.41 - - - -
48656 655,772.29 6,034,539.41 1.0 22.06 0.67 - - - -
48851 655,975 6,034,412 - 32.99 24.47 84.1 97.8 69.9 52.7
48852 656,720 6,033,622 1.0MX1.0M 54.11 0.01 - - - -
GN-08-PH-08 652,352 6,038,128 - - 6.18 - - - -
GN-08-PH-09 652,352 6,038,128 - 45.82 22.62 100.1 365.8 193 106.5
GN-08-PH-10 652,352 6,52,352 - - 1.93 - - - -
GN-08-PH-11 652,352 6,038,128 - - 0.4 - - - -
GN-08-PH-24 650,387 6,041,221 - - 0.28 - - - -
GN-08-PH-25 650,387 6,041,221 - - 24.5 134.5 519.5 244.6 116.5
GN-08-PH-26 650,387 6,041,221 - - 7.46 - - - -
Source: Norman and Renning (2009) BC Ministry of Energy and Mines Assessment report 30717
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Table 4.6: Pacific Ridge’s 2008 trench results at Wapiti
Trench Location Width Grade Including P2O5
(m) (%P2O5) (m) (%)
#1 North of DDH6-11/6-12 2.0 13.05 0.3 25.5 651267E/6040195N
#2 North of DDH6-11/6-12 2.0 15.40 1.0 28.9 651320E/6040070N
3# South of DDH6-11/6-12 3.0 28.97 2.0 31.3 652615E/6037900N
#4 South of DDH6-11/6-12 3.0 29.07 2.0 34.7 652680E/6037823N
#5 South of DDH6-11/6-12 2.0 20.47 1.0 30.5 652850E/6037595N
#6 South of DDH6-11/6-12 3.0 2.43 1.0 4.9 655777E/6034535N Source: Norman and Renning (2009) BC Ministry of Energy and Mines Assessment report 30717
The assay results also returned anomalous contents of certain rare earths with a range of from 76 to 752 ppm Y, 47.5 to 360 ppm La and 45.8 to 173 ppm Ce and with averages of 438.1 ppm Y, 215.7 ppm La and 108.1 ppm Ce.
Exploration activities in 2012 were largely focussed on the validating the results of previous campaigns in the Wapiti area. These activities included geological mapping with particular attention to fold structures and local stratigraphy, verification rock chip and channel sampling of historic trenches and pits, orientation soil sampling and limited diamond drilling.
A total of 69 rock chip samples were collected from a variety of areas along the eastern and western limbs of the Red Deer Syncline which had been historically investigated, as well as nine soil samples and channel sampling of an old trench adjacent to the Road Showing prospect. This verification program confirmed the thickness and lateral extents of the phosphate horizons and returned comparable results to previous campaigns, thus providing Fertoz with first hand confirmation of the historic results.
The geological mapping suggests the phosphorite horizon can be traced for over 27 km within Fertoz’s Waipiti area and is divided into seven main segments:
The eastern limb of the Red Deer Syncline (south of Red Deer Creek) which measures 5.5 km in length The eastern limb the Red Deer Syncline (north of Red Deer Creek) measuring 3.5 km in length Multiple subsidiary folds area on the west limb of the Red Deer Syncline – 2 km in length West limb of the Red Deer Syncline – measuring 10.5 km in length Western limb of the Wapiti Syncline 1 km in length Eastern limb of the Wapiti Syncline 1 km South Anticline (Permian) – 3.5 km in length.
As a follow up, seven AQ (34.9 mm inner diameter) diamond drillholes for 246.59 m were completed in September to October 2012. Drillhole collar data is summarised in Table 4.7 and drillhole locations shown in Figure 4.7.
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Table 4.7: Drill collar summary for 2012 Wapiti drilling program
Drillhole Northing Easting Azimuth Dip Elevation Length (m)
WF-12-01 6048105 652352 062 -45 1125 34.14
WF-12-02 6048105 652352 062 -65 1125 44.20
WF-12-03 6038199 652303 062 -45 1149 35.97
WF-12-04 6038199 652303 062 -60 1149 45.11
WF-12-05 6037910 652456 062 -45 1150 34.14
WF-12-06 6037910 652456 062 -60 1150 21.64
WF-12-07 6037910 652456 062 -60 1150 34.39
Drillholes WF-12-01 and 02 were completed near Esso drillholes 80-11 and 80-12 (Figure 4.7). Holes WF-12-03 and 04 were drilled around 100 m north of WF-12-01 and 02. Holes WF-12-05, 06 and 07 were situated on the south side of Wapiti Lake about 100 m south of WF-12-01 and 02 (located in proximity to ESSO holes 80-11 and 80-12).
Significant results (grade width intervals exceeding 0.1 m at +8% P2O5) encountered in the first four holes are summarised in Table 4.8. No obvious phosphorite zones were intersected in WF-12-05, 06 and 07, as the drill was reportedly unable to be appropriately positioned.
Table 4.8: Significant intercepts from the 2012 diamond drilling at Wapiti East
Drillhole From To (m) Length (m) P2O5 (m) (%)
WF-12-01 5.42 5.77 0.35 9.14
8.15 8.55 0.40 11.71
8.55 9.00 0.45 22.72
9.00 9.33 0.33 21.51
WF-12-02 5.82 622 0.40 8.87
9.10 9.55 0.45 19.99
10.06 10.65 0.59 18.99
WF-12-03 8.53 8.77 0.24 9.22
11.32 11.43 0.11 21.65
12.66 13.11 0.45 22.51
13.11 13.40 0.29 17.94
13.40 14.11 0.71 19.32
WF-12-04 9.46 10.06 0.60 8.67
10.06 10.38 0.32 12.45
13.79 14.54 0.75 13.00
14.54 15.10 0.56 16.16
15.10 15.53 0.43 22.42
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Figure 4.7: Wapiti East 2012 drillhole location map
Source: Cardinal, 2013
Cross-sections for the WF-12-01 and 02, and the WF-12-03 and 04 holes are presented in Figure 4.8 and Figure 4.9, respectively.
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Figure 4.8: Wapiti East Drilling – Cross-section WF-12-01 and 02
Source: Cardinal, 2013
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Figure 4.9: Wapiti East Drilling – Cross-section WF-12-03 and 04
Source: Cardinal, 2013
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Recent drilling within the Wapiti area has demonstrated the presence of narrow zones of high-grade sedimentary phosphate, which appears to be laterally continuous based of previous geological mapping. The results encountered to date are encouraging and further work including additional diamond drilling in 2013 is clearly warranted.
Wapiti West
In 2008, Pacific Ridge also conducted helicopter supported reconnaissance rockchip sampling (Phase I) and follow-up hand trenching (Phase II) of the Tunnel areas within the Wapiti West area (Norman and Renning, 2009b).
A total of 50 grab and float samples were collected during Phase I Exploration Program and 33 chip samples from Phase II were taken from hand trenching and chip sampling of exposed bed rock of seven trench sites at the Tunnel Zone. The trenches span a strike length of 900 m of prospective phosphate bearing sediments. Results from the 2008 trench sampling are summarised in Table 4.9 and Figure 4.10.
Table 4.9: Pacific Ridge’s 2008 trench results at the Tunnel Zone
Trench Location From – To (m) Length (m) P2O5%
#1 589,898E 0 – 3.0 3.0 19.4 6,088,208N 0– 2.0 2.0 19.7
#2 590,057E 0 – 6.0 6.0 16.3 6,087,789N 2.0 – 5.0 3.0 18.8
#3 590,216E 0 – 3.0 3.0 17.07 6,087,513N
#4 590,166E 1.0 - 2.0 1.0 13.5 6,087,616N
#5 590,224E 1.0 – 4.0 3.0 17.65 6,087,500N 2.0 – 4.0 2.0 17.6
#6 590,254E 0 – 5.0 5.0 15.8 6,087,453N 2.0 – 4.0 2.0 19.7
#7 590,272E 0 –4.0 4.0 12.32 6,087,420N 1.0 – 3.0 2.0 19.45
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Figure 4.10: Location of 2008 trench samples from the Tunnel prospect
Source: Norman and Renning, 2009b
In 2012, airphotograph interpretation was conducted over the Sukunka and Tunnel areas of the Wapiti West project in order to provide further detail to the mapped location of the known phosphorite horizons and to guide future ground sampling. Individual beds are well exposed at higher elevations (due to an absence of vegetation) and prominent northeast- southwest linear structures are evident within the airphotographs. Additional hand trenching and diamond drilling has been recommended for the Tunnel Zone going forward, while initial sampling is recommended for the Sukunka area.
4.2.5 Exploration potential
From Xstract’s review of the technical data, it is apparent that the Wapiti project offers potential for laterally continuous phosphorite layers at attractive grades and which with further studies may prove amenable for open pit mining. The area has received only
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limited attention since the 1980s, which defined shallow zones of variable grade phosphorite. Exploration since that time has been largely surficial in nature but has confirmed the results of previous exploration activities. However, there are sizeable areas, which remain largely untested, in particular where the prospective phosphate stratigraphy is not exposed at surface.
Fertoz’s proposed exploration program over its Wapiti East and West project tenements will involve the further compilation and interpretation of all available geological, geophysical and geochemical data, including previous drilling results. In addition, geological mapping and further sampling are proposed to define additional targets that Fertoz considers capable of supporting a JORC Code compliant Mineral Resource able to be developed by open pit. These targets will be prioritised according to strict geological criteria and receive further geological/structural mapping prior to drill assessment.
In Xstract’s opinion, there is scope to rapidly define a JORC Code compliant Mineral Resource at Wapiti given the generally robust continuity and style of phosphorite mineralisation encountered to date. Further targeted drilling is recommended once the appropriate data compilation and review work is completed.
4.3 Barnes Lake, British Columbia
4.3.1 Overview
Fertoz’s Barnes Lake Project is located within the Fort Steele Mining Division in the East Kootenay region of southeastern British Columbia, Canada. The Kootenay region is loosely bounded by the Alberta border to the east, Highway 3 (Crows Nest Highway) to the north and west, and the US-Canadian border to the south.
The nearest communities to the project are Fernie (5,000 population), located 27 km to the west, and Sparwood (3,667 population), 32 km to the north at the junction between Provincial Highways 43 (Elk Valley Highway) and 3 (Crows Nest Highway). Other nearby towns include Elkford (2,600 population), Cranbrook (19,000 population) and Crows Nest (6,500 population).
Access to the Fertoz’s Barnes Lake project is provided by Corbin Road, which leaves the Crows Nest Highway at Michel, approximately 15 km southeast of Sparwood. After following Corbin Road for approximately 30 km to the Corbin town site and coal mine, the access to the property continues southwards along the Flathead Forest Service Road, which passes along the eastern boundary of Fertoz’s claim area. Total travel time via 4WD vehicle from Fernie is approximately 1.5 hours. Numerous forestry and mineral exploration tracks occur throughout the surrounding region.
The Elk Valley Airport (paved 4,000-ft runway) is located 8 km north of Sparwood. Small airplane and helicopter charter service is available. The nearest commercial airport and airfreight facilities are located at the Canadian Rockies International Airport, 10 minutes west of Cranbrook, 125 km from Sparwood. The airport has an 8,000 m runway with 24 hour, air-ground and approach lighting, plus ground services. Daily jet services connect Cranbrook to Vancouver and Calgary. The Calgary International Airport is located 250 km to the east of Sparwood.
The Canadian Pacific Railway hauls coal shipments by unit trains to Robert's Bank port facilities on Canada’s west coast (a total rail distance of some 1,150 km). The primary transportation route is through Crows Nest Pass north to Golden where it intersects the CPR mainline that travels from Calgary to Vancouver. Another major rail corridor travels through Crows Nest Pass and Cranbrook linking the USA cities of St. Paul and Portland.
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Although the main shipment is coal from the East Kootenay coalfields, other freight shipments include grain from the Prairies and mixed commodities.
Fernie is a regional centre and enjoys all the usual amenities associated with a regional hub. Facilities in Sparwood include elementary, secondary and tertiary education facilities, health care centre, emergency services (fire, ambulance and police), a post office, several banks, library, local court, and local offices for several provincial government departments.
Coal extraction dominates the economy, with the majority of the local population working in or supporting the coal mining industry, but forestry-related industries also contribute significantly. The East Kootenay coalfields comprise three separate fields extending from the Montana border northward and known respectively as Flathead, Crows Nest and Elk Valley coalfields. These are the most important coalfields of British Columbia, having produced over 500 Mt of mainly metallurgical coal since 1897 (Ryan, 2002). Coal rank is generally medium-volatile bituminous but varies from high-volatile bituminous to low- volatile bituminous. Major coking coal mines in the region include Elkview, Line Creek, Fording River and Greenhills, which are all located to the north of Fertoz’s Barnes Lake phosphate project.
The Barnes Lake area lies within the Northern Rocky Mountain physiographic province and is characterised by north to northwest trending mountain ranges separated by straight valleys that run parallel to the ranges. The topography is dominated by steep, heavily forested mountains and valleys. Slopes are steep and rugged. Soils are regosolic, acid brown and brown wooded and form a shallow mantle over bedrock or glacial till of varying depths. Nearly all of the major drainages in the region have very high channel gradients. The main drainages in the area are the Elk River, Cummings (Wilson) Creek and Michel Creek.
Vegetation varies with elevation. Valley bottoms are dominated by Ponderosa Pine, Rocky Mountain Douglas Fir, Lodgepole Pine and Trembling Aspen. At elevations from 1,000 m to 2,200 m, vegetation comprises Engelmann Spruce, Lodgepole Pine, Western Larch and Trembling Aspen. Treeless areas above 2,250 m are in the Alpine Zone.
Elevations within Fertoz’s Barnes Lake Project range from 1,585 m to 2,255 m.
The area receives heavy snowfall and is in avalanche country. Records from the weather reporting station at Fernie indicate total average yearly precipitation is 105 cm with winter snowfall averaging 368 cm. The highest and lowest temperatures recorded at Fernie were 36˚C and -40˚C respectively. Snow depths at higher elevations exceed 4 m in places. Exploration activities are only possible during the summer and fall, approximately June 1 to October 31.
4.3.2 Mineral tenure
The Barnes Lake project comprises a single granted Mineral Claim (1011319) covering an area of 608.98 ha (6.09 km2) centred at approximately 49° 27' north latitude and 114° 41’ west longitude (UTM 11 N, 667573 mE, 5481233 mN), which lies immediately east of Barnes Lake.
4.3.3 Geology
Regional
Fertoz’s Barnes Lake Project lies within the Fernie Basin, a broad, curvilinear syncline lying with the Rocky Mountain fold and thrust belt, which covers roughly 2,000 km2 in southeastern British Columbia (Figure 4.11). The basin hosts widespread phosphatic shales, pelletal phosphorite and lesser limestone, siltstone and sandstone units of the
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Jurassic Fernie Formation (refer Table 4.2 in Section 4.2.3). It ranges in thickness from 70 to 365 m and consists of:
a lower zone of dark grey to black shales, dark brown shales, phosphates and minor limestones, siltstones and sandstones (the basal phosphate zone and equivalents of the Nordegg Member, Poker Chip Shales and the Rock Creek Member) a middle unit of light grey shale, calcareous sandstone and sandy limestone (the Grey Beds) an upper unit of glauconitic sandstone and shale grading upwards into interbedded fine-grained sandstone, siltstone and black shales (the Green and Passage Beds).
Figure 4.11: Distribution of the Jurassic Fernie Formation in southeastern British Columbia
Compiled by J A J McKibben from Butrenchuk (1986) BC Ministry of Energy and Mines
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The base of the Fernie Formation is marked by a persistent pelletal phosphorite horizon
that is 1 to 2 m thick and generally contains greater than 15 per cent P2O5 (although
grades up to 30 per cent P2O5 have been reported) and unusually high concentrations of yttrium. It commonly consists of two pelletal phosphorite beds separated by a thin, chocolate brown to black phosphatic shale bed. Phosphatic shales of variable thickness, generally less than 3 m, overlie the phosphorites. The top of this sequence is locally marked by a yellow-orange bentonite bed. This part of the formation is Sinemurian in age and generally considered to be a lateral facies of the Nordegg Member and Nordegg equivalent beds. A second phosphatic horizon is present in the Bajocian Rock Creek Member, approximately 60 m above the base of the Fernie Formation.
The Fernie Formation unconformably overlies the fine clastic sediments and carbonates of the Triassic Sulphur Mountain and Whitehorse Formations.
In southeastern British Columbia, the Fernie Formation is overlain by Cretaceous-aged coal-bearing sedimentary units of the Kootenay Group. The Kootenay Group, which can reach thicknesses in excess of 1,000 m, includes the Morrissey, Mist Mountain and Elk Formations. Coal beds within the Mist Mountain Formation are usually up to 18 m thick and vary in rank from place to place from high volatile bituminous to semianthracite.
The entire Triassic/Jurassic sequence has been structurally deformed, primarily by folding and thrust faulting. This structural deformation is important as it has resulted in considerable localised thickening of the phosphorite horizon, either by thrusting one section of the horizon directly on top of another, or by slumping during folding resulting in increased thicknesses at the nose of folds. The folding has also brought larger areas of the phosphorite horizon close to surface, paralleling the topography.
Local
In the Barnes Lake area, rocks of the Fernie Formation are poorly exposed. Where they are exposed, they are typically marked by a phosphorite horizon that is 1.1 to 2.1 m thick. Brown and black shales commonly overlie the phosphorites. The shales are overlain by black, brown and dark grey shales with interbedded dolostone, buff, fine grained sandstone and light-grey limestone units.
The basal phosphorite horizon generally consists of poorly to well consolidated, gritty, pelletal phosphorite and shale-phosphorite capped by phosphorite shale.
Trenching in the Barnes Lake area has shown that the phosphorite horizon overlies orange to yellow clays, or interbeded Triassic-aged shale and siltstone units. The phosphorites are generally shale to pelletal in nature and exhibit an increase in grade up-section until a
fairly pure phosphorite (28% to 32% P2O5) is developed. Commonly, the high-grade phosphorite is black, pelletal and overlain by increasingly shalely phosphrite and shale. Locally, phosphorite nodules hosted in a pelletal phosphorite matrix are developed in high- grade beds.
The stratigraphically completed measured sections average 22.53% P2O5 and 606 ppm yttrium across an average thickness of 1.43 m (Pell, 1990). The values range from
2.66% P2O5 and 98 ppm yttrium in shale layers within the phosphorite section to 32.18%
P2O5 and 1,065 ppm yttrium in the phosphorite itself.
The structure of the Barnes Lake area is dominated by a pair of north-northwest trending, upright to overturned anticlines and the intervening syncline which is cored in the central and northern part of the property by a thrust fault. Small back thrusts occur along the western limb of the easternmost anticline and locally disrupt the phosphate-bearing strata.
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4.3.4 History
The Fernie Basin phosphorites have experienced several periods of exploration since their discovery in the 1920s (Henneberry, 1999). The entire basin was explored by the predecessor to Cominco Ltd (Cominco) during the period 1925 to 1932, outlining various phosphate horizons and defining areas, which offered the greatest economic potential. Three small exploratory underground mines were opened, but work was halted due to poor beneficiation results. Cominco did obtain mining leases on the most important showings. Cominco re-examined and further explored several of the leases in the 1960s, using new metallurgical recovery techniques. Preliminary feasibility studies were conducted, but poor beneficiation characteristics halted the project (Kenny, 1977).
Logging operations progressively opened much of the southern Fernie Basin, resulting in an exploration boom in the 1970s and early 1980s. Several companies actively explored the basin during this period, completing geological mapping, geochemical sampling, trenching and drilling programs. In addition, the Canadian Federal Government undertook metallurgical testing on samples from the southern basin.
With reference to the Barnes Lake area, four main phases of exploration have reportedly been undertaken in the late 1960s/70s, late 1980s, late 1990s and 2008.
The Western Warner/Medesto programs have been poorly documented and are not publicly available. Exploration activities reportedly consisted of geological mapping, trenching, drilling and bulk testing in the period 1968 to 1972.
Table 4.10: Poorly documented exploration programs in the Barnes Lake area during the period 1968 to 1972
Reference Claims Activities
1968 MMAR pp324 Not Specified Access road construction Drilling (7 holes for 642 ft)
1969 GEM pp 398 - 399 Not Specified Trenching (50 ft) Road construction Diamond drilling (6 holes for 756 ft) Drilling (2 holes of unknown length)
1970 GEM pp504 WW(1-40) Trenching (8 by 1,600 ft) WW48,57,101 Drilling (3 holes for 217 ft)
1971 GEM pp468 - 469 WW46,48,50,102,104 Road construction WW46,48,50,102,104 Trenching (20,400 ft) WW55,102 Drilling (2 holes for 207 ft) PH8,10 Trenching (2,000 ft)
1972 GEM pp 605-606 WW102,104 Drilling (5 holes for 280 ft) PH10 Drilling (2 holes for 120 ft)
The first documented program was a seismic refraction geophysical survey was completed in 1975. Four seismic lines (totalling 4,350 feet of survey) were run, three on the west side of Michel Creek and one on the east side over a strike length of 4.5 km. Prior to the field testing, the survey was deemed to have located the phosphorite bed on each of the lines (Dorian, 1975).
Percussion and diamond drilling was undertaken in 1977 to test the phosphorite at a depth accessible for open pit mining (deemed to be less than 16 m depth) on two of the 1975 seismic lines. Drilling difficulties and budget constraints were a factor and in the end only
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two holes were completed, neither of which encountered the phosphorite horizon (Pelzer, 1977). Three additional holes were drilled in 1978. One intersected the oolitic phosphate bearing shale 1 m thick along the basal contact of the Fernie Formation at an approximate depth of 10 m. Two other holes were completed to depths of 10 and 16 m but failed to intersect the disconformity at the base of the Fernie Formation (Dales, 1978).
Based on bulk testing work and diamond drilling undertaken in 1978, in-situ tonnages and grades of rock phosphate were estimated outlining a modest sized phosphate deposit.
The Barnes Lake phosphorites were again investigated in 1990 with geological mapping, sampling, hand trenching and backhoe trenching carried out. Eight backhoe trenches and two hand trenches were dug along strike on the west side of Michel Creek. The trenching results confirmed the continuity of the phosphorites and the continuity of grade along strike (Table 4.11 and Figure 4.12).
Table 4.11: Historic trench assays
+ Trench Thickness P2O5%* Y ppm* (m)
Hand Trenches
BN90-23** 0.98 30.50 777
BN90-37** 0.65 27.29 658
Backhoe Trenches
BNT90-01** 0.68 25.00 722
BNT90-02** 0.52 25.67 718
BNT90-03-1 1.11 23.16 629
BNT90-03-2 1.11 21.63 712
BNT90-04** 0.78 21.24 582
BNT90-05-1 1.24 23.73 643
BNT90-05-2 0.75 25.14 758
BNT90-06** 0.87 24.89 712
BNT90-07 1.45 23.58 595
BNT90-08 1.62 20.94 493
BNT90-09 2.07 22.14 565
+ Thicknesses quoted are all true stratigraphic thicknesses, either measured as such or calculated.
* Measured sections are generally composed of a number of smaller interval samples; weighted averages, based on proportional sample thicknesses were calculated to represent the yttrium and phosphate content of the entire section
** Incomplete section due to erosion or faulting Source: Pell, 1990
In 1998, limited reconnaissance sampling of the Barnes Lake phosphorites was carried in support of metallurgical and agronomical testing (Henneberry. 1998). These samples were reportedly placed in storage and do not appear to have been analysed. However, the large follow-up exploration program planned for 1999 was not undertaken as the company was unable to secure financing (Henneberry, 1999).
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In 2007, one reverse circulation drillhole, BLK-001 (total length 48 m), was completed at Barnes Lake. This hole was not optimally positioned due to poor access and the environmentally sensitive nature of the area. The hole encountered siltstone throughout its entire length and geophysical logging did not indicate the presence of any anomalous layers (Parent, 2008).
Fertoz is yet to commence its exploration program at Barnes Lake, given that the Company has only recently been awarded the Mineral Claim.
Figure 4.12: Location of hand dug (BN series) and backhoe dug (BNT series) trenches within Fertoz’s Barnes Lake project
4.3.5 Exploration potential
Based on Xstract’s review of the available technical data relating to the Barnes Lake area, it is evident there is the potential for shallow phosphate-bearing rock within the property, however, the extent and structure of any such occurrences have not been conclusively determined through previous exploration efforts. While there are historical workings and numerous samples collected over an extended period, to confirm the grade of the structure, further geological investigations are required.
Fertoz’s proposed exploration program at Barnes Lake will initially focus on the compilation and interpretation of all available geological, geophysical and geochemical data, including previous trenching and drilling results. Integrated with the exploration program should be
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the accumulation of relevant technical, environmental and logistical information to allow for accurate review. In addition, further geological mapping, trenching and diamond drilling appears warranted. Furthermore, as beneficiation is likely to be key to any future project development, bulk sample testing may be warranted upon demonstration of the lateral continuity of the phosphorite layer in preparation for the estimation of a JORC Code compliant Mineral Resource.
Certain issues may constrain on-going exploration efforts including road access restrictions, habitat protection areas, and restrictions on the development of other commodities, including coal and uranium. Providing the Company is prepared to address environmental and stakeholder issues during exploration and development planning, Xstract considers there is merit in continuing to investigate the potential of the property.
4.4 Crows Nest, British Columbia
Fertoz’s Crows Nest Project comprises a single granted Mineral Claim (1013727) covering a total area of 1,471.81 ha located at approximately 49° 38' north latitude and 114° 43’ west longitude.
The Crows Nest Project is located approximately 15 km east of Sparwood and 18 km north- northwest of the Company’s Barnes Lake Project in southeastern British Columbia (Figure 4.13). The project is accessible via logging roads from Highway 3 (Crows Nest Highway) and Corbin Road. The Canadian Pacific Railway, which connects Calgary to Vancouver, passes along through the northern portion of the project area.
Figure 4.13: Location of Fertoz’s Crows Nest Project
Compiled by J A J McKibben based on BC Ministry of Energy and Mines - Mines Titles Online, April 2013
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The lease lies near the mouth of Alexander Creek, which occupies a broad valley east of the High Rock Range. At elevations of 1,400 to 1,800 m, the project is located below the tree line in an area of relatively gentle topography.
Fertoz’s Crows Nest Project lies immediately south of adjacent third-party held claims, which host a phosphate quarry and historical underground workings. The following is a modified summary of previous activities on these adjacent claims (Butrenchuck, 2002):
Phosphate was discovered immediately to the north, but outside, of Fertoz’s Crows Nest claim in the early 1900s. In 1931, 600 m of underground workings were developed and a 1,800 tonne sample shipped to Trail for metallurgical testing. Further exploration and testing of the surrounding area was completed in the 1960s continuing intermittently until the mid-1970s. Approximately 42.0 tonnes of
phosphorite containing 22.30% P2O5 were previously extracted from an area measuring 20 m by 15 m at the quarry. In 1997, a small diamond drill programme was completed in proximity to the adit and then in 1998, a bulk sample was collected from a phosphate showing approximately 500 m south of the adit. The results of this work were not reported.
The region surrounding the Crows Nest Project is mainly underlain by carbonate rocks of the Permian Rocky Mountain River Group, siltstone, shale and mudstone of the Triassic Spray River Group and shale, siltstone and phosphate of the Jurassic Fernie Group (refer to Figure 4.11). Carbonate rocks of the Mississippian Rundle Group occur on either side of Alexander Creek. The basal phosphorite unit to the Fernie Group is typically 1 to 2 m thick, but may attain greater thicknesses due to repetitive thrusting.
This sequence has been folded about a broad synclinal structure, with trends typically north-south and dips gently to moderately to the west. North-south trending, westerly dipping thrust faults occur within the Fernie Group shales. East-west trending block faulting may also be present.
Outcrops of phosphorite are limited in the area with a former adit and quarry located immediately to the north of Fertoz’s claim providing the best exposures. Telfer (1933) describes the phosphate horizons of this area as consisting of three beds: a lower oolitic high-grade phosphorite, a shale parting and upper nodular phsophorite with a yellow marker bed at the top. The high-grade phosphorite bed consists of structureless pellets and rare pellets with an oolitic structure. The beds are average approximately 1 m in thickness but are repeated as many as four or five times by easterly directed thrusting. According to Butrenchuk (1996), previous sampling at the adjacent third-party-held quarry location indicates that the phosphate content of a 1 m thick phosphorite bed is 26.02%
P2O5.
Within Fertoz’s current project area, Butrenchuck (1996) reports a phosphorite bed 1.2 m thick is also exposed in a road cutting on Highway 3 near Alexander Creek (Lat: 49˚ 39’ 15”, Long: 114 ˚ 44’ 10”). A second occurrence, comprising a 1 m thick phosphorite bed near the base of the Fernie Group, crops out along Alexander Creek south of the highway.
The Crows Nest Project has been subject to cursory exploration work to date despite the presence of several small historical phosphate workings and regional showings. At present Fertoz has proposed a limited work program for the Crows Nest Project comprising initial data compilation and technical assessment including geological mapping and reconnaissance rockchip sampling. Should the results of this initial phase prove positive, further geological mapping, trenching and diamond drilling will be carried out as part of an integrated regional strategy designed to jointly advance the Company’s Barnes Lake and Crows Nest properties.
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Based on its review of the available technical data, Xstract considers the Crows Nest Project offers potential for phosphate and the level of exploration expenditures proposed by Fertoz appears appropriate. 5 Australian Projects
5.1 Overview
5.1.1 Introduction
Fertoz’s Australian exploration project tenements are located in the Daly and Georgina Basins of the Northern Territory and Queensland, Australia between latitudes -11° and - 26°, and longitudes 131° and 140°, as shown in Figure 5.1.
Figure 5.1: Fertoz's Australian tenements
Fertoz’s premier Australian project is at Sherrin North located approximately 80 km northwest of Mount Isa in northwestern Queensland.
In the Northern Territory, Fertoz has structured its exploration holdings into three geographic groupings, referred to from north to south as the Katherine, Barkly and Barrow Creek Projects. The location of Fertoz’s projects relative to Darwin, the capital of the Northern Territory and larger urban centres, are outlined in Table 5.1.
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Table 5.1: Location of Fertoz's projects relative to Darwin and major urban centres
Project Name Distance and direction Closest urban Distance and direction from Darwin centre(s) from centre
Katherine 330 km SSE Katherine 20 km S
Barkly 980 km SE Tennant Creek 220 km E
Barrow Creek 1,200 km SSE Tennant Creek 220 km S Alice Springs 260 km N
5.1.2 Tenement status
Fertoz’s Australian tenements cover a combined area of approximately 3,549 km2. The Company’s project groupings, as well as the status of the individual tenements within the projects and its equity entitlement, are detailed in Table 5.2.
Table 5.2: Status of Fertoz’s Australian tenements
Project Tenement Equity Area Grant Date Expiry Date Reduction 2013 Number (%) Approx. Date Rent 4 (km2) (AUD)
Sherrin EPM19448 100 221 6/05/2013 5/05/2018 5/05/2016 8,243 North
Barrow EL26915 100 744 8/04/2009 7/04/2015 7/04/2015 01 Creek
Katherine EL26995 100 584 3/09/2009 2/09/2015 2/09/2013 6,6382
EL26997 100 269 3/09/2009 2/09/2015 2/09/2013 6,129
EL27008 100 53 3/09/2009 2/09/2015 2/09/2013 8,929
Barkly EL26054 100 526 5/09/2008 4/09/2014 4/09/2014 12,0932
EL26055 100 7823 5/09/2008 4/09/2014 4/09/2014 17,9842
EL27076 100 370 23/07/2009 22/07/2015 22/07/2013 8,820
Total 3,549 68,836
1 NuPower Resources Limited (now known as Central Australian Phosphate Ltd) earning initial 10% interest under Barra Joint Venture 2 Planned 50% reduction in tenement area in 2013 3 EL 26055 will be reduced by approximately 48 km2 on completion of the split out and sale of 15 sub-blocks to FSL Corporation Pty Ltd 4 Rent payments are exclusive of GST
In February 2012, NuPower (now CEN) announced an agreement with Fertoz, which was finalised in May 2012, to earn an initial 10% interest in EL26915 through exploration expenditure totalling AUD100,000 in the first year. At 10% ownership, NuPower may then elect to earn an additional 40% interest by solely meeting exploration covenants over the next 24 months. NuPower will manage the joint venture throughout this three-year period. Progressing beyond this point, both Fertoz and NuPower may elect to co-contribute towards the ongoing exploration and development or dilute at a rate of 10% per AUD100,000 spent by the other party. If either party reaches 90% ownership, it can automatically move to 100% ownership through dilution, leaving the minority party with a right to a 0.5% gross revenue royalty from any operation that may be developed on EL26915.
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Xstract notes some of Fertoz’s Australian projects are subject to a number of infrastructure easements including the Barkly Highway, Amadeus-Darwin gas supply pipeline, the Adelaide-Darwin railway line, telecommunication towers and overhead electricity lines and equipment. None of these easements are considered to be detrimental to future exploration activities within the projects.
Fertoz is keen to develop and maintain good relations with the relevant Land Councils, as future discoveries on its exploration licences will require Native Title Agreements to be in place prior to any proposed mining. Table 5.3 details the key Land Councils and relevant 1:250,000 map sheet(s) for each project.
Fertoz’s Sherrin North project falls within the Native Title Claim area of the Injalandji- Dhidhanu (Claim Number QC09/3).
A number of traditional owner groups were identified in proximity to Fertoz’s Northern Territory tenements. These include the Jaywon (Katherine project), Wunara, Anurrete and Arruwurra (Barkly), and Angarapa (Barrow Creek) peoples.
Xstract is not aware of any environmental issues that may impact on the subject tenements.
Table 5.3: Land Council, landholding types and map sheet details for each project area
Project Name Land Council Landholding types Mapsheet (1:250,000)
Sherrin North Mount Isa
Katherine Northern Land Perpetual Pastoral Lease Fergusson River, Katherine and Council Larrimah
Barkly Northern and Perpetual Pastoral Lease Alroy, Elkedra, Frew River, Avon Central Land Downs & Ranken Councils
Barrow Creek Central Land Perpetual Pastoral Lease Barrow Creek Council
5.1.3 Geological setting
Essentially, all of Australia’s phosphate resources are located within the Georgina Basin, a large (325,000 km2) sedimentary basin extending across northwestern Queensland and the Northern Territory, as far south as Tennant Creek. The Georgina Basin is one of a number of Neoproterozoic to Palaeozoic sedimentary intracratonic basins that comprise the Central Australian Platform Cover.
The Georgina Basin is bound by the South Nicholson and McArthur Basins to the north, the Tennant Inlier to the west and Arunta Province to the south, and abuts the Mount Isa Block to the east in Queensland.
The sediments of the Georgina Basin range from late Proterozic to early Palaeozoic in age and are unconformably overlain by Late Jurassic to Cretaceous sedimentary units. The basin developed to a maximum thickness of about 9,000 m, although the majority is less than 2,000 m.
Late Proterozoic continental and possibly marine sandstones, carbonates and glacial sediments occur at the base of the Georgina Basin, followed by marine shale and sandstone with minor carbonates. Cambrian to Ordovician-aged marine carbonate and siliciclastic sediments overlie the Proterozoic sedimentary succession. By Middle Cambrian,
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marine conditions prevailed in the basin and phosphogenesis was widespread (Southgate and Shergold, 1991). Devonian sedimentary units form the uppermost unit of the basin.
Rifting during the formation of the Georgina Basin produced a number of separate depositional centres and complex facies relationships, which has led to the definition of numerous stratigraphic units. As such, there is no generic stratigraphic column for the Georgina Basin. The basin has been deformed by minor to moderate folding and faulting throughout, with moderate to severe folding, faulting and extensive overthrusting along the southern margin.
Of economic importance are the basal units of the Middle Cambrian Border Waterhole Formation and its southerly equivalent, the Beetle Creek Formation.
The phosphorites of Northern Australia are soft, fine-grained sedimentary units of the mudstone phosphorite type (microsphorite). They are non-pelletal and often structureless in hand specimen but show fine bedding in thin section on occasion. The phosphate- bearing siltstones show micro-bedding comprising layers of silty collophane mudstone intercalated with less silty cellophane. The surface ‘phoscrete’ is typically high-grade,
usually in the order of 30 to 35% P2O5 and dense, resembling a cream coloured porcellanite. Manganese and iron-oxides commonly coat this material, which has a rubbly or bouldery appearance in outcrop.
Economic phosphate deposits of the Middle Cambrian Georgina Basin are being mined at Phosphate Hill in Queensland. These phosphatic sediments were deposited in a restricted embayment that was bounded by land on its northern, western and southern sides and whose eastern connection with the Bourke River Outlier, an appendage of the Georgina Basin, was restricted by shallow banks.
Figure 5.5 shows the phosphate prospectivity of northern Australia, in particular the Georgina Basin.
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Figure 5.2: Location of Fertoz’s projects and phosphate prospectivity of northern Australia
Katherine
Barkly
Sherrin North
Barrow Creek
Modified by J A J McKibben after Jaireth and Huleatt (2009)
5.1.4 Deposit model
Phosphates of the Georgina Basin are interpreted to have formed via the upwelling of phosphate-rich, cold oceanic waters and the subsequent concentration of phosphate-rich sediments along the continental shelf. Phosphate precipitation is interpreted to have occurred within shallow water embayments, where warmer waters reduced the solubility of phosphate. A high degree of biological mortality is also considered important to phosphorite formation.
Key features of this model include:
Sea levels were higher during the Cambrian, with ocean currents pushing phosphate- rich water to the shallow seas of the Central and Northern Australian super-basin
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Increased water temperature and organic processes in shallow water resulted in the deposition of phosphate beds along the basin margins and on basement highs.
5.2 Sherrin North Project, Queensland
Fertoz’s Sherrin North project comprises a single granted exploration permit located approximately 80 km northwest of Mount Isa and 90 km east of the Northern Territory border in northwestern Queensland (Figure 5.3).
Figure 5.3: Location of Fertoz’s Sherrin North Project
Compiled by J A J McKibben from Geological Survey of Queensland Interactive Resource and Tenure Maps, June 2012
The sealed Barkly Highway traverses the northeastern boundary of the project area, with well-formed gravel roads and pre-existing station tracks providing ready access throughout the project tenement. The nearest populated site to most of the area is the Yelvertoft Homestead, a cattle station located approximately 8 km south of the Barkly Highway.
The physiography of the project area is generally flat ranging in elevation from 260 to 380 m above sea level, with intermittent low quartzite ridges. These plains are broken at sparse intervals by generally shallow ephemeral tributaries to the Georgina River. Artesian wells typically provide much of the water to the surrounding area. Low scrub and sparse grasses are the dominant vegetation of the area. The principal land use is pastoral, in particular cattle grazing.
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Fertoz’s Sherrin North project lies immediately adjacent to and surrounds Legend International Holdings Inc’s (Legend) EPM14912 to the northeast, east and southeast. Legend’s EPM14912 hosts the Lily Creek, Engine Creek and Sherrin Creek phosphate deposits, which have been the focus of numerous studies dating back to the late 1960s. Fertoz’s Sherrin North project is interpreted to lie along the northern extension to the Sherrin Creek deposit (Figure 5.3).
5.2.1 Local geology
The Undilla Sub-basin represents the easternmost part of the Georgina Basin and is stratigraphically correlated with the Lawn Hill Outlier. The sub-basin rarely exceeds 400 m in thickness and comprises sedimentary rocks of Lower to Middle Cambrian age. Several classifications have been proposed for the sub-basin but simplistically the basin demonstrates shallow to deeper marine conditions.
Broadly, the Undilla Sub-basin comprises:
a basal sandstone – conglomerate (deposited in a shore/marine environment) chert-siltstone-limestone-phosphate (extremely shallow water shelf environment characterised by shoals and a coastline broken by embayments, estuaries and lagoons) Silt-shale-chert (quiet, deeper water environment) Limestone (offshore to open marine environment) Dolomite (mudflats, saline lagoons and lakes) Sandstone-siltstone (shore to shallow marine).
Local stratigraphy in the surrounding area to Fertoz’s Sherrin North project is represented from oldest to youngest by:
Yelvertoft Beds represents the lower part of the Beetle Creek Formation, where the Thorntonia Limestone has been completely replaced. It consists of fossiliferous shale and chert. Beetle Creek Formation comprising carbonate to deeper water shales, cherts and siltstones. It is generally a light brown to light grey siltstone-shale with interbedded brown-black chert and some conglomerate intervals locally. Minor dolomitic limestone is locally present. This unit contains phosphorite and phosphatic siltstone with P2O5 content varying from less than 1% to over 30% locally in environments ranging from relatively thin erosional surfaces to relatively thick beds of phosphorite. Inca Creek Formation crops out as chert, silicified shale, thin extensive limestone lenses, weathered siltstone, and fine sandstone. The formation varies in thickness from 3 to 600 m near Phosphate Hill (Duchess).
After the deposition of these units during the Middle or Upper Ordovician, a major break took place resulting in faulting and fracturing, although in general strata remain horizontal.
Figure 5.4 outlines the regional stratigraphy for the Undilla Basin area.
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Figure 5.4: Cambrian stratigraphic correlation – Undilla Basin
Source: After Opik, 1960
Most of the recorded phosphate occurrences lie along the outer margin of the eastern Georgina Basin (Undilla Sub-basin) as shown in Figure 5.5.
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Figure 5.5: Location of Fertoz’s Sherrin North project relative to other known phosphate occurrences in the eastern Georgina Basin (Undilla Basin)
Modified by J A J McKibben after Hough (2010)
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5.2.2 History
The area currently covered by Fertoz’s Sherrin North tenement has previously been the subject of various exploration campaigns dating back to the mid-1960s.
The Sherrin Creek deposit was discovered, along with the Lily Creek and Engine Creek deposits (located to the southwest and outside of Fertoz’s tenement), by the Continental Oil Company (Australia) Ltd in December 1966. Since that time, various activities have been carried out over the project area and surrounds focussed predominantly on the exploration and evaluation of phosphate resources, oil shale and base metal mineralisation.
Key activities completed include a regional study of eastern Georgina Basin, geological mapping, drilling and limited downhole logging (166 holes) in Sherrin, Engine and Lily Creek areas, tonnage/grade estimation, beneficiation tests, market testing and transportation studies.
Broadly speaking, activities carried out between 1967 and 1974 centred predominantly on exploration, delineation and quantification of the Sherrin, Engine and Lily Creek deposits. From 1975 onwards, operations concentrated on the beneficiation studies to find an economic method of upgrading the phosphate product to a marketable product.
Table 5.4 lists the previous holders and titles, which have impinged on the area currently covered by Fertoz’s Sherrin North project.
Table 5.4: Holders and tenements related to EPM19448
ATP/EPM Holder
315 IMC Development Corp. (IMC)
375 Continental Oil Co. of Australia Ltd.
601 Continental Oil Co. of Australia Ltd.
1297 IMC Development Corp.
1376 IMC Development Corp.
2190 IMC Development Corp., Australian Fertilizers Ltd.
4126 IMC Development Corp., Australian Fertilizers Ltd.
7861 BHP (BHP)
8117 Mount Isa Mines Ltd. (MIM)
9757 CRA Exploration Pty. Limited (CRAE)
Percussion drilling undertaken during 1968 and 1969 returned encouraging intercepts of
P2O5. This drilling indicated that variably mineralised phosphatic sediments extend as a discontinuous belt trending northwest-southeast from Sherrin Creek to Lily Creek, a distance measuring approximately 16 km. There is reportedly a general increase in grade and depth towards the southeast.
Table 5.5 summarises assay results from drilling completed during 1968 and 1969 that falls within Fertoz’s current EPM.
Beneficiation tests conducted on phosphatic material from Sherrin Creek comprised three main approaches including froth flotation on ground feed, agglomeration flotation in Humphrey spirals, heavy media cyclone and skin flotation on Wifley tables of sized feeds and direct acidulation. This work indicated that direct acidulation resulted in the highest recoveries (90 to 95%) and provided that the very fine material removed through washing the rock performs well at pilot plant scale for the dehydrate process. Further improvements
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in recoveries may be achievable provided material finer than +0.09 mm can be utilised
without affecting the extraction of P2O5 or significantly reducing the filtration rates.
Table 5.5: Summary of historical drilling assay results within the Sherrin North Project
Hole Easting Northing Azimuth/Dip From To Interval %P2O5 Number (m) (m) (m) (m) (m)
Y060 275,214 7,755,283 0°/-90° 9.14 33.53 24.39 5.45
Y105 276,212 7,754,037 0°/-90° 15.24 29.72 14.48 12.93
Y106 275,159 7,754,231 0°/-90° 12.95 32.00 19.05 4.84
Y176 276,673 7,756,247 0°/-90° 24.38 45.72 21.34 3.18
Y177 276,561 7,755,212 0°/-90° 16.76 36.58 19.82 4.56
Y208 277,863 7,753,671 0°/-90° 12.19 27.43 15.24 6.30
Note: Intervals calculated at 0% P2O5 cut-off
In 2008, WCP Resources Ltd (“WCP”) entered into an option agreement to acquire Deep Yellow Ltd’s phosphate interests at Sherrin Creek. Work undertaken by WCP consisted of a detailed review of all open file data, reconstruction of the drill database, and evaluation of key economic factors likely to influence the project’s development viability including data integrity, continuity of the phosphate mineralisation’s grade and thickness, waste-to-ore stripping ratios and processing options. WCP withdrew from the option agreement prior to completing any site-based investigations.
Figure 5.6 presents a geological summary, historical drill locations and intercepts with respect to generalised outlines of the phosphate mineralisation defined by previous explorers in the Sherrin North area.
Figure 5.6: Geological summary and historical drillhole and intercepts location
EPMA 19448
Source: Modified after Bridgewater (2010) - Queensland Digital Exploration Reports
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5.2.3 Recent exploration
As the tenement has only recently been granted, Fertoz is yet to commence site-based field investigations, and to date has completed data compilation, limited re-assay of 1968/69 percussion drill samples and mineralogical testing in order to assist in the reporting of the historic estimate in compliance with the 2004 JORC Code.
Mineralogical testing
In March 2012, Fertoz commissioned hrltesting Pty Ltd (“hrltesting”) to undertake mineralogical studies (including mineralogical investigation, chemical analysis, quantitative X-ray diffraction analysis and MLA bulk mineralogical analysis) on samples from the Sherrin North phosphate deposit.
On the basis of the test work completed, hrltesting noted the following:
The samples provided were derived from a narrow geospatial spread across the Sherrin North phosphate deposit. The assay of the composites taken, agree well with the predicted assays based on the historical assay data supplied. The chemical assays reveal the composites all had phosphate values less than required
for direct shipping. Hence, some form of beneficiation will be required to raise the P2O5 grade. While deleterious elements were detected, none of them were at levels that would currently cause concern in the ore. Post beneficiation the distribution of deleterious elements may change and the potential detrimental effect could increase. Quantitative X-ray diffraction analysis revealed the dominant minerals in each of the composites were quartz, apatite, goethite and clays. MLA Analysis of the +38 micron fraction of Composite 3 revealed the apatite had a P80 of 70 microns and was well liberated at 72%. The most likely processing option to beneficiate the ore would be by flotation. The samples as provided are unlikely to be representative of the bulk RC chip sample as the top size was too coarse for the sample size taken. All other conclusions and recommendations in this report are based on the samples examined and may not be representative of the bulk samples from which the samples supplied were obtained.
All samples with greater than 5% P2O5 were from depths of approximately 16 to 31 m below surface. In hrltesting’s experience commercial phosphate deposits are near surface deposits requiring limited or no overburden removal in order to minimise cost.
Historic estimate
Xstract has completed a high-level review of the historic tonnage and grade estimate for Sherrin North and notes the following:
Data preparation and validation
Available information pertaining to the Sherrin North deposit includes 30 drillhole collars and assays in Excel files; topography and tenement boundary in dxf format; and geological log scans in hard copy. Drillhole spacing is approximately 1,000 m by 1,000 m.
Assays were not available for drillholes Y207, Y209 and Y250. Xstract excluded drillholes
Y243 and SC9 from the model because only one assay of 0.5% P2O5 exists in the data, which is located above phosphate horizons modelled.
During the data validation process, a number of errors were fixed, including:
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Two geographic co-ordinate systems used for collars and topography. The entire dataset was converted to AGD 94, Zone 54 geographic co-ordinate system. Correction of discrepancies between digitised hole collar positions and the hard copy source data from which they were derived. Additional drilling data was sourced to assist in interpreting the lateral extent of the mineralisation. Negative phosphate percentages were corrected according to the logs. Data length units in the assay table were corrected from feet to metres. Discrepancies resolved between total depth from collar table and final ‘TO’ intervals of the assay and lithology tables. Differences between drillhole collar and topography (of up to 4 m) were resolved by adjusting hole positions to coincide with the provided topography.
Specific gravity measurements were not provided. Xstract has assumed a dry bulk density factor of 1.60 t/m3 for the estimation of tonnages from modelled volumes.
Geological interpretation and modelling
Using the data supplied, Xstract correlated data between drillholes using geology logs, gamma logs, 3D visualisation and grade profiles. Xstract used this correlation to model the mineralisation at two ranges of selectivity. The first, ‘Lower End Estimate’, interpreted at
around 10% P2O5 lower cut-off includes some lower grade areas internal to the mineralisation envelopes to ensure geometrical continuity. Results were reported within an area where the mineralisation is continuous between holes, greater than 1 m thick and can be reasonably expected to be mined.
In response to notification from Fertoz that a mill study is working to a 15% P2O5 feed grade, Xstract created a second, ‘Selective Estimate’, which adopted an approach that assumes only the higher grade sections of the horizons can be identified, are continuous between drillholes and can be mined with precision. A minimum thickness down to one sample (0.3 m) was modelled, internal dilution minimised or eliminated, but 3-dimensional integrity and continuity between the three identified phosphate horizons was retained. Tonnages reported include isolated areas of higher grade mineralisation that may not be practical to mine.
Based on these interpretations there are at least three phosphate horizons defined from the drillhole data set, named (from top to bottom):
P1: average thickness is 1.4 m, ranges from 0.3 m to 2.3 m. The 23 samples of the P1
horizon average 8.3% and range 0.7% to 18.2% P2O5. Notably only 21% of data is
above 10% P2O5, indicating this is not a particularly high-grade horizon. P2: average thickness is 1.57 m, ranges from 0.76 m to 6.9 m. The P2 horizon has a broader spread of grades, between 0.1% and 30.1% P2O5 and a higher mean of all
three horizons overall at 12.5% P2O5. P3: average thickness is 1.52 m, ranges from 0.76 m to 3.8 m. Approximately half the
data of the P3 horizon is over 10% P2O5 with a range from 0.8% and 20.4% P2O5 and
a mean of 9.4% P2O5. P3 is positioned directly below P2 and in some areas is may be of sufficient grade to be combined for mining.
Estimation
There is too little data in each horizon to warrant spatial analysis, particularly as data will be composited to the thickness of the horizon intersection for estimation, making a maximum of 15 data points available for analysis. A seam modelling approach was selected to model the Sherrin North deposit with the geological model constructed using a two dimensional grid (100 m by 100 m) to model thickness, roofs, floors and phosphate grades
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at each node. Using a combination of planar and finite element interpolators (power one) with a search radius of 1,500 m, contour maps of thickness, roofs and floors for each phosphate horizon were then generated. This model was then validated, and phosphate grade maps constructed for each phosphate horizon, using inverse distance interpolator power of two and a search radius of 1,500 m.
Table 1 of the JORC Code (2004) was then used as a guide to determining the level of public reporting possible for the Sherrin North mineralisation estimate. At this stage of project development, Xstract considers the mineralisation estimate to be only publicly reportable as an Exploration Target.
On this basis, Xstract considers it reasonable for Fertoz to report an Exploration Target of
between 50 and 60 Mt grading between 12% and 13% P2O5 for the Sherrin North area. Tonnages reduce to around 8 to 28 Mt when reported from both models at an average
grade of around 15% P2O5. The significant range in tonnages reporting from Xstract’s models is indicative of the high degree of risk relating to the assumptions of how continuous the high-grade portions of the horizons are and how selectively the deposit can be mined.
Importantly, Xstract notes that this target remains conceptual in nature and that future studies are required in order to report a JORC Code compliant Mineral Resource. Furthermore, there is currently no guarantee that such studies will result in the determination of a Mineral Resource.
Reconciliation with previous phosphate estimates
Xstract carried out an analysis to understand how the previous estimate was derived and its likely supporting assumptions. The key finding from this comparison was that the tonnages of the August 1988 estimate could not be reproduced for the same average grade, if any degree of geological interpretation between holes is introduced into the approach.
Xstract therefore considers the 1988 estimate is likely to be overly optimistic.
5.2.4 Exploration potential
Extensive wide-spaced drilling has been carried out historically within Fertoz’s current application area as part of previous studies investigating the Sherrin Creek phosphate deposit. Modest tonnages were reported at this time within Fertoz’s tenement area and provide the basis for the Company’s current Exploration Target at Sherrin North.
Fertoz’s primary objective at Sherrin North is to attract a joint venture partner, preferably one with exposure to nearby phosphate resources, to assist in the ongoing assessment of the Sherrin North phosphorites. Fertoz plans to undertake further geological mapping and sampling combined with additional drilling to verify the historic results and further delineate the deposit. Contingent upon the results of this initial assessment phase, follow- up drilling will be conducted to delineate a JORC Code compliant Mineral Resource.
Xstract is of the opinion that the project is of merit and worthy of exploration to the extent being proposed by Fertoz. However, Xstract cautions that only modest tonnages are likely to be defined within Fertoz’s Sherrin North project area, with eventual development potentially contingent upon other third-party owned projects in the surrounding area (such as Legend’s Paradise South or Incitec Pivot’s Phosphate Hill projects).
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5.3 Northern Territory Projects
5.3.1 Barrow Creek
Fertoz’s Barrow Creek Project lies approximately 220 km south of Tennant Creek and consists of a single granted exploration licence covering 744 km2 s shown in Figure 5.7.
Importantly, CEN is currently earning an initial 10% interest in EL26915 through exploration expenditure totalling AUD100,000 in the first year. For further details of the Barra Joint Venture with CEN refer to Section 5.1.2.
Figure 5.7: Barrow Creek Project
Compiled by J A J McKibben from Northern Territory Geological Survey Tenement Information System , March 2013
The Stuart Highway runs northeast-southwest through the Barrow Creek area, passing through the Barrow Creek township. The unsealed Sandover and Plenty Highways provide access to the southern extents of the project area. Unsealed roads connect all homesteads and Aboriginal communities to the Sandover and Stuart Highways. Access is also provided by pastoral tracks, fence lines and tracks along the Amadeus-Darwin gas pipeline and the Darwin-Adelaide rail link.
Despite its remote nature, the Barrow Creek Project is well supported by its relative proximity to the Stuart Highway, the Amadeus-Darwin gas pipeline and the Darwin- Adelaide rail link.
There are permanent settlements at Barrow Creek, Murray Downs, Neutral Junction and Stirling homesteads, and the Aboriginal communities of Ali Curung, Tara and Wilora.
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The Barrow Creek area is characterised by sandy and alluvial plains with an average height of about 450 mASL, which pass into hilly country and low ranges with a maximum relief rarely exceeding more than 200 m above the surrounding plain. The most important of these include the Davenport, Crawford, Osborne and Dulcie Ranges.
There are a number of airfields in the region including Tennant Creek Airport, Ali Curung, Singleton, McLaren Creek and Kurundi homestead and at the Wauchope Hotel. Charter flights can be organised from Darwin or Alice Springs to Tennant Creek. Outback Airlines currently service Tennant Creek, providing mining charters between Alice Springs and Tennant Creek with seats available to the general public.
Tennant Creek has daily coach bus service from Darwin, Alice Springs, and Queensland.
Sand plains are covered by thick grasses, particularly spinifex (Triodia), and sparse low shrubs and trees such as mallee, bloodwood, desert currajong, and witcherty bush.
Major watercourses are lined by eucalyptus, Grevillea and various low trees and shrubs. Ridges support sparse shrubs, low trees and abundant spinifex. Stands of mulga and mallee occur in some areas.
Should a discovery be made all services will need to be imported to the site. Water in particular is scarce in the region.
History
Various tenements have previously covered the area currently held by Fertoz, however assessment of the previous work completed in the area has shown that it was largely aimed at rocks of Proterozoic age and very little, if any, targeted Cambrian age rocks (i.e. those interpreted to be more prospective for phosphorite development).
The area covered by EL26915 was previously explored for diamonds and base metals and has little outcrop exposure. Located approximately 90 km to the east of EL26915 is water bore RN123015, which intersected several enriched zones grading between 2% and 17%
P2O5 at downhole depths of between 30 and 72 m.
Local geology
EL26915 lies on the southern flank of the Tennant Creek Inlier where it is overlain by the Palaeozoic Georgina Basin Sequence. The basin margin areas of the Georgina and Wiso Basins are seen as areas highly prospective for the development of phosphate.
The oldest rocks exposed in the EL area are the Coulters Sandstone Member of the Wauchope Subgroup of the Hatches Creek Group. The Coulters Sandstone is described by the Northern Territory Geological Survey (“NTGS”) as “a quartz arenite, subordinate feldspathic, lithic, kaolinitic arenite and siltstone”.
The outcropping Georgina Basin Sequence within the licence area is represented by the Middle to late Cambrian Chabalowe Formation. The NTGS describes the unit as: “thinly bedded quartz arenite and dolomite. Dolostone and siltstone, stromatolitic in places. The surface exposures are most commonly ferruginous sandstones and cherty rubble”.
Underlying the Chabalowe Formation but covered by transported sands and soils is the Arthur Creek Formation which is our target lithology. This Formation does not outcrop in the licence area but immediately to the east hosts the Barrow Creek 1 and Arganara phosphate deposits of Rum Jungle and CEN, respectively.
Drilling by Rum Jungle at the Ammaroo project since 2009 has encountered several thick zones of moderate grade phosphorite. In January 2013, Rum Jungle announced an updated (Measured, Indicated and Inferred) resource estimate for its Barrow Creek 1 deposit
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(contained within its Ammaroo project) of 238 Mt grading 14.6% P2O5 at a 10% P2O5 cut-
off (Rum Jungle ASX announcement 21 January 2013). At a 15% P2O5 cut-off, Rum Jungle’s total resource (Measured, Indicated and Inferred) at Barrow Creek 1 is 93 Mt at an average
grade of 18.2% P2O5.
In August 2012, NuPower (now CEN) announced a maiden Inferred Resource of 310 Mt
grading 15% P2O5 at a 10% P2O5 cut-off (Nupower ASX announcement 15 August 2012) at
Arganara. At a 15% P2O5 cut-off, CEN’s Inferred Resource at Arganara is 120 Mt at an
average grade of 18% P2O5.
These results demonstrate the presence of high grade, phosphorous-bearing material at shallow depths in the surrounding area to Fertoz’s Barrow Creek project.
Exploration potential
From Xstract’s assessment of the exploration data, it is evident that the Barrow Creek Project contains sizeable areas, which remain to be adequately assessed. Xstract agrees with Fertoz that the project area is prospective for sedimentary-hosted phosphate deposits, as demonstrated by the widespread presence of known phosphate occurrences and mineralised drillhole intercepts from the surrounding region. Certainly, the entry of CEN into an earn-in joint venture with Fertoz over EL26915 provides further support of the perceived prospectivity of the project. EL26915 lies immediately along strike of CEN’s Araganara and Rum Jungle’s Barrow Creek 1 resource projects.
At Barrow Creek, Fertoz and CEN (the Barra JV) are proposing road spaced, shallow reverse circulation drilling aimed at defining phosphate mineralisation followed by closer spaced, infill drilling to enable estimation of mineral resources for any potential mineralisation discovered. Specifically, this is likely to comprise:
Several drill lines comprising approximately 45 holes in the eastern part of EL26915. This area lies adjacent to Rum Jungle’s Barrow Creek 1 phosphate prospect, which recently returned positive results. Undertake further regional exploration to identify new targets, including additional geological, structural, regolith and geomorphological mapping.
As such, Xstract considers that the Barrow Creek project is worthy of further exploration to the extent being proposed by the Barra JV partners (Fertoz and CEN).
5.3.2 Barkly
Fertoz’s Barkly Project lies some 220 km east (as a straight line or 290 km by road) of Tennant Creek within a remote and sparsely populated area of the Northern Territory. The project is approximately equidistant between Tennant Creek and Mount Isa in Queensland.
The project comprises three granted exploration licences, which occur in two separate areas as shown in Figure 5.8.
The project tenements are accessible from the sealed Barkly Highway, which connects Tennant Creek to Mount Isa in Queensland approximately 360 km to the east. Station roads provide access from the Barkly Highway.
Tennant Creek is the major service centre for the region and hosts a range of social, commercial and professional services. Tennant Creek is generally well equipped with essential and non-essential services including a hospital, emergency services (police, fire, ambulance, Royal Flying Doctor Service), child care centre and education facilities for pre- school through to secondary and vocational education and training.
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Figure 5.8: Location of the Barkly Project tenements
Compiled by J A J McKibben from Northern Territory Geological Survey Tenement Information System, May 2013
The nearest airfield is 20 km to the west at the Barkly Roadhouse, which lies at the junction of the Barkly and Tablelands Highways. Fuel, accommodation and limited provisions are available at this roadhouse.
Rail access is available from the Darwin to Adelaide railway, located approximately 280 km to the west near Tennant Creek. Alternatively, the next closest rail-line is the Mount Isa to Townsville railway, which is located approximately 400 km to the east of the project area.
The project is generally flat, mostly cleared grazing pasture, dissected with a solid network of station tracks and unsealed gravel roads. However, the southernmost tenement, EL27076 suffers from limited access due to the lack of developed roads.
Watercourses that drain the area are ephemeral and only flow after major rains to several large shallow lakes, very few of which are permanent.
Numerous permanent, semi-permanent and seasonal waterholes occur along the main watercourses. There is no major water storage, diversion or supply infrastructure within the area.
Vegetation throughout the area is characterised by grasses, scattered trees and shrubs, including acacias, eucalyptus and grevilleas. Acacia, Grevilliea and Hasitidia and Spinifex grasses occur on sandy plains, with Acacia, Eucalyptus, Hakea and Melaleuca over spinifex in the open woodlands and Acacia, Eucalyptus over spinifex grasses in rocky rises. River red gums line the larger watercourses, especially around waterholes.
Fertoz’s Barkly Project lies immediately northwest of Minemaker’s Wonarah phosphate project. Wonarah is the largest rock phosphate deposit in Australia. At Wonarah,
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Minemakers completed an Enabling Study in November 2011 and a Definitive Feasibility Study has not been commissioned as yet. Minemaker’s Enabling Study contemplates two
options to produce 1 Mtpa of contained P2O5: 1.4 Mtp of 70% P2O5 superphosphoric acid (“SPA”) or 2 Mtpa of Diammonium phosphate/Monoammonium phosphate (“DAP/MAP”) (UCL Takeover Bid – Independent Expert Report, 2012). Minemakers is currently investigating the feasibility of a rail link and gas pipeline to connect the Wonarah project to the Adelaide-Darwin railway and the Amadeus-Darwin pipeline respectively.
Other known phosphate deposits occurring in close proximity to Fertoz’s Barkly tenements are shown in Figure 5.8 and include:
the Arruwarra deposit is reported by Minemakers to contain an Indicated and Inferred
Resource of 130.6 Mt grading 17% P2O5 (Minemaker’s ASX announcement 5 October 2012) and lying south of Fertoz’s EL26055 Phosphate Australia Limited’s Alroy, Buchanan Dam and Alexandria deposits Phosphate Australia Limited’s Highland Plains deposit on the Queensland/Northern Territory boarder.
The main commercial land uses evident within the area include cattle grazing and mineral exploration.
Other considerations for any potential future mine development include the movement of mined material by road transport to major mining centres such as Mount Isa in Queensland or Tennant Creek and the potential use of slurry pipes to deliver product for export by the Gulf of Carpentaria.
Power generation will also be a major consideration in any future mine development plans.
Local geology
Fertoz’s Barkly tenements lie within and along the western margin of the Georgina Basin. In the Barkly Tablelands region, the Georgina Basin is divided into the Brunette Sub-basin to the northwest and the Undilla and Oban Sub-basins to the east and southeast. Phosphatic sedimentary units and phosphorites are typically distributed along basement highs in association with the Wonarah Beds to the south and correlative Burton Beds to the north.
During a site visit, Xstract confirmed that the central tenements, ELs 26054 and 26055 cover the Alexandria-Wonarah Basement High, which separates the Undilla Sub-basin in the east from the Barkly Sub-basin to the west. The presence of this basement high is extremely important, as it represents a basinal edge where the prospective Wonarah Formation outcrops. The Wonarah Formation is part of the Middle Cambrian Barkly Group and hosts the Wonarah phosphate deposit.
NTGS drillholes, AY06DD01 and NTGS00/1 occur in proximity to these ELs and indicate that the prospective Wonarah Formation is present in substantial thicknesses throughout the area. In the project tenements, carbonate and siliciclastic sediments of the Wonarah Formation overlie the carbonates of the Gum Ridge Formation, which in turn overlies the mafic Helen Springs Volcanics.
A number of known phosphate deposits surround ELs 26054 and 26055, including the Alroy and Alexandria deposits to the north and the Wonarah and Arruwurra deposits to the south. The Wonarah phosphate deposit extends northwards and may underlie ELs 26054 and 26055. The southern project boundary will thus provide an immediate target for initial exploration activities.
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EL27076 is located some 24 to 40 km south of the Arruwurra and Wonarah phosphate deposits respectively. The EL covers the Alexandria-Wonarah basement high. Prospective lithologies include limestone units of the basal Wonarah Formation.
History
Fertoz’s current ELs 26054 and 26055 were previously assessed as part of a regional phosphate targeting exercise. In 1968, IMC Development Corporation used widely spaced drilling to define the Wonarah phosphorite deposit, to the south of the current tenements. Several holes were drilled along widely-spaced lines within ELs 26054 and 26055 where numerous, highly anomalous phosphate intersections were reportedly returned. Significant
results (i.e. >2% P2O5) from within Fertoz’s tenements are summarised in Table 5.6.
In 1979, ICI Australia (“ICI”) undertook drilling in the area and concentrated their efforts
near drillhole W122 (16.8 m grading 15.2% P2O5 from 44.2 m lying south and outside of Fertoz’s current tenements). This drilling program intersected phosphate in all the four holes completed. The assay results from samples collected by ICI varied from between one
and seven metres at about 15% P2O5.
Table 5.6: Summary of historical drilling assay results within the Barkly Project tenements
Hole number Down hole depth (m) Width (m) Grade (% P2O5)
W6 20 0.8 3.0
W7 9 2.0 2.8
W32 45 3.0 2.2
W34 30 12.5 4.4
W139 15 25.0 4.1
W83 30 16.0 5.1
W17 22 5.8 4.8
W18 32 23.0 3.9
W76 26 5.0 6.5
W125 38 2.5 2.2
W74 42 2.0 7.0
A60 48 12.5 9.2
The location of the drillhole collars within Fertoz’s current tenements is shown below in Figure 5.9.
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Figure 5.9: Barkly Project – historic drillhole collar positions
Source: Lindsay-Park (2009) N.B. Map shows Barkly tenements prior to reduction on 4 August 2012
In 2012, Fertoz engaged Terra Search Pty Ltd (Terra Search) to undertake an evaluation of the phosphate potential of its Barkly tenements. Terra Search’s work program comprised:
Review of water bore data and chemical analysis of relevant drill chips Incorporate water bore geological and chemical data into a review of the stratigraphy of Fertoz’s Barkly tenements and production of cross sections over the area, particularly identifying phosphatic horizons Assessment, reprocessing and reimaging the Barkly geophysical data (aeromagnetics, radiometrics and gravity) to determine whether phosphate enriched areas present recognisable geophysical signatures Generation of drill targets using the new data sets. Design of drill program to rapidly target phosphate mineralisation.
This review highlighted several domains in which water bores recorded values exceeding
5% P2O5 and in some cases more than 10% P2O5. These domains have a spatial associated with basement highs and are largely restricted to fine-grained siltstone/mudstone units. Integration of the geophysical imagery with the geological information and phosphate assay data from previous drilling outlined three high priority areas and two lower ranked areas for follow up exploration (Figure 5.10).
Area 1 is within the central portions of EL26055 where several higher grade (5 to 10%
P2O5) are coincident with several magnetic high ridges and located immediately north of Minemaker’s Wonarah deposit.
Area 2 lies in EL26054 and to the west of Minemaker’s Wonarah deposit. There is no previous drilling within this area despite the presence of magnetic ridges and a mottled magnetic pattern.
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Area 3 lies in the outlying portion of EL26055 and also to the west of Minemaker’s Wonarah deposit. As with Area 2 there is no previous drilling in the area despite an interesting geophysical signature.
Area 4 is a prominent magnetic ridge located to the northwest of Area 1.
Area 5 is adjacent to IMC’s drillhole W74, which reportedly encountered modest phosphate grades and a subdued magnetic pattern. More drilling is required in this area to evaluate the significance of previous drill results.
Based on these targets, Terra Search has proposed an 85 hole (5,000 m) Reverse Circulation drilling program for Year 1 as shown in Figure 5.10.
Figure 5.10: Key target areas in Barkly Project
Source: Terra Search
Exploration potential
Reconnaissance exploration work has been completed on a selective wide-spaced basis over several parts of the Barkly Project area. Regional magnetic and radiometric geophysical data indicates Fertoz’s licences lie immediately along strike to the north of Minemaker’s Wonarah project, which is currently undergoing feasibility studies. Furthermore, previous drilling within the licence area has encountered numerous anomalous results as shown in Table 5.6.
Fertoz’s future assessment of the Barkly project area is subject to finding a suitable joint venture partner.
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5.3.3 Katherine
Fertoz’s Katherine project comprises three contiguous exploration licences covering a combined area of 906 km2 and located some 20 km south of the regional centre of Katherine (Figure 5.11).
The project is supported by its proximity to the Stuart Highway, whilst the Dry River Stock Route from Katherine to Top Springs in the Victoria River district traverses the western part of the project area. The North Australian Railway from Darwin to Alice Springs and the Amadeus-Darwin gas pipeline parallels the Stuart Highway.
Katherine airport lies 7 km south of the town centre. No commercial flights are available, however charter flights can be arranged.
Other important settlements in proximity to the project include the townships of Mataranka and Larrimah.
Flat to gently undulating terrain of the Stuart Plateau and Barkly Tablelands dominates the topography of the region. The Stuart Plateau is deeply weathered and covered by thick laterite and associated soils achieving an elevation ranging from 170 to 250 mASL. North to northeast flowing tributaries to the Daly River System have variably incised the Stuart Plateau forming a karst landscape of ancient limestone gorges, rocky escarpments, outcrops and subterranean caves in the Katherine area.
The Barkly Tablelands lies between 230 and 270 mASL, is gently undulating and comprises an extensive laterite sheet. Creeks in the Tablelands are widely spaced, meandering, typically poorly defined and discontinuous, for surface run-off pays an insignificant part in the drainage system.
The vegetation of the area is predominantly tropical savannah woodland, comprising grasslands with lesser open eucalypt forest and isolated pockets of monsoon rainforest and vine thickets.
The Tindal Limestone is known to host significant phosphorite contents particularly in the Daly River Basin further to the west of the Company’s licences. Further exploration of the company’s Katherine project is required to assess its phosphate potential.
Other tenement holders immediately adjacent to Fertoz’s Katherine project include granted tenements held by Century Hill Pty Ltd (EL26900), Imperial Granite & Minerals Pty ltd (EL28026) and Crossland Mines Pty Ltd (EL27525), in addition Copper Range (SA) Pty Ltd holds an EL application. No material information is available regarding these properties.
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Figure 5.11: Katherine Project To Katherine
Compiled by J A J McKibben from Northern Territory Geological Survey Tenement Information System, April 2013
Local geology
Fertoz’s Katherine tenements are located in the southwest of the Daly Basin, a Cambro- Ordivician sedimentary basin resting unconformably on Lower Proterozoic basement. Table 5.8 describes the key rock units of the Katherine project.
Units of the Cambrian-aged Tindal Limestone and Jinduckin Formations, and the overlying Cretaceous Mullaman Beds dominate the southern and eastern parts of the project area. These units are covered by skeletal and laterised Tertiary soils.
The Tindal Limestone is a massive grey crystalline limestone, containing minor chert and banded limestone containing fossiliferous intervals. The Tindal Limestone forms the basal unit of the Daly Basin and is the target unit for phosphate mineralisation. The Tindal
Limestone in the Daly Basin is slightly phosphatic (generally less than 1% P2O5) but may
contain up to 2% P2O5.
The Jinduckin Formation consists of maroon-green dolomitic-siliciclastic siltstone containing dolomitic sandstone-siltstone interbeds, dolostone and dolomitic quartz sandstone, probably representing a peritidal depositional environment.
The Cretaceous Mullamen Beds consists of siltstone, sandstone and conglomerate and represent shallow marine fluvial and terrestrial conditions.
The Elsey Lime quarry exploits the Tindal Limestone to the east of EL26995. In this locality, the limestone is exceptionally pure indicating a different sedimentation cycle than for the rest of the Daly River Basin. The potential for commercial viable quantities of limestone will also provide Fertoz with a secondary target.
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Table 5.7: Description of Katherine Project geology
Type Description
Cainozoic
Alluvium Sands, silts and clays that occur in drainage channels
Unconsolidated Sands Sands and silts occurring in major river channels
Colluvium Sheet wash deposits in the head waters of drainage systems
Tertiary-Quaternary
Regolith Skeletal soils developed in non-active erosion and drainage areas
Late rite Remnant laterised cretaceous sediments
Mesozoic
Cretaceous, Mullamen beds Sandy claystone, siltstone, sandstone covers large areas of EL26995, forms an upland with incised windows caused by the King River in this area.
Regional Unconformity
Cambrian – Ordovician, Daly River Group
Oolloo Dolostone Ooid and stromatolitic dolostone, dolomitic sandstone
Jinduckin Formation Dolomitic-siliciclastic siltstone, dolostone, dolomitic quartz sandstone
Tindal Limestone Bioclastic, onkoid and stromatolitic limestone, minor mudstone, basal maroon siltstone
Antrim Plateau Volcanics Massive basalt valley fill flows which pinch out against basement highs
Katherine River Group
Komblogie Formation Medium to coarse grained arenites containing rare interbeds of siltstone and the two Volcanic Members below McAddens Creek Volcanic Member Chloritised andesite and basalt, minor tuff
Henwood Creek Volcanic Amygdaloidal andesite and basalt. Member
History
The area has a long history of limestone mining, chiefly within the Tindal Limestone in areas to the southwest of Katherine. The key deposit in the area is Adelaide Brighton Limited’s Mataranka limestone quarry, which produces quicklime for the domestic market.
The major mining activity in proximity to the Katherine Project is the Mataranka lime mine located on Elsey Station. The mine is owned by Northern Cement Limited and has been operational since 1991. Limestone is mined and processed at the nearby plant to produce quicklime, which is sold within the Northern Territory.
Fertoz’s Katherine Project area has previously been assessed for base metals, bauxite and diamonds, with limited investigation of the phosphate and quicklime potential. Previous exploration focused on the basement sequences (Proterozoic-aged rocks) with the phosphorite-prospective Cambrian units largely ignored. The Tindal Limestone sub-crops throughout the area are considered prospective for deposits of phosphate, quicklime and barite. In summary, the work conducted over the current project area includes:
Between 1967 and 1968, the Continental Oil Company of Australia’s Plant Foods Exploration Division conducted phosphate exploration over the current licence area. Exploration concluded that the Tindal Limestone was the most likely host for a
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phosphate deposit with known accumulations of up to 2% P2O5. However, the area being investigated was not, in their opinion, conducive to the formation of such a deposit. Northern Cement also conducted exploration in the West Matheson area (current EL26997) in the 1970s for a pure limestone source associated with the Tindal Limestone for the production of quicklime. In 1971, Euralba Mining located a barite deposit in the West Matheson area that is still under tenure today. The Mathison Creek Limestone was assessed for phosphate in the late 1980s, but was considered to have a high magnesium, low calcium and phosphate (<0.01%) content. Normandy Exploration conducted a search for base metals in the area around EL26995 from 1995 to 1996 based around the Middle Velkerri black shale of the Roper Group and the Mallapunyah Fault. No exploration activities were reported within the current licence areas. Exploration during the 1980s and early 2000s focussed on diamonds, with the area investigated by CRA Exploration (1980), BHP (1983 to 1986), Stockdale Prospecting (1983 to 1999) and De Beers Exploration (2002 to 2003). No significant diamond indicator minerals were reported.
Exploration potential
The area surrounding Fertoz’s Katherine Project has a long history of limestone mining, with the operating Mataranka quicklime quarry located nearby and to the east of the project. However, there has been a paucity of phosphate-focussed exploration within the current tenement area, despite the presence of the prospective Tindal Limestone. Elsewhere within the Daly River Basin, reported occurrences and bore hole intercepts
encountered phosphate (>2% P2O5) within the Tindal Limestone. In many areas, the Tindal Limestone is buried beneath alluvial and aeolian sediments of variable thickness.
Terra Search coordinated the collection and analysis of cuttings from twenty nine (29) water bores, located within or adjacent to Fertoz’s Katherine tenements. Terra Search determined the lithology of each of the water bore sample intervals which were brought back to Townsville for XRF analysis. Lithologies were then checked against the published log and the drillers log corrected if necessary. A simplified stratigraphy was produced for the water bores and adjacent previous exploration and stratigraphic holes.
These lithostratigraphic logs were used to construct a geographical display of down hole graphic logs across the Katherine tenements (Figure 5.11). Terra Search then reviewed the available assay results and highlighted any holes which returned appreciable phosphate. Only five of the twenty-nine water bores analysed using the XRF returned intercepts higher than 0.1% P. Results of historical drilling including locations and assays compiled by Terra Search from the Katherine area have been processed using Explorer 3 format. Selected phosphate results are shown in Table 5.8
Terra Search reviewed the previous surface geochemical assay results in the Katherine tenements and found limited anomalous phosphate related specifically to outcropping Tindal Limestone. The majority of water bore RN31391 which lies south of the tenement border of EL26997 returned greater than 0.2% P2O5. The log contains dominantly weakly calcareous siltstone and mudstones through to 97.1m where a change to dominantly limestone with thin inter-beds of mudstone continues to 243.8m. An interpretive contact between the Jinduckin Formation and Tindal Limestone takes place at 97.1m. A band of strong radiometrics surrounding RN31391 continues to the northeast into EL26995. This produces a low priority phosphate target in the southwest of EL26995. Anomalous rock chip results to the south east of this area over the outcropping Tindal Limestone also gives confidence to this part of the tenement.
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Table 5.8: Anomalous XRF Results from EL27008 Water Bore Chip Analysis
Hole Tenement From (m) To (m) Interval Geological P (ppm) P2O5 (%) (m) unit
RN5012 EL27008 3.05 7.62 4.57 Clay 2,527 0.58
RN7710 EL26995 9.14 12.19 3.05 Clay 5,335 1.22
RN7710 EL26995 18.28 57.91 39.63 Calcerous 2,261 0.511 Clay
RN31391 South of 0.92 18.22 17.30 Sand and 1,591 0.361 EL26997 siltstone 1 Results Averaged
The proposed drill program will target the contact of the Jinduckin Formation and the Tindal Limestone with the intention of intersecting phosphate at an economically prospective depth.
In total, 20 drillholes at a nominal target depth of 50 m for a total of 1,000 m is proposed over the Katherine tenement group. Ten drillholes have been labelled as priority drillholes, and located on existing track work. A further ten drillholes are proposed as infill drillholes. Not all proposed drillholes are on current access tracks so field inspection will be necessary prior to finalising the drilling program to adequately determine the logistical capability of proposed infill drillholes.
Flexibility in the exact number and depth of holes remains contingent to the depth required to reach the target stratigraphy in the initial few drillholes. Fertoz is seeking a joint venture partner to progress the project.
Xstract supports the staged exploration program proposed by Fertoz as it provide a first pass indication of the phosphate potential of the project. 6 Exploration budget
Fertoz has proposed a staged program of exploration and development for its Canadian and Australian projects over a two-year period following listing on the ASX. Fertoz’s principal strategy is to identify and commercialised direct ship ore (“DSO”) phosphate projects to generate early cash flows, to fund the exploration of other longer-term assets. Currently the Company’s priority is towards its Canadian projects where previous studies have outlined near surface phosphate occurrences in proximity to established mining and transportation infrastructure. Fertoz will also seek strategic partners for its current Australian exploration assets.
Fertoz’s estimated budget is outlined in Table 6.1. The exploration program currently planned by Fertoz totals AUD1.15 M in Year 1 and AUD1.05 M in Year 2 following their equity raising.
In Xstract’s opinion, Fertoz’s proposed expenditures are appropriate in the context of the available working capital currently held by the company. It should be possible to evaluate the resource potential of its key project area at Wapiti in the two-year period. Furthermore, the budget proposed should permit a meaningful assessment of the potential and limited drilling of the key targets identified within its other projects at Barnes Lake, Crows Nest, Sherrin North, Barkly, Barrow Creek (to be funded by CEN under the joint venture), and Katherine. Xstract cautions, however, that the proposed exploration programs may change in Year 2 from that currently stated and will be dependent on the results from the Year 1 program.
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Table 6.1: Fertoz’s proposed two-year exploration expenditures
Project Activity Year 1 Year 2 Total (AUD) (AUD) (AUD)
Wapiti Drilling, resource estimation, mining 850,000 500,000 1,350,000 East studies
Wapiti Validation sampling/mapping, drilling 50,000 200,000 250,000 West
Barnes Validation sampling/mapping, drilling 50,000 100,000 150,000 Lake
Crows Validation sampling/mapping, drilling 50,000 100,000 150,000 Nest
Australia Analysis, studies 150,000 150,000 300,000
Sub-total 1,150,000 1,050,000 2,200,000
Should the maximum subscription of AUD4 M be achieved, then Fertoz will increase its exploration budget to AUD3.05 M, with further funding allocated to target generation and follow-up activities such as drilling across Fertoz’s Canadian projects. In this circumstance, the proposed exploration budget will amount to AUD1.3 M in Year 1 and AUD1.75 M in Year 2.
Table 6.2: Fertoz’s budget under targeted and minimum subscription levels
Minimum Subscription Targeted subscriptions
Project Year 1 Year 2 Total (AUD) Year 1 Year 2 Total (AUD) (AUD) (AUD) (AUD) (AUD)
Wapiti East 850,000 500,000 1,350,000 850,000 850,000 1,700,000
Wapiti 50,000 200,000 250,000 100,000 450,000 550,000 West
Barnes 50,000 100,000 150,000 100,000 150,000 250,000 Lake
Crows Nest 50,000 100,000 150,000 100,000 150,000 250,000
Australia 150,000 150,000 300,000 150,000 150,000 300,000
1,150,000 1,050,000 2,200,000 1,250,000 1,750,000 3,050,000
7 Conclusions
Canadian Projects
Xstract considers Fertoz’s Wapiti Project to represent an advanced exploration project capable of being rapidly advanced should ongoing exploration support the reporting of a JORC Code compliant Mineral Resource. Fertoz’s Barnes Lake and Crows Nest projects are at an earlier stage of assesement, however, previous studies within and in the surrounding areas to the projects support the presence of easily accessible and laterally continuous phosphate horizons at potentially mineable depths. Fertoz’s exploration efforts are supported by the relative proximity of its projects to established mine and transport infrastructure associated with the coal mines and coal exploration projects in the immediately vicinity of Fertoz’s Canadian projects.
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In Xstract’s opinion, Fertoz has a well-defined exploration strategy, the exploration budget appears reasonable and the proposed exploration program is appropriate for the targets being considered.
7.1 Australian Projects
After completing its review of all of the available data pertaining to Fertoz’s projects, Xstract considers the Sherrin North Project offers the best potential for the rapid delineation of a JORC Code compliant Mineral Resource. However, Sherrin North is likely to be of limited tonnage and may be unable to support a standalone mining and processing operation. As such, development of the Sherrin North deposit is likely to be contingent upon the activities of other companies in the eastern Georgina Basin, in particular, Fertoz’s immediate neighbour to the south, Legend Holdings International (holder of the Sherrin Creek deposit). Legend is currently seeking a strategic partner to assist in the development of its Paradise North and South (D-Tree) projects. Future project development is also likely to be contingent on the development of a viable process to treat lower grade (15%
P2O5) phosphate.
The Barrow Creek project is the most prospective of the Company’s Northern Territory projects for the discovery of phosphate. In addition to its geological attractiveness, the Barrow Creek Project presents an ideal exploration play due to its proximity to the Sandover Highway and Rum Jungle’s Barrow Creek and CEN’s Arganara phosphate projects.
Fertoz’s Barkly project is also considered attractive given its interpreted position along a northern extension to the Wonarah deposit, its accessibility to the Barkley Highway and its proximity to the proposed infrastructure associated with Minemaker’s Wonarah phosphate project.
The Katherine project also has potential to host phosphorite, despite little or no recorded phosphate occurrences. While suitable host rocks are known to occur within or in proximity to these project areas, these regions have suffered from a lack of previous systematic, phosphate-directed exploration. The implementation of a fertiliser-focused exploration strategy and sampling of refined targets should readily elucidate the potential for significant phosphorite development.
In addition to favourable geology, the success of Fertoz is dependent upon the skills of its exploration and management team. In Canada, Fertoz has engaged Mr Joe Shearer to manage the Company’s future exploration projects., Mr Shearer has an extensive knowledge of the Wapiti project area and his teams have previous conducted a number of surveys across the area which appear to be of high quality and in line with current industry practice. 8 Bibliography
This report contains statements attributable to third persons. These statements are made in, or based on, previous geological reports that are publicly available from either government agencies or the ASX. The authors of these previous reports have not consented to the statement’s use in this report and these statements are included in accordance with ASIC Class Order 07/428 – Consent to quote: Citing trading data and geological reports in disclosure documents and Product Disclosure Statements.
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Anderson B (2003), Nil Report for ELs 22997 and 23066, De Beers Australia Exploration, unpublished company report, CR 2003-0423.
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Berryman AK (1997), EL 9625 Annual Report for the Period 11 December 1996 to 10 December 1997 Stockdale Prospecting unpublished company report, CR1998-0070.
Berryman AK (1998), EL 9625 Annual Report for the Period 11 December 1997 to 10 December 1998 Stockdale Prospecting unpublished company report, CR1998-0756.
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BHP, (1984), Final Report on EL 4448, Durrinyah Creek for the period 20/01/84 to 26/06/84, BHP Ltd, unpublished company report, CR1985-0185.
BHP, (1985), Annual Report on EL 4447, January 1984 to January 1985, BHP Ltd, unpublished company report, CR1985-0083.
BHP, (1985), Final Report on EL 3347, August 1984 to April 1985, BHP Ltd, unpublished company report, CR1985-0128.
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8. INVESTIGATING ACCOUNTANT'S REPORT
Tel: +61 7 3237 5999 Level 10, 12 Creek St Fax: +61 7 3221 9227 Brisbane QLD 4000 www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia
The Directors Fertoz Ltd 40 Balgowlah Street WAKERLEY QLD 4154
12 July 2013
Dear Directors
INVESTIGATING ACCOUNTANT'S REPORT 1. Introduction
We have been engaged by Fertoz Ltd (Company) to prepare this investigating accountant’s report on Historical and Pro-forma Financial Information of the Company for inclusion in the prospectus dated on or about 16 July 2013.
The Company is looking to raise capital and list on the Australian Securities Exchange (ASX) via an initial public offering to raise $3 million to $4 million before costs. The Historical and Pro-forma Financial Information included in the prospectus illustrate the financial position of the Company as at 31 March 2013 and provides investors with a Pro-forma Statement of Financial Position as at 31 March 2013 adjusted to include the Pro-forma Transactions outlined in Section 9.3 of the Prospectus. The purpose of this report is to report whether anything has come to our attention which causes us to believe that the Historical and Pro-forma Financial Information are not presented fairly in accordance with the recognition and measurement requirements of Australian Accounting Standards and other pronouncements issued by the Australian Accounting Standards Board, the accounting policies of the Company and the basis of preparation described in Sections 9.1 to 9.5 of the prospectus. This report does not address the rights attaching to the shares to be issued in accordance with the prospectus, the risks associated with the investment, nor forms the basis of an independent expert’s opinion with respect to a valuation of the Company or a valuation of the share issue price. References to the Company and other terminology used in this report have the same meaning as defined in the Glossary of the prospectus in which this report appears.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 8. INVESTIGATING ACCOUNTANTS REPORT 162
2. Historical & Pro-forma Financial Information
We have been requested to prepare a report covering the Historical and Pro-forma Financial Information described below and disclosed in the Company’s prospectus at Sections 9.1 to 9.5:
• the Historical Statement of Financial Position as at 31 March 2013; • the Pro-forma Statements of Financial Position as at 31 March 2013; and • the other notes to the Historical and Pro-forma Financial Information.
Together, the above is referred to as the “Historical and Pro-forma Financial Information”. The Historical and Pro-forma Financial Information presented in the Company’s prospectus has been derived from the audited historical financial information of the Company for the nine months ended 31 March 2013 , adjusted as applicable to reflect the Pro-forma Transactions detailed in Section 9.3 of the prospectus. The financial statements of the Company for the year ended 31 March 2013 were audited by BDO Audit Pty Ltd. The audit opinion issued to the members of the Company relating to these financial statement was unqualified.
The Historical and Pro-forma Financial Information is presented in an abbreviated form insofar as it does not include all of the disclosures required by Australian Accounting Standards applicable to financial reports prepared in accordance with the Corporations Act 2001. 3. Scope
We have reviewed the Historical and Pro-forma Financial Information in order to report whether anything has come to our attention which causes us to believe that the Historical and Pro-forma Financial Information set out in the prospectus, is not presented fairly in accordance with the recognition and measurement requirements of Australian Accounting Standards and other pronouncements issued by the Australian Accounting Standards Board, the accounting policies of the Company and the basis of preparation described in Sections 9.1 to 9.5 of the prospectus. Our review has been conducted in accordance with Australian Auditing Standards on Review Engagements ASRE 2405 ”Review of Historical Financial Information Other than a Financial Report”. We made such enquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances including:
• Review of procedures applied to the Historical and Pro-forma Financial Information; • Review of work papers, accounting records and other documents; • Review of the Pro-forma Transactions described in Section 9.3 of the prospectus; and • Inquiry of Directors, management and others.
These review procedures were substantially less in scope than an audit examination conducted in accordance with Australian Auditing Standards and therefore provide less assurance than an audit .We have not performed an audit and , accordingly, we do not express such an opinion on the Company’s Historical and Pro-forma Financial Information. The review statement expressed in this report has been formed on the above basis.
2 163 LTD REPLACEMENT PROSPECTUS 2013
4. Directors' responsibilities
The directors of the Company are responsible for the preparation and presentation of the Historical and Pro-forma Financial Information, including the determination of the pro-forma Transactions.
The directors' responsibility includes establishing and maintaining internal controls relevant to the preparation of the financial information in the prospectus that is free from material misstatement, whether due to fraud or error. 5. Review Statement on Historical and Pro-forma Financial Information
Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the Historical and Pro-forma Financial Information set out in Sections 9.1 to 9.5 of the prospectus is not presented fairly in accordance with the recognition and measurement requirements of Australian Accounting Standards and other pronouncements issued by the Australian Accounting Standards Board, the accounting policies of the Company and the basis of preparation described in Sections 9.1 to 9.5 of the prospectus. 6. Subsequent Events
Apart from the matters dealt with in this report, and having regard to the scope of our report, to the best of our knowledge and belief no material items, transactions or events outside of the ordinary business of the Company have come to our attention which would require comment on, or adjustment to, the information referred to in our report or that would cause the information to be misleading or deceptive.
7. Independence Disclosure BDO Audit Pty Ltd does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to this matter. BDO Audit Pty Ltd has provided advisory services and will receive normal professional fees for the preparation of this report. The Directors of BDO Audit Pty Ltd do not hold nor have any interest in any Ordinary Shares of the Company or its subsidiaries.
BDO Audit Pty Ltd are the appointed Auditor of the Company for which normal professional fees are received. 8. Consent Consent to the inclusion of the Investigating Accountants Report in the prospectus in the form and context in which it appears has been given. At the date of this report this consent has not been withdrawn. Yours faithfully BDO Audit Pty Ltd
A J Whyte
Director
3 8. INVESTIGATING ACCOUNTANTS REPORT 164 165 LTD REPLACEMENT PROSPECTUS 2013
9. FINANCIAL INFORMATION
9.1 INTRODUCTION This section sets out the historical and pro-forma financial information for Fertoz Ltd. The basis for preparation and presentation of this information is also set out below.
The financial information has been prepared by management and adopted by the Board. The Board is responsible for the inclusion of all financial information in the Prospectus. BDO Audit Pty Ltd has prepared an Investigating Accountant’s Report in respect of the historical and pro-forma financial information. A copy of the report is contained in Section 8.
The historical and pro-forma financial information has been prepared in accordance with the measurement and recognition criteria of Australian Accounting Standards and the significant accounting policies set out in Section 9.5 below. The historical and pro-forma financial information comprises financial information of the Company. The historical and pro-forma financial information is presented in an abbreviated form insofar as it does not include all the disclosures and notes required in an annual financial report prepared in accordance with Australian Accounting Standards and the Corporations Act 2001.
9.2 HISTORICAL FINANCIAL INFORMATION
The historical financial information for Fertoz Ltd set out below comprises:
ɒ The Statement of Financial Position as at 31 March 2013; and ɒ Selected notes to the Statement of Financial Position.
The historical financial information has been extracted from the audited financial statements of Fertoz Ltd for the nine month period ended 31 March 2013. The historical financial information does not include a Statement of Comprehensive Income or a Statement of Cash Flows. The Company is a phosphate exploration company. During the nine months ended 31 March 2013 the Company has not earned any revenue from operations and therefore presentation of the Statement of Comprehensive Income and Statement of Cash Flows is not considered relevant.
9.3 PRO-FORMA FINANCIAL INFORMATION
The pro-forma financial information for Fertoz Ltd set out below comprises:
ɒ The Minimum Subscription Pro-Forma Statement of Financial Position as at 31 March 2013; ɒ The Maximum Subscription Pro-Forma Statement of Financial Position as at 31 March 2013; and ɒ Selected notes to the Pro-Forma Statements of Financial Position.
The Pro-Forma Statements of Financial Position has been derived from the audited Statement of Financial Position as at 31 March 2013 adjusted for the following transactions as if they had occurred at 31 March 2013 (pro-forma transactions):
i. The issue of 15,000,000 ordinary shares (minimum subscription) and 20,000,000 ordinary shares (maximum subscription) at an issue price of $0.20 per share to raise $3,000,000 (minimum subscription) or $4,000,000 (maximum subscription) before expenses of the Offer. All ordinary shares issued pursuant to this Prospectus will be issued as fully paid.
ii. Total cash costs expected to be incurred in connection with the preparation of the Prospectus of approximately $410,000 (minimum subscription) and $480,000 (maximum subscription). The total non- cash costs expected to be incurred in preparation of the Prospectus comprising a share based payment expense of $150,000 for the granting of 4,000,000 options to the Lead Manager and $22,500 options to advisers. The issue of 4,000,000 unlisted options exercisable at $0.25 and expiring 4 years from the date of Listing to the Lead Manager.
iii. The issue of 461,538 unlisted options exercisable at $0.25 and expiring 4 years from the date of Listing to advisers. 9. FINANCIAL INFORMATION 166
iv. The issue of 5,128,205 ordinary shares and an issue price of $0.0975 per share subsequent to 31 March 2013, raising $500,000.
v. The sale of the Winnecke and certain Barkly tenements for $250,000 (subject to certain conditions being satisfied).
vi. The conversion of all the shares in the issued capital of the company into a smaller number on the basis that every 3.25 shares were consolidated into 1 share effective 1 May 2013.
9.4 FERTOZ LTD HISTORICAL AND PRO-FORMA FINANCIAL INFORMATION
The historical and pro-forma information should be read in conjunction with the notes in Section 9.5.
MINIMUM MAXIMUM SUBSCRIPTION SUBSCRIPTION HISTORICAL PRO-FORMA PRO-FORMA FINANCIAL FINANCIAL FINANCIAL INFORMATION INFORMATION INFORMATION STATEMENT OF FINANCIAL POSITION 31 MARCH 2013 31 MARCH 2013 31 MARCH 2013 Notes $ $ $
CURRENT ASSETS Cash and cash equivalents 9.5.3 439,032 3,779,032 4,709,032 Trade and other receivables 60,360 60,360 60,360 Total current assets 499,392 3,839,392 4,769,392
NON-CURRENT ASSETS Property, plant and equipment 1,423 1,423 1,423 Exploration and evaluation assets 9.5.4 1,862,420 1,612,420 1,612,420 Total non-current assets 1,863,843 1,613,843 1,613,843
Total assets 2,363,235 5,453,235 6,383,235
CURRENT LIABILITIES Trade and other payables 107,456 107,456 107,456 Total current liabilities 107,456 107,456 107,456
Total liabilities 107,456 107,456 107,456
Net assets 2,255,779 5,345,779 6,275,779
EQUITY Issued capital 9.5.5 4,449,742 7,515,701 8,445,701 Share-based payment reserve 9.5.7 817,000 989,500 989,500 Accumulated losses 9.5.6 (3,010,963) (3,159,422) (3,159,422) Total equity 2,255,779 5,345,779 6,275,779 167 LTD REPLACEMENT PROSPECTUS 2013
9.5 NOTES TO AND FORMING PART OF THE FINANCIAL INFORMATION The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial information. The accounting policies have been consistently applied unless otherwise stated.
9.5.1. Basis of Preparation
Going Concern The financial information has been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. The Company has not generated revenues from operations. As such, the Company’s ability to continue to adopt the going concern assumption will depend upon a number of matters including the successful closure of its initial public offering, its subsequent successful raising in the future of necessary funding and the successful exploration and subsequent exploitation of the Company’s tenements.
Reporting Basis and Conventions
The financial information has been prepared on an accruals basis and is based on historical costs.
9.5.2. Accounting Policies a. Income Tax The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. The charge for current income tax expense is calculated using the tax rates that have been enacted or are substantially enacted by the reporting date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates expected to apply to the period when the asset is realised or liability is settled based on tax rates (and laws) that have been enacted or substantially enacted by the reporting date. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences and unused tax losses can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumptions that no adverse changes will occur in income taxation legislation and the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. b. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. c. Plant and Equipment Plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, less depreciation and any impairment.
Depreciation on assets is calculated on a straight-line basis over the estimated useful life, as follows:
Office Equipment 3-8 years 9. FINANCIAL INFORMATION 168
d. Exploration and Evaluation Assets Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Such expenditures comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration expenditure not having a specific nexus with a particular area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active or significant operations in relation to the area are continuing.
A regular review has been undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
A provision is raised against exploration and evaluation expenditure where the directors are of the opinion that the carried forward net cost may not be recoverable or the right of tenure in the area lapses. The increase in the provision is charged against the results for the year. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. e. Trade and Other Payables Trade and other payables are carried at amortised cost and due to their short term nature they are not discounted. They represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30-60 days of recognition. f. Issued Capital Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. g. GST Revenues, expenses and assets are recognised net of GST except where GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. h. Share Based Payments The fair value of shares and options granted to Directors, employees and consultants is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the relevant vesting period. For options, fair value is determined using an appropriate option pricing model.
For options issued to Directors and employees, the fair value is measured at grant date and recognised over the period during which the Directors or employees become unconditionally entitled to the options. The cumulative expense recognised between grant date and vesting date is adjusted to reflect the Directors best estimate of the number of options that will ultimately vest because of internal conditions of the options, such as the Directors or employees having to remain with the company until vesting date. No expense is recognised for options that do not ultimately vest because internal conditions were not met. An expense is still recognised for options that do not ultimately vest because a market condition was not met. 169 LTD REPLACEMENT PROSPECTUS 2013
Where the terms of equity instruments granted are modified, the expense continues to be recognised from grant date to vesting date as if the terms had never been changed. In addition, a further expense is recognised for any increase in fair value of the transaction as a result of the change.
Where equity instruments granted are cancelled, they are treated as if vesting occurred on cancellation and any unrecognised expenses are taken immediately to the profit or loss. If new instruments are substituted for the cancelled instruments and designated as a replacement, the combined impact of the cancellation and replacement instruments are treated as if they were a modification. i. Critical Accounting Estimates and Judgments The preparation of the financial statements in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectation of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The estimates and judgements that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Key Judgements – Exploration & Evaluation Assets The Group has capitalised exploration expenditure. This amount includes costs directly associated with exploration. These costs are capitalised as an intangible asset until assessment and/or drilling of the areas of interest is complete and the results have been evaluated. These costs include employee remuneration, materials, rig costs, delay rentals and payments to contractors. The expenditure is carried forward until such a time as the area of interest moves into the development phase, is abandoned, sold or sub-blocks relinquished.
The ultimate recoupment of cost carried forward for the exploration and evaluation assets is dependent upon the successful development and commercial exploitation or sale of the respective areas of interest. Ultimate exploitation through the development of mines will depend on raising the necessary funding.
9.5.3. Cash and Cash Equivalents MINIMUM MAXIMUM RECONCILIATION OF MOVEMENTS IN PRO-FORMA CASH AND CASH EQUIVALENTS SUBSCRIPTION SUBSCRIPTION $$
Cash and cash equivalents at 31 March 2013 439,032 439,032 Proceeds from the issue of shares pursuant to this Prospectus 3,000,000 4,000,000 Payment of estimated costs with respect to this Prospectus (410,000) (480,000) Proceeds from the issue of 5,128,205 shares subsequent to 31 March 2013 500,000 500,000 Proceeds from the sale of Winnecke and certain Barkly tenements 250,000 250,000 Pro-Forma cash and cash equivalents 3,779,032 4,709,032
9.5.4. Exploration and Evaluation Assets RECONCILIATION OF MOVEMENTS IN PRO-FORMA EXPLORATION AND EVALUATION MINIMUM MAXIMUM ASSETS SUBSCRIPTION SUBSCRIPTION $$
Exploration and evaluation assets at 31 March 2013 1,862,420 1,862,420 Written down value of Winnecke and certain Barkly tenements sold (250,000) (250,000) Pro-Forma exploration and evaluation assets 1,612,420 1,612,420 9. FINANCIAL INFORMATION 170
9.5.5. Issued Capital MINIMUM MAXIMUM RECONCILIATION OF MOVEMENTS IN PRO-FORMA ISSUED CAPITAL SUBSCRIPTION SUBSCRIPTION Number of shares Number of shares
Shares on issue at 31 March 2013 64,614,517 64,614,517 Consolidation of every 3.25 shares into 1 share (44,733,127) (44,733,127) Issue of shares subsequent to 31 March 2013 5,128,205 5,128,205 Issue of shares pursuant to this Prospectus 15,000,000 20,000,000 Pro-Forma issued capital 40,009,595 45,009,595
MINIMUM MAXIMUM RECONCILIATION OF MOVEMENTS IN PRO-FORMA ISSUED CAPITAL SUBSCRIPTION SUBSCRIPTION $$
Issued capital at 31 March 2013 4,449,742 4,449,742 Proceeds from the issue of shares pursuant to this Prospectus 3,000,000 4,000,000 Payment of estimated costs with respect to this Prospectus (share issue costs) (434,041) (504,041) Proceeds from the issue of shares subsequent to 31 March 2013 500,000 500,000 Pro-Forma issued capital 7,515,701 8,445,701
9.5.6. Accumulated Losses MINIMUM MAXIMUM RECONCILIATION OF MOVEMENTS IN PRO-FORMA ACCUMULATED LOSSES SUBSCRIPTION SUBSCRIPTION $$
Accumulated losses at 31 March 2013 (3,010,963) (3,010,963) Payment of estimated issue costs with respect to this Prospectus (listing of existing shares) (148,459) (148,459) Pro-Forma accumulated losses (3,159,422) (3,159,422)
9.5.7. Share-based Payments Reserve MINIMUM MAXIMUM RECONCILIATION OF PRO-FORMA SHARE OPTIONS SUBSCRIPTION SUBSCRIPTION Number of shares Number of shares
Share options on issue at 31 March 2013 20,000,000 20,000,000 Cancelation of options (20,000,000) (20,000,000) Reissue of a smaller number of options to directors in line with the consolidation of every 3.25 options into 1 option 5,846,154 5,846,154 Consolidation of every 3.25 options into 1 option for options not held by the directors 307,692 307,692 Share options granted or to be granted to advisers1 461,538 461,538 Share options granted to the Lead Manager pursuant to the Offer2 4,000,000 4,000,000 Pro-Forma share options 10,615,384 10,615,384
1 The grant of 461,538 share options to advisers. The options are fully vested on the date of grant and may be exercised at a price of $0.25 per share on or before the end of four years from the date of listing. 2 The grant of 4,000,000 share options to the Lead Manager pursuant to the Offer. The options are fully vested on the date of grant and may be exercised at a price of $0.25 per share on or before the end of four years from the date of listing. 171 LTD REPLACEMENT PROSPECTUS 2013
MINIMUM MAXIMUM RECONCILIATION OF MOVEMENTS IN PRO-FORMA SHARE-BASED PAYMENT RESERVE SUBSCRIPTION SUBSCRIPTION $$
Share–based payment reserve at 31 March 2013 817,000 817,000 Share options granted or to be granted to advisers 22,500 22,500 Share options granted to the Lead Manager pursuant to the Offer 150,000 150,000 Pro-Forma issued capital 989,500 989,500
Director Share Options Share options are granted to Directors. The contractual life of each option granted is four years. There are no cash settlement alternatives. Each option can be exercised from vesting date to expiry date for one share with the exercise price payable in cash.
Option Pricing Model The fair value of the equity settled share options granted is estimated using a Black-Scholes option pricing model taking into account the terms and conditions upon which the instruments were granted. The following table lists the inputs to the model used for valuing the share options granted subsequent to 31 March 2013:
Weighted average exercise price $0.25-$0.55 Weighted average life of the option 4 years Underlying share price $0.20 Expected share price volatility 93% Risk free interest rate 2.92% Value (Black-Scholes) per option $0.036-$0.05
9.5.8. Deferred Tax
At 31 March 2013, the company had un-recognised deferred tax assets of $902,054 which primarily relate to carry-forward tax losses. Following the pro-forma transactions outlined above, in particular the share issue costs, the total carry-forward tax losses will be increased to $1,019,054.
Deferred tax assets which have not been recognised as an asset, will only be obtained if:
i. the Company derives future assessable income of a nature and of an amount sufficient to enable the losses to be realised;
ii. the Company continues to comply with the conditions for deductibility imposed by the law; and
iii. no changes in tax legislation adversely affect the Company in realising the losses. 9. FINANCIAL INFORMATION 172
9.5.9. Commitments
Future Exploration Commitments The Company has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Company. The commitments are as follows:
EXPLORATION COMMITMENTS $
Less than 12 months 907,219 Between 12 months and 5 years 1,120,842 Pro-Forma issued capital 2,028,061
To keep tenements in good standing, work programs should meet certain minimum expenditure requirements. If the minimum expenditure requirements are not met, the Company has the option to negotiate new terms or relinquish the tenements. The Company also has the ability to meet expenditure requirements by joint venture or farm-in agreements.
9.5.10. Contingent Assets and Liabilities
There are no contingent assets and liabilities at 31 March 2013.
9.5.11. Subsequent Events
The Directors are not aware of any significant changes in the state of affairs of the Company or events that would have a material impact on the historical and pro-forma financial information. 173 LTD REPLACEMENT PROSPECTUS 2013
10. SOLICITOR'S TENEMENT REPORTS
10.1 CANADIAN SOLICITOR’S TENEMENT REPORT
1600 - 609 GRANVILLE STREET ANFIELD P.O. BOX 10068 PACIFIC CENTRE VANCOUVER, B.C. V7Y 1C3 SUJIR TELEPHONE: (604) 669-1322 KENNEDY FACSIMILE: (604) 669-3877 & DURNO LLP
BARRISTERS &SOLICITORS
July 12, 2013
Fertoz Limited ACN#145 951 622 40 Balgowlah Street Wakerley, Queensland 4154 Australia
Attn: Les Szonyi
Dear Sirs/Mesdames:
Re: Fertoz Limited
We have acted as British Columbia legal counsel to Fertoz Limited ("Fertoz") with respect to the provision of an opinion pertaining to the interest of Fertoz' wholly-owned subsidiary incorporated in the Province of Ontario, Canada, Fertoz International Inc. ("Fertoz International") in certain mineral property claims situated in the Province of British Columbia, Canada, located approximately 75km southeast of the Town of Tumbler Ridge and listed in Schedule "B" attached hereto (the "Fertoz Mineral Claims"), which includes the Wapiti East and Wapiti West projects (both as defined in the Prospectus).
We have also been asked to provide an overview of the regulatory regime applicable to the development of mineral resources in British Columbia, a copy of which is attached as Schedule "A" hereto.
A. Scope of Review
We have reviewed online reports in respect of the Fertoz Mineral Claims, dated May 24, 2013, ("Online Reports") generated through a search of the mineral tenure database maintained by the British Columbia Ministry of Energy and Mines and Responsible for Housing ("Ministry"), copies of which have been provided to you.
B. Assumptions and Qualifications
The opinion expressed herein is subject to the following assumptions and qualifications and restrictions ("Assumptions and Qualifications"):
1. We are qualified to practice law in the province of British Columbia and our opinion herein is restricted to the laws of the province of British Columbia and the federal laws of Canada applicable therein.
2. It is possible that information set out in the Online Reports may have been superseded by transactions, recordings or claims made subsequent to the time such reports were generated.
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3. Neither the contents of the Online Reports nor the location of the Fertoz Mineral Claims as recorded, are guaranteed by the Province of British Columbia to be complete and accurate, i.e., the mineral claims in the Online Reports are not the equivalent of a Torrens title system.
4. No investigation has been made of the original application for filing, the location of the boundaries of the Fertoz Mineral Claims and we have not examined the ground to determine if the Fertoz Mineral Claims have been staked in accordance with applicable laws or regulations nor whether any assessment work filed is in accordance with applicable laws or regulations. Further, to our knowledge no survey has been completed in respect of the Fertoz Mineral Claims and accordingly, their location, size and area may be in doubt.
5. Title to the Fertoz Mineral Claims may be subject to unrecorded instruments or claims. There is no requirement under the Mineral Tenure Act that encumbrances be recorded by the Chief Gold Commissioner of British Columbia. The Mineral Tenure Act does not contain any provisions granting priority to the recorded holder of a mineral claim over unrecorded instruments or claims. Accordingly, status as a recorded holder of the Fertoz Mineral Claims does not ensure that the Fertoz Mineral Claims are free from adverse claims or other interests.
6. We have assumed that the persons purporting to execute the documents examined in the course of title examinations are, in fact, the same persons named therein and, when executed by a corporation, that the persons so executing on behalf of the corporation have been duly authorized as signing officers;
7. We have assumed that copies of documents examined are, in fact, true copies of documents in existence and that the originals of such documents were properly executed.
8. As an agreement governed by the laws of the Province on Ontario, we express no opinion with respect to the enforceability of the Wapiti Option.
9. To the extent this opinion references negotiations and consultations by Fertoz regarding aboriginal interests in the Fertoz Mineral Claims and annual rent owing on the Fertoz Mineral Claims, we have relied exclusively and without independent investigation on an Officer's Certificate from Fertoz.
10. We have not conducted any searches or investigations, and express no opinion, with respect to:
(a) litigation in respect of the Fertoz Mineral Claims;
(b) taxes assessed by or payable to government authorities;
(c) statutory liens or charges to which the Fertoz Mineral Claims may be subject, including without limitation liens under the Employment Standards Act, Workers Compensation Act, or Income Tax Act (Canada);
(d) whether any of the Fertoz Mineral Claims are subject, or potentially subject, to a claims by Aboriginal groups, and the effect of any such claims; and
(e) any rights of expropriation, restrictive covenants, rights of reverter or obligations imposed by legislation which may defeat ownership with respect to the Fertoz Mineral Claims.
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SCHEDULE "A"
DISCUSSION RE: MINERAL TENURES IN BRITISH COLUMBIA
The following summarizes the principal aspects of government granted mineral claims in British Columbia. However, it is simply an overview of some of the issues discussed, and is not a comprehensive account of all factors relevant to exploration and development on such mineral claims. In particular, the discussion must be qualified by reference to the complete contents of applicable legislation and other requirements.
Mineral Claims
Mineral tenure in British Columbia is governed by the Mineral Tenure Act, RSBC 1996, Chapter 292 and the Mineral Tenure Act Regulation, B.C. Reg. 78/2008, as amended. Mineral tenure on Crown land is acquired through an on-line staking system for "claims".
A claim is a surveyed parcel recorded under the Mineral Tenure Act that gives the owner (the "Recorded Holder") the right to access, explore, occupy and develop its underlying minerals. Claims may be for placer titles or mineral titles. A "mineral" claim is used when the target minerals occur in hard rock and a "placer" claim is used when the target minerals occur in loose or fragmentary or broken rock, gravel or sand. Our review of the Online Reports indicates that all of the Fertoz Mineral Claims are "mineral claims" vs. placer claims.
A claim is made up of 1 or more cells, and an individual cell can range from approximately 21 hectares (in the south to approximately 16 hectares at the north of the province, as a result of proximity to the equator. Each mineral cell has approximately $100/year in fees and each placer cell has approximately $250/year in fees, more or less, depending on size. If improvements are made, or exploration work performed, the value of the work may be submitted online in lieu of the majority of this fee.
In addition to the restrictions imposed on mining in certain designated areas such as land occupied by a dwelling, protected heritage area, orchard land and land under cultivation, parks and ecological reserves, the Ministry may restrict the use of surface rights by a Recorded Holder if the Minister considers the surface area should be used for purposes other than mining. No compensation is payable to the Recorded Holder if the Ministry determines that land should be used for purposes other than mining.
Maintenance and Renewal of Tenements
A mineral or placer claim has a set expiry date (the "Good To Date"), and in order to maintain the claim beyond that expiry date, the Recorded Holder (or an agent) must, on or before the expiry date, register either exploration and development work that was performed on the claim, or a payment instead of exploration and development. Within one year of completing exploration and development work on a claim, the Recorded Holder must file a report detailing that work with the Ministry. Filing of work on a tenement automatically extends the Good To Date, for a period consistent with the cost of work completed. For example, based upon the below work requirements, if Fertoz were to expend $30 per hectare on a newly staked claim, they would be able to extend the Good To Date on the that claim for a period of four (4) years. Aside from initial registration fees, no payments are due until the expiration of the Good To Date. In the event that no work is filed against the claims and no payments are made in lieu of work, prior to the Good To Date, the respective claims will be forfeited at midnight on the Good To Date. There is no notice to the claim holder prior to forfeiture. In the event the claims are forfeited, and provided they have not been staked by a third-party in the meantime, the Recorded Holder may go
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back at a later date and re-stake the claims. There is no requirement to reduce the area of a claim after a designated number of operational years.
For the purposes of completing the required exploration and development work on a tenement, the Recorded Holder is permitted to amalgamate a number of contiguous tenements as one single tenement. The Recorded Holder is also permitted to utilize work conducted on adjoining claims, for the purposes of maintaining their interest in a separate claim. For example, work conducted by Fertoz on one claim comprising the Wapiti West project (as defined in the Prospectus), could be utilized to maintain all of the claims comprising the Wapiti West project.
In the event that no work is filed against the claims and no payments are made in lieu of work, prior to the Good To Date, the respective claims will be forfeited at midnight on the Good To Date. There is no notice to the claim holder prior to forfeiture. In the event the claims are forfeited, and provided they have not been staked by a third- party in the meantime, the Recorded Holder may go back at a later date and re-stake the claims.
There is no requirement to reduce the area of a claim after a designated number of operational years (regardless of any maintenance or extension of the term of the tenement and Good To Date, and regardless of any forfeiture and re-staking of any claim).
When either exploration and development work or a payment instead of work is registered, provided the requisite payments made or work performed, the claim may be advanced forward by the Recorded Holder to a new expiry date from year to year. With a payment, this new date cannot exceed one year from the current expiry date; with work, it may be any date up to a maximum of ten years beyond the current anniversary year. "Anniversary year" means the period of time from the last expiry date to the next immediate expiry date.
The following are the costs required to maintain a claim for one year:
Mineral Claims - Work Requirement:
$5 per hectare during each of the first and second anniversary years;
$10 per hectare for each of the third and fourth anniversary years;
$15 per hectare for each of the fifth and sixth anniversary years; and
$20 per hectare for each subsequent anniversary year.
Placer Claim - Work Requirement:
$20 per hectare
Where the minimum work requirement is not carried out, payment of a fee equal to double the amount of the work requirement is required to maintain the claim.
Exploration and Development Work
Exploration and development work is defined in section 1 of the Mineral Tenure Act Regulation as either physical exploration and development or technical exploration and development.
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"physical exploration and development" includes:
(d) if the work is related to a mineral claim, any of the following:
i. trenching, open cuts, adits, pits, shafts and other underground activity for the purposes of collecting samples or other geological or technical information;
ii. reclamation related to exploration and development activities;
iii. ground control surveys, line cutting and grids that support an activity described in paragraphs (b) to (h) of the definition of technical exploration and development;
iv. precision survey techniques such as global positioning or surveys conducted by a practising land surveyor;
v. global positioning surveys in accordance with section 20;
(e) if the work is related to a placer claim, any of the following:
i. activities referred to in paragraph (a);
ii. panning, digging or washing of gravels to test for the presence of economically significant minerals;
"technical exploration and development" for mineral claims and placer claims includes:
(a) archaeological impact assessments;
(b) geological surveys and studies;
(c) mineral resource or ore reserve calculations and related work;
(d) geophysical surveys;
(e) geochemical surveys;
(f) drilling, including drilling for the purposes of collecting samples, core logging or other geological or technical information;
(g) analysis of mineral or rock samples including a bulk sample to assess characteristics pertinent to the assessment of the mineral resource, including acid base accounting, metallurgical, mineralogical, beneficiation and petrological studies;
(h) prospecting and exploring;
(i) environmental baseline studies;
(j) construction and maintenance of roads, trails, helicopter landing sites, drill sites and drill core storage if required to support an activity described in any of paragraphs (b) to (i);
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(k) preparation and geological interpretation of air photo, satellite or other remotely sensed images that support an activity described in paragraphs (a) to (i);
(l) preparation of orthophoto and topological surveys that support an activity described in paragraphs (a) to (i);
(m) compilations of previous exploration and development studies and reports if those compilations lead to new exploration and development;
(n) any other similar activity that may be approved by the chief gold commissioner before the exploration and development is done.
There were some significant changes in the fore-going that were introduced in January 2005:
Road and trail work, whether construction or upgrading, cannot be registered on its own as physical work; road and trail work is only acceptable when it is part of a technical work program.
Travel and accommodation costs are not acceptable on their own; if other physical or technical work was performed, travel and accommodation costs may be included.
General property evaluations and similar activities are not acceptable.
Ground control surveys, line cutting and grids cannot be registered as stand-alone physical work, but only as part of a technical work program.
Suspension of Operations or Cancellation of Claims
If a Recorded Holder or any other person conducting operations in respect of a mineral title fails to comply with any provision of the Mineral Tenures Act, or any other enactment with respect to mining activity, the Ministry may make an order suspending any exploration and development or production of minerals until the provision in question has been complied with (an "Order"). The Ministry may cancel the claim of any Recorded Holder who deliberately fails to comply with an Order, the Mineral Tenures Act or regulations, the Mines Act, RSBC 1996, Chapter 293, the Heaths Safety and Reclamation Code for Mines in British Columbia, the protection of a protected heritage property under the Heritage Conservation Act RSBC 1996, Chapter 187,or any other enactment under which mining activity has been or is required to be authorized.
Leases: Mineral & Placer Titles
A lease is the production tenure for mining. A claim allows the holder to explore and develop the mineral or placer mineral resource, and contains a production limit for mineral claims of 1000 tonnes of ore in a year from each unit in a legacy claim or each cell in a cell claim, and for placer claims of 2000 cubic metres of pay dirt from each legacy claim in a year or 1000 cubic metres of pay dirt from each cell in a cell claim in a year. A bulk sample of up to 10,000 tonnes of ore may be extracted from a mineral claim not more than once every five years. Production beyond these limits requires a lease tenure.
Leases are issued according to a survey plan, and for a specific term, with an initial term of not longer than 30 years. If the lessee complies with the Mineral Tenures Act and regulations and the terms and conditions of a lease, the lessee is entitled to a renewal of the mining lease for one or more terms not exceeding 30 years each,
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subject to the approval of the Ministry that the lease is required for mining activity. A lease is maintained by payment of the annual rental of $20 per hectare for a mining lease and $20 per hectare for a placer lease. If the Recorded Holder of a lease does not pay the rental or fails to comply with the Mineral Tenures Act or regulations, the Ministry may order that the lease forfeits and vests in the government. There are no work requirements on a lease, but the term of a lease will only be renewed if the lease is required for a mining activity.
Permitting and Reclamation
The Ministry is responsible for approving mineral exploration and mine project proposals in British Columbia. The rights associated with a mineral claim or mining lease do not provide the immediate right to conduct exploration work other than work that does not disturb the surface. Any work that includes surface disturbance must first be submitted to the government for review and approval prior to commencing the work.
In order to obtain a permit for a mine or exploration project, proponents must submit an application. As part of the application for the permit, the Recorded Holder must file with an inspector of mines a plan outlining the details of the proposed work and a program for the conservation of cultural heritage resources and for the protection and reclamation of the land, watercourses and cultural heritage resources affected by the mine. The review process will very likely include public and First Nations consultation and accommodation and the work approval if granted, will have to be accompanied by a reclamation security deposit. This process ensures that mineral exploration and mining projects benefit local communities and provide economic benefits for all British Columbia.
First Nations may have aboriginal interests in a tenure area that could be impacted by any planned mining activity. At various stages in a mineral exploration or mine development project, the Ministry of Natural Resource Operations (MNRO) will be required to meet applicable legal obligations to consult with and, if appropriate, accommodate affected First Nations.
a) Mineral Exploration Permitting
The application for mineral exploration must contain a Notice of Work providing details on the scope and nature of the exploration work, as well as evidence of compliance with applicable health and safety laws and environmental compliance with respect to the actual work and camp accommodations.
b) Mine Development Permitting
British Columbia has a stringent mine project review process in place. The review process of a mine project is dependent on the nature and scope of the project. The Environmental Assessment Act Reviewable Projects Regulations contain thresholds which define either use of the Environmental Assessment Act, SBC 2002, Chapter 43 (EAA) or the Mines Act, RSBC 1996, Chapter 293, as the principal review process and agency. A new mine development with proposed annual production greater than 750,000 tonnes per year must complete a provincial environmental assessment and obtain an Environmental Assessment Certificate from the British Columbia Environment Assessment Office prior to being granted a Mines Act permit. The British Columbia government requires a reclamation security deposit to be posted in the amount of the maximum estimated reclamation liabilities associated with a mining project.
A project may also require that a federal environmental assessment under the Canadian Environmental Assessment Act, S.C. 1992, c.37, be carried out where federal permits or other triggers are engaged. It is common for the two assessment processes to be carried out in a harmonized process. In addition to the provincial and
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federal environmental assessment processes, other environmental legislation may also apply to the development and operation of a mine in British Columbia.
c) Mine Reclamation in British Columbia
British Columbia's reclamation laws ensure that, once operations cease, mine site lands are returned to a useful and productive state. Before any work on a new mine site can commence, the company or individual doing the work must post a security which is held in trust by the Ministry of Energy and Mines. For new mines, the reclamation security is set annually at a level which reflects all outstanding decommissioning and closure obligations existing at that time. This security is returned only once the mine site is reclaimed to a satisfactory level and there are no ongoing monitoring or maintenance requirements. If a mine site is not reclaimed properly, the security money may be used by the Ministry to complete the remediation work.
Aboriginal Interests
Aboriginal rights stem from the long standing use and occupancy of the land by Aboriginal groups both before and after European settlement. The Canadian Constitution recognizes and affirms existing Aboriginal rights and establishes a requirement for the Crown (which includes both the Federal Provincial governments, and their respective agencies) to negotiate treaties in order to reach a settlement of claims and to reconcile pre-existing Aboriginal sovereignty with assumed Crown sovereignty. As a result, Canadian Courts, have established that the constitutional protection afforded to Aboriginal rights places an obligation on the Crown to consult Aboriginal groups and accommodate their interests to preserve Aboriginal interests until formal treaties are concluded.
In British Columbia, few treaties have been entered into with Aboriginal groups and Aboriginal groups continue to hold Aboriginal interests both as treaty rights but also as claimed, but unproven, Aboriginal rights or title. As a result, the duty to consult with Aboriginal peoples arises wherever the Crown knows of the potential existence of an Aboriginal right, title or other interest, whether proven or unproven, and contemplates an activity or decision that may adversely affect such interest. The duty to consult will require that the Crown and its respective agencies negotiate with Aboriginal people who they are aware may have either treaty rights or simply claimed Aboriginal rights in a particular area before fundamental exploration and development decisions are made.
The degree of consultation required varies with the circumstances. Where there is a strong claim or a proven right, or where the potential adverse effect of the proposed decision on the Aboriginal interest is severe, the requisite consultation will be more comprehensive than where there a weaker claim or the potential adverse effect is minor. In some cases, this more comprehensive duty may require the Crown to amend plans or decisions to address the concerns of Aboriginal groups.
The duty to consult applies only to the Crown, it does not extend to third parties. In practice, however, elements of the duty are often delegated by the Crown to the Recorded Holder. For example, the Crown may delegate information gathering on potential claims or the potential impacts of a proposed mining project on Aboriginal or treaty rights. As a result, a Recorded Holder will be expected the engage with local Aboriginal groups who have claimed Aboriginal rights in respect of each activity or decision that may adversely affect such interest. The result is that many mine developers in Canada enter into formal agreements with Aboriginal groups relating to matters of importance to the particular Aboriginal community.
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In a recent landmark decision1 the British Columbia Supreme Court cautioned that resource tenures that have been granted and failed to meet adequate consultation requirements risk being struck down as unconstitutional. As a result, where the Crown is not satisfied that adequate consultation and/or accommodation has occurred with respect to the Crown decisions relating to a project, the Crown may refuse to issue the requisite approvals and authorizations. Additionally, where consultation and/or accommodation with respect to a project have failed to satisfy the applicable legal standard, issued permits and authorizations may be challenged by Aboriginal groups.
All of the foregoing commentary regarding the exploration and development of mineral resources in British Columbia must be qualified by the existence of Aboriginal interests and the legal requirements of consultation and/or accommodation.
Status of Aboriginal Interest in Fertoz Mineral Claims
The area comprising the Wapiti West and Wapiti East projects (both as defined in the Prospectus) is contained within the jurisdiction governed by Treaty No. 8 (1899). Based solely on an examination of the Online Reports, generated through the mineral tenure database maintained by the Ministry, the McLeod Lake Indian Band, the West Moberly First Nations, and the Saulteau First Nations, are active in the vicinity of the Wapiti West and Wapiti East projects (both as defined in the Prospectus). The Akisqnuk First Nation, the Lower Kootenay Band, St. Mary's Indian Band, the Tobacco Plains Indian Band, the Shuswap Indian Band, and the Ktunaxa Nation Council are active in the vicinity of the Barnes Lake and Crows Nest projects (both as defined in the Prospectus).
We understand that, in connection with the commencement of exploration work on the Fertoz Mineral Claims, Fertoz and its agents have commenced initial consultation discussions with the McLeod Lake Indian Band and the West Moberly First Nations, and that at this time there are no aboriginal settlements located or active on the area comprising the Fertoz Mineral Claims. The lack of activity or settlement on the Fertoz Mineral Claims, by aboriginal groups, does not in any way prevent such groups from asserting rights or interests (of use or occupancy) in the property comprising the Fertoz Mineral Claims, in the future.
We have further examined correspondence received by an agent of Fertoz from the McLeod Lake Indian Band, on June 18, 2013, and such correspondence indicates that the McLeod Lake Indian Band has no concerns with the present proposal of Fertoz to conduct exploration and investigative activities on the Wapiti West and Wapiti East projects (both as defined in the Prospectus). This correspondence is not binding on the band, and does not in any way mitigate the rights the band, or any other aboriginal group, may have to the Fertoz Mineral Claims.
1 Tsilhqot'in Nation v. British Columbia, 2007 BCSC 1700
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SCHEDULE "B" FERTOZ MINERAL CLAIMS – BRITISH COLUMBIA
Claim Name Tenure # Area Good To Date Issue Date 2013 / 2014 Rent CAN$ (1) Wapiti WK-1 851942 450.83 ha April 21, 2017 April 18, 2011 N/A1 WK-2 851948 451.02 ha April 21, 2017 April 18, 2011 N/A1 WK-3 851952 450.77 ha April 21, 2017 April 18, 2011 N/A1 WK-4 851958 451.20 ha April 21, 2017 April 18, 2011 N/A1 Subtotal 1,803.82 ha
WK-5 941760 450.83 ha January 21, 2017 January 21, 2012 N/A1 WK-6 941761 469.87 ha January 21, 2017 January 21, 2012 N/A1 WK-7 941762 450.86 ha January 21, 2017 January 21, 2012 N/A1 WK-8 941763 451.08 ha January 21, 2017 January 21, 2012 N/A1 WK-9 941764 451.33 ha January 21, 2017 January 21, 2012 N/A1 WK-10 941769 451.36 ha January 21, 2017 January 21, 2012 N/A1 WK-11 955278 470.31 ha January 21, 2017 March 4, 2012 N/A1 WK-12 956829 225.35 ha January 21, 2017 March 9, 2012 N/A1 Subtotal 3,420.99 ha
(2) Tunnel Tunnel 1 942096 446.13 ha January 23, 2014 January 23, 2012 $ 2,230.65 Tunnel 2 942097 445.97 ha January 23, 2014 January 23, 2012 $ 2,229.85 Subtotal 892.10 ha $ 4,460.50
(3) Sukanka 1 851714 18.51 ha September 15, April 14, 2011 $ 92.55 2014
(4) Sukanka 2 980302 444.23 ha September 15, April 15, 2012 $ 2,221.15 2014
(5) Wk-One 982744 18.80 ha January 21, 2017 April 27, 2012 N/A1 Wapiti NE 1015556 375.54 ha December 31, December 31, $ 1,877.70 2013 2012 Wapiti Two 1015557 168.93 ha December 31, December 31, $ 844.65 2013 2012 Wapiti South 1015558 376.35 ha December 31, December 31, $ 1,881.75 2013 2012 Subtotal 939.62 ha $ 4,604.10
(6) PAL 1 942169 18.49 ha January 23, 2014 January 23, 2012 $ 92.45
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(7) T11 1018128 316.18 ha March 28, 2014 March 28, 2013 $ 1,580.90
(8) Wapiti West Extended PAL2 1018084 443.88 ha March 27, 2014 March 27, 2013 $ 2,219.40 PAL3 1018085 388.49 ha March 27, 2014 March 27, 2013 $ 1,942.45 PAL4 1018086 444.10 ha March 27, 2014 March 27, 2013 $ 2,220.50 SUK3 1018087 444.32 ha March 27, 2014 March 27, 2013 $ 2,221.60 SUK4 1018095 444.53 ha March 27, 2014 March 27, 2013 $ 2,222.65 SUK5 1018096 444.71 ha March 27, 2014 March 27, 2013 $ 2,223.55 SUK6 1018097 444.89 ha March 27, 2014 March 27, 2013 $ 2,224.45 SUK7 1018098 445.08 ha March 27, 2014 March 27, 2013 $ 2,225.40 SUK8 1018099 445.25 ha March 27, 2014 March 27, 2013 $ 2,226.25 SUK9 1018101 445.39 ha March 27, 2014 March 27, 2013 $ 2,226.95 SUK10 1018102 445.57 ha March 27, 2014 March 27, 2013 $ 2,227.85 SUK11 1018103 445.80 ha March 27, 2014 March 27, 2013 $ 2,229.00 Tunnel 3 1018100 442.64 ha March 27, 2014 March 27, 2013 $ 2,213.20 Subtotal 5,724.65 ha $30,296.60
(9) Wapiti East Extended WAP S2 1018104 451.82 ha March 27, 2014 March 27, 2013 $ 2,259.10 WAP S3 1018106 451.75 ha March 27, 2014 March 27, 2013 $ 2,258.75 WAP S4 1018107 451.93 ha March 27, 2014 March 27, 2013 $ 2,259.65 WAP S5 1018108 452.09 ha March 27, 2014 March 27, 2013 $ 2,260.45 WAP S6 1018109 452.30 ha March 27, 2014 March 27, 2013 $ 2,261.50 Subtotal 2,259.89 ha $ 9,037.95
(10) Barnes Lake 1011319 608.98 July 19, 2013 July 19, 2012 $ 3,044.90
(11) Crows Nest 1013727 1,471.81 ha October 14, 2013 October 14, 2012 $ 7,359.05
Total Area 17,919.27 $63,378.30
1 N/A – Not Applicable – rent is only due at expiry of the tenement. Sufficient exploration was carried out in 2012 to extend “Good to Date” and avoid rent payment in 2013 or 2014.
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10.2 AUSTRALIAN SOLICITOR’S TENEMENT REPORT
Partner Wayne Penning Direct line +61 7 3001 2132 Direct fax +61 7 3105 7363 Email [email protected] Our ref WP: 14733 10 July 2013
The Directors Fertoz Limited 40 Balgowlah Street WAKERLEY QLD 4154
Dear Directors
SOLICITOR’S TENEMENT REPORT
This solicitor’s tenement report (Report) has been prepared for inclusion in the prospectus for the listing of Fertoz Limited A.C.N. 145 951 622 (Fertoz) on the Australian Securities Exchange Limited.
We have been requested to prepare this Report to consider the matters relating to the mineral tenements currently held by and tenement applications made by Fertoz in Australia (collectively referred to as the “Tenements”). This Report is made up of three parts:
(a) Part A contains details of our assumptions, qualifications and scope in preparing this Report;
(b) Part B contains details of the relevant regulatory regime and matters affecting the Tenements; and
(c) Part C contains a table providing an overview of certain information relating to the Tenements.
This Report has been provided solely for the benefit of Fertoz and the directors of Fertoz in connection with its disclosure obligations in connection with the initial public offering of Fertoz on the Australian Securities Exchange. This Report may not (in whole or in part) be used, referred to or relied upon for any other purpose, without the express written consent of Porter Davies Lawyers.
Yours faithfully
PORTER DAVIES LAWYERS
Liability limited by a scheme approved under professional standards legislation. This document is confidential and may be subject to legal professional privilege. Please return if you are not the intended recipient.
Email: [email protected] Level 5, 46 Edward Street, Brisbane 4000 Postal GPO Box 2942, Brisbane 4001 Web: www.porterdavies.com Telephone +61 7 3001 2100 Facsimile +61 7 3105 7360 10. SOLICITOR'S TENEMENT REPORT 186
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PART A: ASSUMPTIONS, QUALIFICATIONS AND SCOPE
1 SCOPE OF THIS REPORT
In accordance with the scope of work agreed between Fertoz and Porter Davies Lawyers, our investigations have been limited to a consideration of the following:
(a) the title and standing of the Tenements;
(b) material contracts relating to the Tenements;
(c) native title and Aboriginal Freehold Land rights;
(d) cultural heritage; and
(e) environmental matters.
This Report also contains a brief overview of the regulatory regime applying to mineral tenements in the Northern Territory and Queensland.
2 QUALIFICATIONS
This Report is also subject to the following qualifications:
(a) this Report relates only to the tenements Fertoz currently holds (or has applied for) in the Northern Territory and Queensland (as specifically identified in this Report). This Report does not contain any examination of, or opinion in respect of, any tenements Fertoz holds (or has applied for) outside of Australia;
(b) Porter Davies Lawyers has, in undertaking its review of the Tenements:
(i) acted on Fertoz’s written and oral instructions as to the manner and extent of the enquiries to be conducted; and
(ii) been constrained by considerations of, and instructions regarding:
(A) the information and material to be reviewed and the way it was to be reviewed;
(B) the availability and source of relevant material;
(C) the restrictions on, or exclusions of, access to sources which might have been used to verify information; and
(D) reliability of information supplied by Fertoz and the officers of Government and regulatory authorities;
(c) Porter Davies Lawyers have not undertaken any of the following searches and investigations:
(i) searches of the National Heritage List and the Commonwealth Heritage List maintained by Department of Sustainability, Environment, Water, Population and Communities;
(ii) searches of the Heritage Register maintained by the Northern Territory Department of Lands, Planning and Environment;
(iii) searches of the Cultural Heritage Database and Cultural Heritage Register maintained by the Department of Environment and Heritage Protection in Queensland (DEHP); and
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and accordingly it is outside the scope of this Report to provide an analysis or opinion in relation to such matters;
(d) it is outside the scope of this Report to identify or provide an analysis of the land tenure underlying the Tenements and we give no opinion regarding any third party land title rights or interests that exist in relation to the land underlying the Tenements, including but not limited to:
(i) native title rights and interests;
(ii) freehold land and pastoral leases; and
(iii) easements (for example, railway lines, highways, telecommunication towers and overhead electricity lines and equipment);
(e) with respect to each Tenement that has not yet been granted, Porter Davies Lawyers expresses no opinion as to whether the relevant application will ultimately be granted, the terms on which it may be granted or the estimated timing of any such grant;
(f) this Report is not concerned with, and Porter Davies Lawyers has not conducted any review of, issues relating to business risk, competition, geology, finance, insurance, real property, litigation, health/safety or taxation. In particular, this Report does not discuss the commercial viability of the Tenements;
(g) in relation to the material contracts reviewed and discussed in section 3 of Part B of this Report, Porter Davies Lawyers has not undertaken any investigations in relation to the counterparties to these contracts or holders of the Tenements, including any dealings by those parties (including in respect of the contracts or the Tenements). We are unable to comment on whether any such matters may materially affect Fertoz’s rights under such material contracts or in relation to the Tenements;
(h) Porter Davies Lawyers has sought to identify high level legal matters (it considers relevant) in relation to the Tenements and warrant identification;
(i) it is essential to recognise that the accuracy and utility of this Report depends substantially on the quality of the information provided to Porter Davies Lawyers. Only to a limited extent can information be verified by searches of public and statutory registers or other independent sources; and
(j) in providing this Report, Porter Davies Lawyers only holds itself out as having legal skills and experience with respect to the laws of the Commonwealth of Australia and its States and Territories, and the Report is given on the basis that it will be construed in accordance with those laws.
3 SEARCHES
In preparing this Report we have reviewed and relied on the following reports and sources (only):
(a) Minister’s Certificates dated 3 April 2013 and 11 April 2013 relating to each of the Tenements located in the Northern Territory provided by the Northern Territory Department of Mines and Energy (Minister’s Certificates);
(b) Public Enquiry Reports dated 8 May 2013 relating to the Tenement located in Queensland downloaded from the MinesOnline database maintained by the Department of Natural Resources and Mines (DNRM) (Public Enquiry Reports);
(c) extract dated 8 April 2013 obtained from the Interactive Resource Tenure Mapping system maintained by DNRM relating to the Tenement located in Queensland (IRTM Extract);
(d) Overlap Analysis Report dated 12 April 2013 in respect of any mining or petroleum tenements that overlap the Tenements prepared by Complete Tenement Management (Overlap Analysis Report); and
(e) native title searches dated 10 April 2013 in respect of the Tenements provided by the National Native Title Tribunal (Native Title Searches). In particular, searches of the following:
(i) Register of Native Title Claims; 10. SOLICITOR'S TENEMENT REPORT 188
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(ii) National Native Title Register;
(iii) Register of Indigenous Land Use Agreements; and
(iv) Schedule of Native Title Applications (which includes claims that have not been registered),
(collectively referred to as the “Searches”).
We have also reviewed and relied on information provided by Fertoz in relation to the Tenements (including information relating to the steps that have been taken to comply with the requirements of the Tenements) (the Fertoz Information).
It should be noted we have not sought to independently verify the information contained in the Searches or the Fertoz Information.
4 ASSUMPTIONS
Porter Davies Lawyers has made the following assumptions in conducting its review of the Tenements, Searches and Fertoz Information and in preparing this Report:
(a) the accuracy, completeness and conformity to originals of all documents made available to Porter Davies Lawyers;
(b) the documents examined by Porter Davies Lawyers have been validly authorised, executed and delivered by (and are binding on) the parties to them and continue unamended (other than as noted in the document) in full force and effect;
(c) all facts contained or stated in documents, responses to requests for further information (whether provided by the officers, employees and agents of Fertoz, officers of governmental and regulatory authorities, or other third parties), and other material which Porter Davies Lawyers has relied upon in providing this Report, are (and continue to be) correct, and no relevant matter has been misstated or withheld from Porter Davies Lawyers (whether deliberately or inadvertently);
(d) there are no other documents material to the areas requiring examination by Porter Davies Lawyers, except for the documents disclosed to Porter Davies Lawyers; and
(e) the details revealed by searches of public registers maintained by governmental or other regulatory authorities have been properly and accurately recorded in those registers by those authorities. It must be noted that many public and governmental registers do not have adequate recording procedures in place and delays occur between filing and notification on a publicly available register.
5 CONSENT
Porter Davies Lawyers has given, and has not before the lodgement of the Prospectus, withdrawn its consent to the issue of the Prospectus with this Report including in the form and context in which it appears. Porter Davies Lawyers takes no responsibility for any matter or omission in the Prospectus, other than responsibility for this Report subject to the qualifications and assumptions outlined above. 189 LTD REPLACEMENT PROSPECTUS 2013
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PART B: DETAILS
1 NORTHERN TERRITORY TENEMENTS
1.1 TENEMENTS IN NORTHERN TERRITORY
Fertoz is the registered:
(a) holder of the following exploration tenements in the Northern Territory:
(i) Carpentaria Group - Katherine Project: EL 26995, EL 26997 and EL 27008;
(ii) Wiso-Georgina Group – Barkly Project: EL 26054, EL 26055, EL 27076, EL 29193, EL 29194, EL 29195, EL 29196, EL 29197 and EL 29198 (it should be noted that EL 29193, EL 29194, EL 29195, EL 29196, EL 29197, EL 29198 and sub-blocks SE 533075 K, P and SE 533076 F, G, H, J, L, M, N, O, Q, R, S, V, W of EL 26055 are currently subject to a tenement sale agreement (the Barkly Tenement Sale Agreement) - refer to section 3.4 of Part B of this Report for further details);
(iii) Wiso-Georgina Group – Winnecke Project: EL 26978, EL 26981, EL 28644 (it should be noted these tenements are currently subject to a tenement sale agreement (the Winnecke Tenement Sale Agreement) – refer to section 3.3 of Part B of this Report for further details);
(iv) Barrow Creek – Barrow Creek Project: EL 26915 (it should be noted this tenement is currently subject to a farm-in and joint venture agreement (the CEN Agreement) – refer to section 3.1 of Part B of this Report for further details);
(v) Roper Project: EL 27026 (it should be noted this tenement is currently subject to a tenement acquisition agreement (the Ebony Tenement Acquisition Agreement) – refer to section 3.2 of Part B of this Report for further details); and
(vi) Hodgson Project: EL 26969 (it should be noted this tenement is currently subject to the Ebony Tenement Acquisition Agreement – refer to section 3.2 of Part B of this Report for further details),
(collectively referred to as the “Granted NT Tenements”); and
(b) applicant in respect of applications for the following exploration tenements known as the Wiso-Georgina Group – Winnecke Project: ELA 28476 (application), ELA 28478 (application), ELA 28479 (application), ELA 28480 (application), ELA 28482 (application), ELA 28483 (application), ELA 28484 (application), ELA 28642 (application), ELA 28643 (application) and ELA 28645 (application) (collectively referred to as the “NT Tenement Applications”) (it should be noted the NT Tenement Applications are currently subject to the Winnecke Tenement Sale Agreement – refer to section 3.3 of Part B of this Report for further details).
In this Report, the Granted NT Tenements and the NT Tenement Applications will be collectively referred to as the “NT Tenements”.
It should be noted that the NT Tenement Applications are currently in the application stage only and have not yet been granted.
1.2 TENEMENT REGULATORY REGIME IN THE NORTHERN TERRITORY
In the Northern Territory, mineral tenements are granted under the Mineral Titles Act 2010 (NT) (MTA). Different types of mineral titles may be granted under the MTA, and different types of mineral titles give the tenement holder the right to conduct certain activities. A mineral exploration licence (EL) is the primary title issued for the purpose of conducting exploration activities for non-extractive minerals (including, for example, phosphate). 10. SOLICITOR'S TENEMENT REPORT 190
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An EL grants the tenement holder the right to occupy and conduct exploration for minerals in the relevant tenement area. The holder of an EL may conduct activities within the tenement area for that purpose, including:
(a) conducting activities for ascertaining the quality, quantity or extent of other material;
(b) sinking bores and tunnels;
(c) digging pits, trenches and holes; and
(d) extracting and removing samples of ore and other substances in amounts reasonably necessary to evaluate the potential for mining in the tenement area.
An EL holder must comply with the conditions attached to the EL as imposed by the Minister or as prescribed by the MTA and the Mineral Titles Regulations 2010 (NT) (MTR). In that regard, section 32 of the MTA states that:
(a) before starting to conduct authorised activities under an EL, the tenement holder must follow the procedures prescribed by regulation for giving notice to landowners or occupiers of land in the tenement area:
(i) of the intention to start conducting the activities; and
(ii) of the entry of the tenement holder onto the land to conduct the activities;
(b) the tenement holder must carry out the work necessary for the discovery and assessment of the potential value of minerals in the tenement area substantially in accordance with:
(i) the technical work program for the EL; and
(ii) the expenditure requirements specified in the EL;
(c) if a mineral that may be of economic or scientific interest is discovered in the tenement area, the tenement holder must give the Minister a notice of the discovery within 28 days after the mineral is discovered;
(d) if underground water is found when conducting authorised activities, the tenement holder must notify the Minister of the find within 28 days and give the Minister the samples and data the Minister requires;
(e) before the end of each operational year of the EL, the tenement holder must give the Minister a technical work program for the authorised activities to be conducted in the tenement area in the next operational year; and
(f) the holder of an EL must not:
(i) extract or remove ore or another substance from the tenement area unless authorised under section 31 (1)(c) or (2) of the MTA; or
(ii) sell a mineral discovered in the tenement area unless the Minister has approved the sale.
The holder of an EL has the exclusive right to apply for a mineral lease for production over all or part of the area comprised within the EL.
1.3 TITLE AND STANDING
Fertoz is the registered holder of 100% of the legal interest in all Granted NT Tenements and is the registered applicant for all of the NT Tenement Applications. It should be noted that there is no certainty that the current NT Tenement Applications will be granted.
We are instructed that:
(a) Fertoz is currently in the process of transferring EL 27026 and EL 26969 to Ebony Iron Pty Ltd A.C.N. 147 618 148 (Ebony) in accordance with the Ebony Tenement Acquisition Agreement (refer to section 3.2 of Part B of this Report for further details). Fertoz currently holds (as the registered tenement holder) EL 27026 and EL 26969 as bare trustee for Ebony until the Minister approves the transfer and the transfer is 191 LTD REPLACEMENT PROSPECTUS 2013
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registered with the Department. Post-completion of the transfer of these tenements, Fertoz will retain a non-exclusive licence to explore and produce phosphate on the tenements;
(b) EL 29193, EL 29194, EL 29195, EL 29196, EL 29197, EL 29198 and sub-blocks SE 533075 K, P and SE 533076 F, G, H, J, L, M, N, O, Q, R, S, V, W of EL 26055 are being transferred to FSL Corporation Ltd A.C.N. 163 612 575 (FSL Corporation) in accordance with the Barkly Tenement Sale Agreement. We note the transfer of these tenements is subject to certain conditions precedent (refer to section 3.4 of Part B of this Report for further details); and
(c) EL 26978, EL 26981, EL 28644 and the NT Tenement Applications are being transferred to FSL Corporation in accordance with the Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B of this Report for further details). Fertoz currently holds (as the registered tenement holder) these tenements as bare trustee for FSL Corporation until the Minister approves the transfer and the transfer is registered with the Department.
Based on our review of the Minister’s Certificates in respect of the NT Tenements, we note that:
(a) EL 26969 and EL 27026 are subject to dealing number 93205 which was registered on the 23 August 2011. This dealing relates to a previous agreement between Ebony and Fertoz in relation to the transfer of certain iron ore rights to Ebony (dated on or about 1 April 2011). We are instructed that this previous agreement was superseded by the Ebony Tenement Acquisition Agreement and is no longer on foot. We have been instructed this dealing will be withdrawn when the tenements are transferred to Ebony; and
(b) the NT Tenements are otherwise free of any registered caveats, charges, mortgages, options, leases or other encumbrances registered under the MTA.
We have been instructed that the CEN Agreement and Ebony Tenement Acquisition Agreement are in the process of being registered as dealings with the Minister in accordance with section 125 of the MTA. Section 125 allows a person to register an agreement, arrangement, mortgage or dealing (General Dealing) over a mining tenement. Registration of a General Dealing will provide that dealing priority over another General Dealing that is unregistered or registered after the original General Dealing.
None of the NT Tenements grant or provide for production rights in respect of the minerals the subject of the tenement. The holder of an EL has the exclusive right to apply for a mineral lease for production over all or part of the area comprised within the EL.
1.4 RENEWAL OF TENEMENTS
Section 27 of the MTA allows a person to apply to the Minister for an EL for a term of up to 6 years. Section 30(2) of the MTA provides that an EL may be renewed for a period of 2 years, and may be renewed more than once.
We are instructed that none of the NT Tenements are due to expire in the next 12 months.
1.5 REDUCTION OF TENEMENT AREA
The MTA provides that, unless the Minister decides otherwise, the area of an EL must be reduced every 2 operational years during the term of the EL (and any renewal period of the EL). The holder of an EL must nominate to reduce the number of blocks in the tenement area by at least 50% (adding 1 block in the case there are an odd number of blocks). However, in certain circumstances and subject to certain conditions, the holder of an EL can apply to the Minister for an exemption from the surrender requirements.
The reduction dates for the NT Tenements are contained in the table in Part C of this Report.
1.6 RENT, EXPENDITURE AND WORK PROGRAMS
The holder of an EL must carry out the work necessary for the discovery and assessment of mineral in accordance with the technical work program and the expenditure requirements contained in the tenement instrument. The holder of an EL must provide the Minister with an expenditure report each year which contains the following information:
(a) the amount the tenement holder expended on technical work in that operational year; and 10. SOLICITOR'S TENEMENT REPORT 192
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(b) the amount the tenement holder intends to expend in the next operational year.
The MTR sets out the requirements for the submission of these reports and provides that late fees will be payable in certain circumstances where deadlines are not met. If the holder of an EL breaches its expenditure requirements in respect of a mineral tenement:
(a) for an operational year in which the tenement holder is required to reduce the area of the tenement, the Minister need not consider an application to waive all or part of the required reduction of the tenement area; and
(b) for two consecutive years, the Minister may take steps to cancel the EL in accordance with section 105(2)(e) of the MTA.
We understand Fertoz did not comply with all of its minimum expenditure covenants in 2012. We have been instructed by Fertoz that as a result of this non-compliance:
(a) Fertoz relinquished EL 26974, EL 26975, EL 26977, EL 27036, EL 27075, EL 28373, and EL 27027 in their entirety; and
(b) the areas of EL 26054 and EL 26055 were reduced in accordance with the MTA.
We have been instructed that the areas of EL 26978, EL 26981, EL 26995, EL 26997, EL 27008, EL 27076, EL 26969 and EL 27026 were voluntarily reduced to decrease the rent and exploration convenants in relation to these tenements for 2013.
Please refer to Part C of this Report which contains a summary of Fertoz’s expenditure covenants. We have been instructed that Fertoz intends to seek joint venture and / or farm-in partners to fund the nominated expenditure for the relevant NT Tenements for 2013.
The rent payable in respect of an EL is determined annually in accordance with the MTR and varies from year to year. Details regarding the rent payable in respect of the NT Tenements for 2013 and 2014 are contained in the table in Part C of this Report.
1.7 LAND ACCESS IN THE NORTHERN TERRITORY
The MTR sets out certain land access requirements which must be complied with by applicants for mineral tenements and by tenement holders. For example, the applicant or tenement holder must:
(a) give notice to landowners prior to entering the relevant land:
(b) comply with the reasonable requests of any landowners;
(c) only use water conserved artificially by or for the landowner with the landowner’s consent;
(d) if it is necessary for the person to stay overnight, inform the landowner accordingly; and
(e) have in the person's possession the documents required by the MTR (for example, documents relating to the person's identity and proof of attempts to give notice of the exploration).
A person who holds an interest in land (including the registered owner of freehold land, a licence holder under the Crown Lands Act (NT) or the landowner in relation to a park or reserve) is entitled under the MTA to receive compensation from a tenement holder if the land or improvements on the land are damaged as a result of activities conducted on the mineral tenement.
1.8 OVERLAPPING TENEMENTS
The Overlap Analysis Report:
(a) did not reveal the existence of any mineral tenements overlapping the NT Tenements; and
(b) revealed the existence of a number of petroleum tenements overlapping the NT Tenements (specifically, Onshore Exploration Permits and a Pipeline Licence). 193 LTD REPLACEMENT PROSPECTUS 2013
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In the Northern Territory, there is no legislative framework for resolving overlaps between the petroleum tenements and mineral tenements. Generally if there is an overlap, the tenement holders will be responsible for resolving any issues associated with the overlap through private negotiations.
In particular, we note that the Northern Territory Government’s grant document for EL 27026 dated 14 September 2009 states that the tenement holder must not interfere with the Darwin to Amadeus Basin gas pipeline that traverses the tenement.
2 QUEENSLAND TENEMENT
2.1 TENEMENT IN QUEENSLAND
In Queensland, Fertoz has been granted Exploration Permit for Minerals (EPM) 19448, known as the Sherrin North Project (the Queensland Tenement).
2.2 REGULATORY REGIME IN QUEENSLAND
In Queensland, mineral tenements are granted under the Mineral Resources Act 1989 (Qld) (MRA) which enables tenement holders to explore for and produce minerals. Different types of mineral titles may be granted under the MRA, and different types of mineral titles give the tenement holder the right to conduct certain activities.
Section 129 of the MRA allows the holder of an Exploration Permit (EP) to enter any part of the land (that is not the surface of a restricted area) for the purpose of exploring for minerals to which the EP applies, subject to compliance with the Queensland Government’s Land Access Regime.
The applicant for an EP must address native title prior to the grant of the tenement in accordance with the provisions of the Native Title Act 1993 (Cth). Land access and compensation must also be addressed after the grant has been made.
Section 144 of the MRA allows the Minister to require payment of security prior to granting an EP or varying a condition of the EP. This security is intended to ensure compliance with the MRA, the conditions of the EP, rectification of any damage caused under the EP and payment of amounts other than penalties imposed by the Queensland Government under the MRA.
An EP does not grant or provide for production rights in respect of the minerals the subject of the tenement. In Queensland, mining production in Queensland requires the grant of a mining lease. The holder of an EP has an exclusive right to have applications for mineral development licences and mining leases considered for grant in respect of the land that is subject to the EP.
2.3 TITLE AND STANDING
Fertoz is the registered holder of a 100% legal interest in the Queensland Tenement.
Based on our review of the Public Enquiry Report, we note that the Queensland Tenement is free of any registered caveats, charges, mortgages, options, leases or other encumbrances registered under the MRA.
2.4 RENEWAL OF TENEMENTS
An EP may be granted for an initial term of not more than 5 years, and may be renewed for further terms of up to 5 years subject to approval by the Minister. The holder of an EP may apply for a renewal of the EP not more than 6 months and not less than 3 months (unless permitted by the Minister) prior to the expiration of the current term. The Minister must generally be satisfied that the applicant has complied with all conditions relating to the EP, that the proposed work program for the renewal term is appropriate, and that the renewal is in the public interest.
2.5 REDUCTION OF TENEMENT AREA
Section 139 of the MRA provides that, unless the Minister otherwise decides, the area of an EP must be reduced by: 10. SOLICITOR'S TENEMENT REPORT 194
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(a) 40% by the end of the first 3 years after the permit is granted;
(b) a further 50% of the remaining area of the permit by the end of the first 5 years after the permit is granted; and
(c) each time the permit is renewed by a further:
(i) 40% of the remaining area of the permit by the end of the first 3 years after the day the renewed permit started; and
(ii) 50% of the remaining area of the permit by the end of the first 5 years after the day the renewed permit started.
The reduction date for the Queensland Tenement is contained in the table in Part C of this Report.
2.6 RENT, EXPENDITURE AND WORK PROGRAMS
Section 141(1)(a) of the MRA makes it a condition of an EP that the tenement holder carry out the program of works and studies for which the EP was granted. The Minister may include as a condition of grant that the tenement holder comply with minimum expenditure requirements. Section 160(1) of the MRA requires that if the holder of an EP fails to comply with such work program and/or expenditure conditions, the Minister may either cancel the EP or impose a penalty on the tenement holder.
An EP holder must also pay rent in relation to each EP it holds. Rent is payable by the anniversary date of the EP. The current rent payable in respect of each EP is $131.40 per sub-block.
2.7 LAND ACCESS IN QUEENSLAND
Section 140A of the MRA requires an EP holder to consult, or use reasonable endeavours to consult, with each owner and occupier of private or public land on which activities are undertaken. Consultation generally relates to access, the carrying on of authorised activities and compensation liability.
An EP holder is required under the MRA to give an entry notice not later than 10 business days prior to entering land to conduct a preliminary activity or advanced activity (unless the activity falls within one of the exemptions in the MRA). A preliminary activity is an authorised activity that will have no impact or a minor impact on the landholder’s business or land use. An advanced activity is an activity that may have a significant impact on the landholder’s business or land use.
Generally, an EP holder must enter into a Conduct and Compensation Agreement (CCA) with each owner or occupier of the land prior to entering private land to conduct an advanced activity. However, no CCA is required where the land is public land (including land owned by a public land authority). A CCA must meet the requirements contained in the MRA (CCA Requirements).
Section 160(1) of the MRA allows the Minister to cancel an EP or impose a penalty of up to $55,000 if the EP holder does not comply with the entry notice provisions or any of the CCA Requirements.
It is also a condition of each EP that the tenement holder must comply with the mandatory provisions of the Queensland Government’s land access code (section 141(1)(aa)(i) of the MRA).
It is outside the scope of this Report to identify the owners and occupiers of the land affected by the Queensland Tenement (if any).
2.8 OVERLAPPING TENEMENTS
The IRTM Extract did not reveal the existence of any mineral tenements or petroleum tenements overlapping the Queensland Tenement. 195 LTD REPLACEMENT PROSPECTUS 2013
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3 MATERIAL CONTRACTS
3.1 EL 26915 FARM-IN AND JOINT VENTURE AGREEMENT
Fertoz is currently the registered holder of a 100% interest in EL 26915. On 3 May 2012, Fertoz entered into a Farm-In and Joint Venture Agreement with Central Australian Phosphate Limited (formerly known as NuPower Resources Ltd) A.C.N. 120 787 859 (ASX:CEN) (CEN) in relation to EL 26915 in the Northern Territory. This agreement was amended by:
(a) Amending Deed dated 1 August 2012;
(b) Amending Deed dated 31 October 2012; and
(c) Deed of Variation dated 17 May 2013,
(collectively referred to as the “CEN Agreement”).
Contribution Obligation
The CEN Agreement broadly provides that if CEN contributes the sum of $110,000 (including GST) towards the expenditure of EL 26915 by 3 November 2013 (Contribution Obligation), a joint venture shall be established between Fertoz and CEN for the objects of exploration, evaluation and, if warranted, the exploitation, development and mining of EL 26915. Upon CEN fulfilling its Contribution Obligations, CEN will hold a 10% participating interest in the tenement.
Earn-in
If CEN satisfies its Contribution Obligation, CEN will be entitled to a further earn-in in respect of a further 40% interest in EL 26915. If CEN wishes to continue the earn-in, CEN must:
(a) during each operational year that falls within the period commencing from 3 May 2013 and ending on 3 May 2015 (Earn-in Period), make further exploration expenditure in respect of EL 26915 of not less than the minimum exploration expenditure conditions attaching to the tenement for each of those operational years; and
(b) in addition, make further exploration expenditure in respect of EL 26915 of not less than the “Shortfall Amount” (being the amount of $110,000 less the actual expenditure made by CEN in respect of the tenement during the period commencing from 3 May 2012 and ending on 3 May 2013) (Earn-in).
Fertoz will not have an obligation to contribute to the exploration expenditure during the Earn-in Period. Upon CEN fulfilling its Earn-in obligations, CEN will hold a 50% participating interest in the tenement.
Transfer of initial 10% participating interest in EL 26915
Within 30 days of fulfilling its Contribution Obligation, CEN must notify Fertoz that it wishes to continue the Earn-in (Earn-in Notification). If CEN fails to make the Earn-in Notification within the specified time period, then CEN will be deemed to have not earned the 10% participating interest and the agreement will be deemed to have concluded. If CEN provides the Earn-in Notification within the specified time period, then within 21 days after receipt of the Earn-in Notification, Fertoz must prepare and execute the appropriate mineral tenement transfer forms to transfer 10% of its participating interest to CEN. CEN will be responsible for the payment of any associated stamp duty and the lodgement of transfer forms for Ministerial approval and registration in accordance with the MTA.
Transfer of 40% participating interest in EL 26915
Upon CEN fulfilling its Earn-In obligations, Fertoz must prepare and execute the appropriate mineral tenement transfer forms pursuant to the MTA to transfer to CEN a further 40% participating interest in EL 26915. CEN will be responsible for the payment of any associated stamp duty and the lodgement of transfer forms for Ministerial approval and registration in accordance with the MTA. 10. SOLICITOR'S TENEMENT REPORT 196
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Future obligations
Upon completion of the Earn-in Period, either party may from that time onwards either:
(a) contribute to all future expenditure according to its participating interest; or
(b) elect not to contribute, in whole or in part, to its share of future expenditure (Reducing Party) in which event, provided that the other party (Non-Reducing Party) shall contribute the share of expenditure not contributed by the Reducing Party, the Reducing Party's participating interest shall reduce at the rate of 10% for every $100,000 (cumulative) that the Reducing Party does not contribute under an approved program and budget.
Should the participating interest of either party reduce to 10% or below then that participating interest shall vest in the other party (Remaining Party) and the Reducing Party shall be entitled to be paid 0.5% of any future gross revenue derived from production of rock phosphate arising from the tenement for each quarter (payable within one month after the end of the relevant quarter).
The CEN Agreement provides that if the Remaining Party receives proceeds or benefits in any quarter from the sale or disposal of phosphate in combination with one or more other products (in each case arising from EL 26915) (Combined Mineral Product), then the royalty will be calculated and payable on the basis that the gross revenue received by the Remaining Party in relation to the Combined Mineral Product is instead taken to be an amount equal to the quantity of rock phosphate in the Combined Mineral Product multiplied by the “Royalty Price” (as defined in the CEN Agreement and calculated by reference to the grade of rock phosphate and prevailing market prices).
Management
After the completion of the Earn-in Period, Fertoz and CEN must establish a management committee (comprising one representative of Fertoz and one representative of CEN) to consider and determine all matters of principle and policy regarding the joint venture.
Prior to establishment of the management committee (and during the Earn-in Period):
(a) an exploration committee (comprising one representative of Fertoz and one representative of CEN) will be formed for the purpose of meeting quarterly to brief Fertoz on all technical aspects of ongoing exploration activities; and
(b) CEN will be solely responsible for all exploration carried out in connection with EL 26915.
The day to day operation of the joint venture will be at the discretion of the Manager, subject always to the overriding control of the Management Committee. CEN will act in the role of Manager of EL 26915 during the Earn- in Period and will continue as Manager after the completion of the Earn-in Period (provided that after the Earn-in Period, CEN holds a participating interest of at least 50%), subject to the provisions of the CEN Agreement.
Withdrawal
The CEN Agreement provides that any party may by giving not less than one month’s written notice to the other party elect to withdraw from the joint venture at the conclusion of the term of the then current budget (if there is one) or otherwise within 30 days of giving such notice of withdrawal. Where a party withdraws from the joint venture that party will cease to have any right or interest in the joint venture property and its rights under the CEN Agreement will terminate without payment or compensation by the continuing parties. The withdrawing party will remain liable to perform and fulfil its obligations (in particular its obligations to make contributions to expenditure for the remainder of the then current operational year) which have accrued or been entered into by the parties and remain unsatisfied at the date of the expiry of the withdrawal notice.
Default
If any party defaults under the CEN Agreement and such default continues for 30 days after receipt of written notice from the other party, the defaulting party will be deemed to have withdrawn from the joint venture. The defaulting party will remain liable in respect of certain obligations to make contributions to expenditure as specified in any approved budget or as otherwise required to be made under the CEN Agreement in respect of the then current operational year. 197 LTD REPLACEMENT PROSPECTUS 2013
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Stamping and Registration
Clause 29 of the CEN Agreement provides that CEN must attend to the assessment and payment of stamp duty on the CEN Agreement. Thereafter, CEN must lodge the CEN Agreement for Ministerial approval and registration in accordance with the MTA. Clause 29 further provides that if such approval and registration is not obtained within 18 months after the date of the CEN Agreement (i.e. by 3 November 2013), then either party may terminate the CEN Agreement. We are instructed that, at the date of this Report, the CEN Agreement has not been stamped and that Ministerial approval and registration has not been obtained in accordance with the MTA.
3.2 EBONY TENEMENT ACQUISITION AGREEMENT
Fertoz entered into a tenement acquisition agreement with Ebony Iron Pty Ltd A.C.N. 147 618 148 (Ebony) on 29 November 2012 in relation to EL 27026 and EL 26969 (Ebony Tenement Acquisition Agreement).
Transfer of the Ebony Tenements
The Ebony Tenement Acquisition Agreement broadly provided that, subject to certain sub-blocks (defined in the Ebony Tenement Acquisition Agreement as the “Identified Blocks”) being relinquished on or before 28 February 2013 and Fertoz notifying Ebony of that relinquishment, Fertoz agreed to sell the remaining sub-blocks of EL 27026 and EL 26969 (Ebony Tenements) to Ebony for a purchase price of $6,014.00 (inclusive of GST).
We are instructed that:
(a) the Identified Blocks were relinquished as required under the Ebony Tenement Acquisition Agreement; and
(b) completion of the sale and purchase of the Ebony Tenements occurred on or about 8 January 2013 (Completion).
Retained Mineral Rights
On and from Completion, Fertoz shall have a non-exclusive licence to enter the area under each Ebony Tenement (Tenement Area) for the permitted purpose of exploring for and producing phosphate (to the extent that such activities are permitted by the Ebony Tenement Acquisition Agreement, the tenements and applicable laws) (Retained Mineral Rights).
The Retained Mineral Rights in respect of the Ebony Tenements will apply until the first to occur of:
(a) the date Ebony ceases to have any right to access the relevant Tenement Area;
(b) either Fertoz (with Ebony’s prior written consent) or Ebony is granted a Mineral Exploration Licence in Retention, Mineral Lease or Extractive Mineral Lease in respect of that part of the Tenement Area; and
(c) the date Ebony gives notice of termination to Fertoz in accordance with the Ebony Tenement Acquisition Agreement (i.e. where Fertoz breaches its obligations under the Ebony Tenement Acquisition Agreement).
Post-Completion
Pending the registration of the transfer of the Ebony Tenements from Fertoz to Ebony with the Department, Fertoz will hold the Ebony Tenements as bare trustee for Ebony and must not encumber or do anything that will affect Ebony’s right to acquire the Ebony Tenements.
We are instructed that Ebony has paid the assessed stamp duty in relation to the transfer of the Ebony Tenements under the Ebony Tenement Acquisition Agreement. We understand that the Ebony Tenements are currently being held on trust by Fertoz for Ebony pending the formal registration of the transfer of the Ebony Tenements to Ebony (as evidenced by Ebony’s name being recorded as the sole legal and beneficial owner of the Ebony Tenements in the register kept by the Department).
Reduction
The Ebony Tenements may be reduced in accordance with the requirements of the MTA. The areas that are reduced will be at the absolute discretion of Ebony provided that Ebony gives Fertoz at least 1 months’ prior notice. 10. SOLICITOR'S TENEMENT REPORT 198
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First right of refusal
During the term of the Retained Mineral Rights, Ebony must not sell, assign or dispose of all or part of Ebony’s interest in the Ebony Tenements to a third party unless it has first offered to assign that interest to Fertoz on the same terms and conditions.
3.3 WINNECKE TENEMENT SALE AGREEMENT
On 13 May 2013, Fertoz entered into a tenement sale agreement with FSL Corporation Ltd A.C.N. 163 612 575 (FSL Corporation) in relation to EL 26978, EL 26981, EL 28644, EL 28476 (Application), EL 28478 (Application), EL 28479 (Application), EL 28480 (Application), EL 28482 (Application), EL 28483 (Application), EL 28484 (Application), EL 28642 (Application), EL 28643 (Application) and EL 28645 (Application) (collectively these tenements are referred to as the “Winnecke Tenements”) in the Northern Territory (Winnecke Tenement Sale Agreement).
Transfer of the Winnecke Tenements
Under the Winnecke Tenement Sale Agreement, Fertoz agreed to sell the Winnecke Tenements to FSL Corporation for a purchase price of $200,000.00 (GST exclusive). We are instructed that completion of the sale and purchase of the Winnecke Tenements took place on 24 May 2013 in accordance with the terms of the Winnecke Tenement Sale Agreement.
Post-Completion
The Winnecke Tenement Sale Agreement provides that:
(a) FSL Corporation must pay all assessed stamp duty in connection with the Winnecke Tenement Sale Agreement;
(b) FSL Corporation must lodge the Winnecke Tenement Sale Agreement with the Department for registration after stamping; and
(c) Fertoz will hold the Winnecke Tenements as bare trustee and nominee until the Department registers the transfer of the Winnecke Tenements to FSL Corporation.
We are instructed that the Winnecke Tenement Sale Agreement has not been stamped and that the transfer of the Winnecke Tenements has not yet been registered.
3.4 BARKLY TENEMENT SALE AGREEMENT
On 13 May 2013, Fertoz entered into a tenement sale agreement with FSL Corporation in relation to EL 29193, EL 29194, EL 29195, EL 29196, EL 29197, EL 29198 and sub-blocks SE 533075 K, P and SE 533076 F, G, H, J, L, M, N, O, Q, R, S, V, W (Identified Blocks) (which at the agreement date each formed part of EL 26055) (collectively these tenements and sub-blocks are referred to as the “Barkly Tenements”) in the Northern Territory (Barkly Tenement Sale Agreement).
Transfer of the Barkly Tenements
Under the Barkly Tenement Sale Agreement, Fertoz agreed to sell the Barkly Tenements to FSL Corporation for $50,000.00 (GST Exclusive). The Barkly Tenements will not be transferred to FSL Corporation and completion will not occur until:
(a) the Department and / or the Minister consents to the Identified Blocks being severed from EL 26055; and
(b) the allocation of a separate exploration licence tenement reference in respect of the Identified Blocks,
(the Conditions Precedent).
The Conditions Precedent must be satisfied before 5.00 pm on the date that is 6 months after the agreement date (being 13 November 2013) (Conditions Date). If the Conditions Precedent are not satisfied before the Conditions Date either party to the Barkly Tenement Sale Agreement may terminate the agreement by written notice to the other party (in which case FSL Corporation will have no claim against Fertoz in connection with the Barkly 199 LTD REPLACEMENT PROSPECTUS 2013
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Tenement Sale Agreement). Completion is due to occur 7 days after the satisfaction of the Conditions Precedent (Completion). Fertoz must use all reasonable endeavours to satisfy the Conditions Precedent. We are instructed that at the date of this Report, the Conditions Precedent had not been satisfied and that Completion had not occurred.
4 NATIVE TITLE AND CULTURAL HERITAGE
4.1 NATIVE TITLE LEGISLATION IN AUSTRALIA
The following is a brief overview of certain matters relating to the native title regulatory regime in Australia.
In the case of Mabo v Queensland (No. 2) 1992 (the Mabo Decision), the High Court of Australia found that Australian law does recognise a form of native title. In response to this case, the Australian Parliament introduced the Native Title Act 1993 (Cth) (NTA). The States and Territories are able to legislate for their own native title provisions provided these act concurrently with and meet the standards set in the NTA. Accordingly, native title in Australia is regulated by the NTA and complementary State or Territory legislation. The National Native Title Tribunal (NNTT) is responsible for a wide range of functions, and delivers a range of services, which are provided for under the NTA, including maintaining the Register of Native Title Claims, the National Native Title Register (the register of determination of native title) and the Register of Indigenous Land Use Agreements (ILUAs).
Extinguishment of native title
Native title can be either totally or partially extinguished in a number of ways, including:
(a) the valid grant of certain titles by the Crown prior to 23 December 1996; and
(b) freehold land and certain exclusive possession leases (listed in Schedule 1 to the NTA).
Some tenements may co-exist with native title (for example pastoral leases).
Future acts
Where native title is not found to be extinguished over an area of land then any proposed act that will affect that native title (for example by extinguishing it or creating interests inconsistent with the exercise or existence of the native title interests or rights) will be subject to the ‘future act’ provisions under the NTA. Examples of such acts are the grant of mining leases and exploration licences or permits. If the relevant future act process is not followed then the act may be invalid to the extent that native title is affected.
The NTA requires that certain procedural rights be granted to registered native title claimants before a future act is granted. The two most common procedures are:
(a) the "right to negotiate" process, which involves a compulsory six month period of negotiation during which the relevant State or Territory, the applicant and the native title claimants negotiate with the view of obtaining the consent of native title parties to the grant of the tenement (with or without conditions). If agreement is reached, the parties will enter into a ‘section 31 agreement’ and an ancillary agreement. The “expedited process” is available for applications of low impact tenements (primarily exploration tenements), which provides the applicants with a faster procedure for obtaining native title compliance than the right to negotiate process (in certain circumstances the native title parties can object to the expedited process); or
(b) entering into an ILUA with relevant native title parties. ILUAs generally deal with topics such as access to an area, how native title rights coexist with the rights of others, future development of the land and matters of compensation. The State or Territory must be a party to an ILUA and an ILUA must be registered on the Register of Indigenous Land Use Agreements. If the ILUA is registered it will be legally binding on all native title parties in the area of the ILUA.
It should be noted that native title parties will have a right to claim compensation for future acts that will extinguish or impair native title. As a result, if a tenement holder is granted a mineral tenement without following the appropriate native title procedure there is a risk the native title parties can claim compensation from the tenement holder. 10. SOLICITOR'S TENEMENT REPORT 200
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Claims and native title determinations
Under the NTA Indigenous people can apply to register their native title rights with the NNTT. To apply to have their native title rights recognised, the native title applicants must have their application tested against a set of conditions. If the Native Title Registrar of the NNTT determines they are suitable for registration, the claim will be recorded on the Register of Native Title Claims, becoming a “Registered Claim”. It should be noted that the existence of a native title ‘claim’ over an area of land is not evidence of the existence or otherwise of native title unless or until a determination is made.
It should also be noted that the absence of a registered native title claim in an area does not necessarily mean that native title does not exist in that area. A native title claim can potentially be established after an EL or EP is granted but before a mineral lease or mining lease is granted. Accordingly, the results of our review of the Native Title Searches are not conclusive as to whether any native title rights affect the Tenements.
Indigenous people can apply to have their native title rights recognised under the NTA by filing an application for a determination of native title (a claimant application) in the Federal Court. A native title determination is a decision by the Federal Court of Australia, the High Court of Australia or another recognised body that native title does or does not exist in relation to a particular area of land or waters.
Application to Fertoz
Native title matters must be considered prior to the grant of a tenement and in determining whether a tenement was validly granted. To establish whether native title affects the Tenements, it would be necessary to determine whether there is a current or former land tenure (e.g. freehold land) or use made of the land (e.g. the construction of a sealed road) that would have previously extinguished native title. If so, there is no further need to consider the provisions of the NTA.
It is outside the scope of this Report to conduct a detailed analysis of the land tenure status underlying the Tenements which fall within a native title claim or determination area.
The Native Title Searches revealed the following:
(a) EL 26969 covers an area that is subject to a native title determination made by the Federal Court of Australia on 27 June 2012 (Vermelha Pastoral Lease - NTD25/2010) in which it was determined that non- exclusive native title exists in relation to parts of the relevant native title determination area. 100% of the area covered by EL 26969 is within the native title determination area. EL 26969 is in the process of being transferred to Ebony;
(b) 63% of the area covered by EL 26915 is within an area that is subject to an ILUA registered on 15 April 2008. The ILUA was entered into by the Central Land Council, Northern Territory Oil Ltd and several Aboriginal groups in relation to Onshore Exploration Permits (petroleum) 127 and 128. We understand Fertoz is not a party to this agreement. We have been instructed that CEN is planning on entering into discussions with the Central Land Council for the purpose of negotiating a suitable arrangement with the relevant Aboriginal groups prior to commencing exploration on EL 26915;
(c) EPM 19448 covers an area that is subject to a native title claim made by the Indjalandji-Dhidhanu People (QUD 243/09). This claim was registered with the NNTT on 27 November 2009. The grant of EPM 19448 is considered a future act for the purpose of the NTA (the Future Act). In accordance with section 31(1)(b) of the NTA, a Native Title “Deed Regarding the Grant of EPM 19448” was entered into by the Indjalandji-Dhidhanu People, Fertoz and the State of Queensland on 2 December 2012 (EPM 19448 Section 31 Agreement). Under the EPM 19448 Section 31 Agreement, the Indjalandji-Dhidhanu People agree to allow Fertoz to exercise its rights and discharge its obligations under EPM 19448 in accordance with the relevant legislation.
Fertoz has also entered into an Ancillary Agreement with Colin Saltmere and Hazel Windsor (on their own behalf and on behalf of the Indjalandji-Dhidhanu People) on 16 October 2012. The Ancillary Agreement operates in conjunction with the EPM 19448 Section 31 Agreement and contains the terms and conditions upon which Fertoz and its successors may access EPM 19448 to conduct exploration activities.
The Indjalandji-Dhidhanu People also obtained a native title determination in the Federal Court of Australia on 18 December 2012. The outcome of the determination was that native title exists in parts of the determination area; 201 LTD REPLACEMENT PROSPECTUS 2013
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(d) the following native title claims overlap certain Tenements and have been registered with the NNTT:
(i) Dalmore Downs NTD6030/01 is a claim made by the Wakaya People that was registered with the NNTT on 7 June 2001. It overlaps the NT Tenements: EL 26055, EL 29193, EL 29194, EL 29195, EL 29197 and EL 29198 (please note these tenements are in the process of being transferred to FSL Corporation - refer to section 3.4 of Part B of this Report for further details);
(ii) Dalmore Downs South NTD6003/02 is a claim made by the Purrukwarra Wakaya People that was registered with the NNTT on 12 April 2002. It overlaps the NT Tenement: EL 26055 (please note that certain sub-blocks within this tenement are in the process of being transferred to FSL Corporation - refer to section 3.4 of Part B of this Report for further details);
(iii) Sandover River NTD6069/01 is a claim made by the Alyawarr & Kaytetye People that was registered with the NNTT on 18 January 2002. It overlaps the NT Tenement: EL 26915;
(iv) Dry River NTD6009/02 is a claim made by Wardaman, Jalalabayin Wubalawun & Ors that was registered with the NNTT on 19 June 2002. It overlaps the NT Tenements: EL 26995 and EL 26997; and
(v) Willeroo Delamere NTD6011/02 is a claim made by the Wardaman Group that was registered with the NNTT on 19 July 2002. It overlaps the NT Tenement: EL 26997.
Each registered claim attracts rights and interest (for example possession, occupation, use and enjoyment rights) specific to the individual claim. We understand that Fertoz has not entered into any native title agreements with the native title parties to these claims; and
(e) the following native title applications have been made (but have not yet been accepted for registration) by native title parties in respect of areas that overlap certain Tenements:
(i) Nenen NTD43/11 is an unregistered claim filed with the NNTT on 14 October 2011. It is currently in the pre-notification stage of the registration process. It overlaps the NT Tenement: EL 26997;
(ii) Tanumbirini Pastoral Lease NTD33/12 is an unregistered claim filed with the NNTT on 15 October 2012. It is currently in the pre-notification stage of the registration process. It overlaps the NT Tenement: EL 27026 (please note this tenement is in the process of being transferred to Ebony - refer to section 3.2 of Part B of this Report for further details);
(iii) Alroy Downs Pastoral Lease NTD34/11 is an unregistered claim filed with the NNTT on 8 September 2011. It is currently in the pre-notification stage of the registration process. It overlaps the NT Tenements: EL 29193, EL 29195, EL 29196 and EL 29197 (please note these tenements are in the process of being transferred to FSL Corporation - refer to section 3.4 of Part B of this Report for further details); and
(iv) Rockhampton-Brunette Downs NTD6001/03 is an unregistered claim filed with the NNTT on 12 February 2003. It is currently in the notification stage of the registration process. It overlaps the NT Tenement: EL 29196 (please note this tenement is in the process of being transferred to FSL Corporation - refer to section 3.4 of Part B of this Report for further details).
We are instructed by Fertoz that Fertoz has not entered into any native title negotiations with any party in relation to native title interests affecting its Tenements in the Northern Territory.
4.2 ABORIGINAL FREEHOLD LAND RIGHTS IN NORTHERN TERRITORY
The following is a brief overview of certain matters relating to the Aboriginal freehold land rights regulatory regime in the Northern Territory.
Aboriginal freehold land in the Northern Territory is land for which Indigenous people hold an inalienable freehold (ownership) title through the Land Trust (Aboriginal Freehold Land) established under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) (ALRA). This legislation was enacted by the Commonwealth legislature prior to the Mabo Decision and the introduction of the NTA, and applies only in respect to Northern Territory. The NTA does not apply to Aboriginal freehold land. 10. SOLICITOR'S TENEMENT REPORT 202
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Any person seeking a right to explore for minerals in Aboriginal Freehold Land (land granted to an Aboriginal land trust under the ALRA) is required to obtain the consent of the Minister and the consent of the relevant Land Council for the area concerned. The prospective tenement holder must enter into an agreement with the Land Council concerning the terms of the mineral tenement and the proposed exploration or mining activities (which, as a result, will require the Land Council to consult with and obtain the consent of the traditional Aboriginal owners).
Such an agreement will generally deal with access rights, sacred site protection, environmental protection, compensation and employment and training of Indigenous people. Where the tenement holder and the Land Council cannot come to an agreement as the terms of the mineral tenement, either party may request that the Minister refer the negotiation to the Mining Commissioner for conciliation and arbitration.
It is outside the scope of this Report to identify the locations of Aboriginal Freehold Land and the extent to which Aboriginal Freehold Land rights affect the Tenements. As noted above, where a Tenement (or future tenement) is subject to Aboriginal Freehold Land rights, Fertoz will need to seek the agreement of the relevant Land Council and comply with the requirements of the ALRA.
Failure to comply with the requirements under the ALRA may result in the refusal of the application by the Minister.
In relation to the granted Tenements, it is understood that consent and agreements under the ALRA were not required because there were no established Aboriginal Freehold Land rights overlapping with the areas of these Tenements at the time of grant.
However, we have been instructed that several of the Granted NT Tenements were granted subject to Aboriginal Freehold Land claims (that had not yet been granted) (detailed in the table in Part C of this Report). In the event that an Aboriginal Freehold Land claim is upheld and the land subsequently becomes Aboriginal Freehold Land, the grant of any consequential mining rights (for example a mining lease) will be subject to the provisions of ALRA. It is outside the scope of this Report to investigate and determine if any such claims have been granted or rejected.
The Minister’s Certificates and the Fertoz Information indicate that exploration applications have been submitted by Fertoz to the relevant Land Councils in respect of all of the current NT Tenement Applications. However, we have been instructed by Fertoz that it has not yet reached agreement with any of the relevant Land Councils in relation to those applications. As noted above, until such an agreement is reached (or a determination is made by the Mining Commissioner) the relevant NT Tenement Applications will not be granted. Please note the NT Tenement Applications are currently in the process of being transferred to FSL Corporation (refer to section 3.3 of Part B of this Report for further details).
4.3 ABORIGINAL CULTURAL HERITAGE AND SACRED SITES
The following is a brief overview of certain matters relating to the aboriginal cultural heritage and sacred sites regulatory regime in Australia.
The Tenements are affected (to varying extents) by Aboriginal sacred sites, heritage places and objects. It is outside the scope of this Report to identify the locations of these sites and objects and the extent to which they affect the Tenements. A brief summary of the regulatory regime regarding Aboriginal cultural heritage and sacred sites for the Northern Territory, Queensland and the Commonwealth is outlined below.
Northern Territory
In the Northern Territory, the Northern Territory Aboriginal Sacred Sites Act 1989 (NT) (SSA) and the Heritage Act 2011 (NT) (Heritage Act) are the primary Acts that set out the framework for protection of Aboriginal cultural heritage.
Sacred sites are places which are sacred to the Indigenous people or have a special significance through association with particular aspects of Aboriginal social and cultural traditions.
The AAPA maintains a Register of Sacred Sites pursuant to the SSA. The Register of Sacred Sites contains details of 'registered sites' but does contain details in relation to 'recorded sites'. Registered sites are sacred sites that have been comprehensively documented and evaluated by the AAPA, and include information on locations and boundaries. Recorded sites are sacred sites of which AAPA has not been able to assess the accuracy and have not been fully mapped. 203 LTD REPLACEMENT PROSPECTUS 2013
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All sacred sites are protected by the SSA, regardless of whether they are included on the Register of Sacred Sites. It is an offence under the SSA to carry out work on or use a sacred site in breach of the requirements contained in the SSA.
The only definitive method of determining the existence, location and extent of sacred sites is to conduct a specific survey having regard to the proposed activities on the land. Such a survey is outside the scope of this Report.
However, it is a defence to conducting works on a sacred site if those works are conducted pursuant to an Authority Certificate issued by the AAPA. A party can obtain an Authority Certificate by making an application to the AAPA. Proponents should not rely on Authority Certificates issued to other applicants as there are limits on the circumstances in which an Authority Certificate can apply to persons other than the applicant.
The Heritage Act commenced on 1 October 2012. The Heritage Act aims to protect places that have been declared as heritage places (including archaeological places and objects). The Heritage Act achieves this by establishing a process for nominating heritage places and for assessing whether or not a place should be declared to be a heritage place that is to be protected.
In particular, the Heritage Act provides that people who want to conduct activities on declared heritage places must obtain a works approval. It is a criminal offence to cause damage to a heritage place.
Queensland
In Queensland, the Aboriginal Cultural Heritage Act 2003 (Qld) (ACHA) establishes a cultural heritage duty of care that applies in respect of all land, regardless of the underlying tenure or the existence of native title. The ACHA imposes a statutory duty of care on proponents when undertaking any project which requires a person who carries out an activity to take all reasonable and practicable measures to ensure the activity does not harm Aboriginal cultural heritage.
Failure to comply with the cultural heritage duty of care under the ACHA, may result in prosecution by the State for breach of the ACHA, an injunction application being made by the relevant Aboriginal parties, or a Ministerial stop order to prevent harm to Aboriginal cultural heritage.
A tenement holder will discharge their duty of care obligations if it:
(a) negotiates a 'native title agreement' (for example an ILUA or a section 31 agreement) or 'another agreement' (for example a Cultural Heritage Management Agreement) with an Aboriginal party that makes provision for managing Aboriginal cultural heritage;
(b) negotiates a cultural heritage management plan (CHMP) (which has been approved by Department of Aboriginal and Torres Strait Islander and Multicultural Affairs) with an Aboriginal party; or
(c) follows the duty of care guidelines published by Department of Aboriginal and Torres Strait Islander and Multicultural Affairs.
Commonwealth
The Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth) (Commonwealth Heritage Act) is aimed at the preservation and protection of any Aboriginal areas and objects. It enables the Australian Government to respond to requests to protect traditionally important areas and objects that are under threat, if it appears that State or Territory laws have not provided effective protection. Under the Commonwealth Heritage Act, the Minister for Aboriginal Affairs may make interim or permanent declarations of preservation in relation to significant Aboriginal areas or objects, which have the potential to halt exploration activities.
The Government cannot make a declaration unless an Aboriginal or Torres Strait Islander person (or a person representing an Aboriginal or Torres Strait Islander person) has requested it and has provided satisfactory evidence of a body of traditions, customs, observances and beliefs that explains, firstly, why there is a threat of injury or desecration and, secondly, why the area, object or class of objects is of particular significance to Aboriginal or Torres Strait Islander people.
The Environment Protection and Biodiversity Conservation Act 1999 (Cth) also makes provision for the protection of places that have 'Indigenous heritage values', which are listed on the National Heritage List or the Commonwealth Heritage List, though this Act is rarely invoked for such protection. 10. SOLICITOR'S TENEMENT REPORT 204
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5 ENVIRONMENT
The following is a brief overview of certain matters relating to the environment regulatory regime in Australia.
5.1 ENVIRONMENT PROTECTION AND BIODIVERSITY CONSERVATION ACT 1999 (CTH)
The Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBCA) establishes the National Heritage List, which includes natural, Indigenous and historic places that are of outstanding heritage value to the nation. Under the EPBCA, there is a requirement to obtain prior approval from the Minister in respect of actions (including mining and exploration activities) that will have or are likely to have a significant impact on a matter of national environmental importance (for example, threatened species) or Commonwealth land. If the required approval is not obtained, then undertaking the action will constitute an offence under the EPBCA and civil and/or criminal penalties may apply.
The EPBCA also establishes the Commonwealth Heritage List, which includes places on Commonwealth lands and waters or under Australian Government control that have Indigenous heritage significance.
It is outside the scope of this Report to identify or provide an analysis in respect of any sites and objects of national environmental importance or Commonwealth land affecting the Tenements or the application of the EPBCA to Fertoz and its Tenements.
5.2 MINING MANAGEMENT ACT 2001 (NT)
The Mining Management Act 2001 (NT) (MMA) applies to and regulates all mining sites and activities (other than fossicking) in the Northern Territory. In particular, the MMA regulates the management of mining activities from an environmental perspective by: (a) setting out environmental obligations that are imposed in respect of the relevant site, the operator, workers and contractors; (b) providing a mechanism for the authorisation and monitoring of mining activities (including requirements for audits, inspections, investigations and reporting), the payment of security by tenement holders, and the enforcement of obligations of all persons on mining sites (including the imposition of penalties); and (c) facilitating implementation of environment protection systems.
An “Authorisation” for mining activities is required under the MMA for activities that will result in substantial disturbance of the ground (including, for example, drilling, bulk sampling and other exploration works, as well as land clearing, earthworks and other similar activities). A mining management plan (MMP) must be submitted with an application for an Authorisation. A MMP must include (among other things) details of the implementation of the applicant’s management systems to address environmental issues. Once an Authorisation has been issued, the holder will be able to undertake activities as detailed in the approved MMP.
The MMA allows the Minister to require an applicant or holder of an Authorisation to provide security for any potential damage caused to, or suffered by, a land holder or other title holder as a result of mining related activities conducted on the land. The obligation to pay security may arise during the application process or at any time during the term of the mineral tenement.
Information regarding approved MMP’s is not available by public enquiry. However, if an Authorisation has been issued to the operator in respect of the Tenements, this indicates that the Department of Resources holds: (a) a security, if required, as a condition of the grant; and (b) an approved MMP in respect of those mining activities.
We understand that Fertoz does not currently hold any Authorisations in relation to any of its NT Tenements. We have been instructed that: (a) intends to apply for an Authorisation for the Barrow Creek Project; and (b) Fertoz has developed a new exploration programme for the tenements it will retain in the Barkly Project post-completion of the Barkly Tenement Sale Agreement. We have been instructed that Fertoz is in the process of locating a joint venture partner for the retained tenements before submitting a revised MMP.
5.3 RESERVES IN NORTHERN TERRITORY
Under Part 6 of the MTA, the relevant Minister has the right to declare certain land in the Northern Territory as “special reserved land” or “general reserved land”. Special reserved land is reserved completely from exploration, extraction and mining activities, and persons may not apply for the grant of a mineral tenement for any part of such land. General reserved land may be reserved from exploration, extraction and mining activities generally, or in relation to particular minerals. 205 LTD REPLACEMENT PROSPECTUS 2013
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5.4 ENVIRONMENTAL PROTECTION ACT 1994 (QLD)
The Environmental Protection Act 1994 (Qld) (EPA) regulates the environmental management for an exploration permit or mineral development licence in Queensland. An applicant for a mining tenement must:
(a) obtain and comply with an environmental authority (EA) in respect of “environmentally relevant activities” from the DEHP; and
(b) provide security to the DEHP to cover the costs of repair of any damage caused by the proposed exploration or mining.
An EA imposes environmental conditions and requirements that must be complied with by a tenement holder in respect of “environmentally relevant activities”. An application for an EA is generally lodged at the same time as the application for the relevant mineral tenement. Prior to the grant of a mineral tenement, the Mining Registrar must be satisfied that environmental matters have been appropriately managed. Before an EA can be granted in respect of a mining project, the EPA requires an assessment of the project to determine its likely environmental impacts. There are two levels of EAs that can be issued having regard to the level of environmental risk associated with the project.
Mining projects that have the potential to cause significant environmental damage require a level 1 EA including specific conditions relating to the proposed project. Low impact mining projects may be issued with the level 2 EA which imposes standard conditions contained in the Code of Environmental Compliance.
Applicants for level 1 EAs must submit an environmental management plan (EMP) for all relevant activities. This is generally only required in relation to mining leases. Level 2 EAs are relatively common for exploration tenements.
We have been instructed that Fertoz has obtained an Environmental Authority MIC203353811 in respect of the Queensland Tenement and has paid a $2,500 financial assurance in accordance with the Code of Environmental Compliance.
5.5 RESTRICTED AREAS, WILD RIVERS AND STRATEGIC CROPPING IN QUEENSLAND
Restricted areas are areas of land that have varying conditions and restrictions placed over them. The restrictions vary according to areas, but relate primarily to the nature and type of mining or geothermal activity that may be undertaken in this area. The key types of restricted areas in Queensland include constrained areas, restricted areas, urban restricted areas, designated urban areas, sterile land, wild rivers areas, floodplain management areas and nominated waterways.
The Strategic Cropping Land Act 2011 (Qld) (SCLA) aims to protect land that is highly suitable for cropping, manage the impacts of development on that land and preserve the productive capacity of that land. Under the legislation, certain protection and management areas have been identified as strategic cropping land and conditions and restrictions may be imposed on the development of such land.
A wild river declaration is a statutory document under the Wild Rivers Act 2005 (Qld) which aims to preserve a river that has all, or almost all, of its natural values intact. The Act establishes a framework for preserving the natural value of a declared wild river by regulating exploration and mining activities in the mining area. A declaration is an instrument that sets specific conditions in respect of mineral tenements which are located within a declared area (including limits on resources that can be taken from the area and any other rules that must be complied with).
The Queensland Government Grant of Exploration Permit for Minerals EPM 19448 dated 15 May 2013 states the Queensland Tenement:
(a) is subject to the Georgina and Diamantina Wild River Declaration 2011. The wild river status of the area (and the existence of endangered regional ecosystems within the area) may affect the requirement for an environmental impact statement and environmental management plan in relation to any future application for a Mining Lease; and
(b) is located within the geographic area of Restricted Area 384 (RA 384), however the application for the Queensland Tenement was lodged prior to Gazettal of the RA 384. RA 384 is in place to manage exploration in close proximity to urban areas. The Queensland Government is currently undertaking statutory regional planning for the key resource regions of the Darling Downs and Central Queensland however such plans will not be in place until August 2013. 10. SOLICITOR'S TENEMENT REPORT 206 - - - Environ- Environ- ment overlaps Native title andNative title Aboriginal Freehold Land NTD6009/02 is a is NTD6009/02 that has claimant for been accepted registration (overlaps 22.22% of the tenement). Willeroo Delamere a is NTD6011/02 that has claimant for been accepted registration (overlaps 77.78% of the tenement). NTD43/11 Nenen that is a claimant has not been accepted for registration (overlaps 10.71% of the tenement). NTD6009/02 is a is NTD6009/02 that has claimant for been accepted registration (overlaps 22.73% of the tenement). the area of tenement was to an subject Freehold Aboriginal Land claim. - Dry River - Dry - At the time of grant, - River Dry Material contracts and Dealings ) OEP Overlaps with tenements not Fertozheld by OEP 167 (NT)Pangaea Ltd – 100% Pty overlap 167 Pangaea 167 Pangaea (NT) Ltd – Pty 100% overlap Onshore Exploration Permit ( OEP 220 Arafura Oil Pty Ltd – 25% overlap OEP 167 (NT)Pangaea Ltd 75% Pty overlap 2014 2014 2013 for 2013 for 2013 for 2014 for 2014 $7,302.00 $3,502.00 $6,742.00 $1,542.00 $14,342 for $902.00 for Annual Annual Rent Note 8 - 22 Note 4 for 2012: $125,000.00 Actual in 2012: $4,433.43 for 2012: $125,000.00 Actual in 2012: $7,466.43 Expenditure covenants for 2012: $125,000.00 Actual in 2012: $5,849.68 - (2012) Area km 2 Katherine Project (Northern Territory) Territory) (Northern Katherine Project Reduction date Note 14 Expiry date Grant or application date % owner- ship Fertoz Ltd 100% Fertoz 02.09.2015 02.09.2013 03.09.2009 Covenanted 584.08 Ltd 100% Fertoz 02.09.2013 02.09.2015 03.09.2009 268.6 Covenanted Ltd 100% Fertoz 02.09.2015 02.09.2013 03.09.2009 53.12 Covenanted Tenement holder Tenement EL 26995 EL 26997 EL 27008 PART C: TENEMENT TABLE 207 LTD REPLACEMENT PROSPECTUS 2013 - - - Environ- Environ- ment overlaps the area of tenement was to an subject Freehold Aboriginal Land claim. the area of tenement was to an subject Freehold Aboriginal Land claim. Native title andNative title Aboriginal Freehold Land Dalmore Downs Downs Dalmore a is NTD6030/01 that has claimant for been accepted registration and of 92.68% overlaps the tenement. Downs Dalmore South NTD6003/02 that is a claimant has been accepted for registration and 7.32% of overlaps the tenement. - At the time of grant, - At the time of grant, Material contracts and Dealings Sub-blocks Sub-blocks SE 533075 K, P and SE 533076 F, G, H, J, L, M, N, O, Q, R, S, V, W are subject to the Barkly Tenement Sale Agreement (refer to section 3.4 of Part B this Report for further details). OEP 202 (application) Wiso Oil Pty Ltd – 100% overlap OEP 178 (application) Amour Energy Ltd – 39% Pty overlap OEP 204 (application) Wiso Oil Pty Ltd – 61% overlap Overlaps with tenements not Fertozheld by OEP 178 (application) Amour Energy Ltd – 39% Pty overlap OEP 204 (application) Wiso Oil Pty Ltd – 64% overlap 2013 2013 2014 2013 2013 2014 for 2013 for 2014 $4,982.00 $9,702.00 $13,302 for $26,342 for $19,782 for $39,302 for Annual Annual Rent Note 8 Note 4 for 2012: $260,000.00 Actual in 2012: $22,766.92 for 2012: $75,000.00 Actual in 2012: $4,836.35 Expenditure covenants Covenanted for 2012: $385,000.00 Actual in 2012: $23,583.67 23 Note 6 (2012) Area km 2 Barkly Project (Northern Territory) Project (Northern Barkly Reduction date Note 14 Expiry date Grant or application date % owner- ship Fertoz Ltd 100% Fertoz 04.09.2014 04.09.2014 05.09.2008 Covenanted 526.38 Ltd 100% Fertoz 22.07.2015 22.07.2013 23.07.2009 Covenanted 370.11 Tenement holder Ltd 100% Fertoz 04.09.2014 05.09.2008 04.09.2014 781.59 Tenement EL 26054 EL 26055 Note 9 EL 27076 10. SOLICITOR'S TENEMENT REPORT 208 - - - Environ- Environ- ment overlaps Native title andNative title Aboriginal Freehold Land Dalmore Downs Downs Dalmore a is NTD6030/01 that has claimant for been accepted registration of (overlaps 100% the tenement). Dalmore Downs Downs Dalmore a is NTD6030/01 that has claimant for been accepted registration of (overlaps 100% the tenement). Downs Alroy Pastoral Lease NTD34/11 is a that has claimant not been accepted for registration (overlaps 37.52% of the tenement). Downs Dalmore a is NTD6030/01 that has claimant for been accepted registration of (overlaps 100% the tenement). Downs Alroy Pastoral Lease NTD34/11 is a that has claimant not been accepted for registration (overlaps 44.71% of the tenement). Material contracts and Dealings Barkly Barkly Tenement Sale Agreement (refer to section 3.4 of Part B this Report for further details). Barkly Barkly Tenement Sale Agreement (refer to section 3.4 of Part B this Report for further details). Barkly Tenement Sale Agreement (refer to section 3.4 of Part B this Report for further details). Overlaps with tenements not Fertozheld by OEP 144 (application) Conarco Pty Minerals Ltd – 100% overlap OEP 144 (application) Conarco Pty Minerals Ltd – 100% overlap OEP 144 (application) Conarco Pty Minerals Ltd – 100% overlap 2013 2013 2014 2013 2014 for 2013 for 2014 $1,312.00 $1,574.00 $288.00 for $550.00 for $352.00 for $614.00 for Annual Annual Rent Note 8 Note 1 Note 1 Note 1 Note 4 n/a n/a n/a Expenditure covenants 24 (2012) Area km 2 Reduction date Note 14 Expiry date Grant or application date % owner- ship Tenement holder Fertoz Ltd 100% 30.07.2012 29.07.2018 29.07.2014 29.19 Ltd 100% Fertoz 29.07.2014 30.07.2012 29.07.2018 133 Fertoz Ltd 100% 30.07.2012 29.07.2018 29.07.2014 35.69 Tenement EL 29193 Note 9 EL 29194 Note 9 EL 29195 Note 9 209 LTD REPLACEMENT PROSPECTUS 2013 - - - Environ- Environ- ment overlaps Native title andNative title Aboriginal Freehold Land Rockhampton- Brunette Downs a is NTD6001/03 that has claimant not been accepted for registration of (overlaps 100% the tenement). Downs Alroy Pastoral Lease NTD34/11 is a that has claimant not been accepted for registration (overlaps 77.64% of the tenement). Downs Dalmore a is NTD6030/01 that has claimant for been accepted registration of (overlaps 100% the tenement). Dalmore Downs Downs Dalmore a is NTD6030/01 that has claimant for been accepted registration of (overlaps 100% the tenement). Downs Alroy Pastoral Lease NTD34/11 is a that has claimant not been accepted for registration of (overlaps 100% the tenement). Material contracts and Dealings Barkly Barkly Tenement Sale Agreement (refer to section 3.4 of Part B this Report for further details). Barkly Tenement Sale Agreement (refer to section 3.4 of Part B this Report for further details). Barkly Barkly Tenement Sale Agreement (refer to section 3.4 of Part B this Report for further details). Overlaps with tenements not Fertozheld by OEP 178 (application) Armour Energy Ltd – 100% Pty overlap OEP 178 (application) Amour Energy Ltd – 80% Pty overlap OEP 204 (application) Wiso Oil Pty Ltd – 20% overlap OEP 144 (application) Conarco Pty Minerals Ltd – 100% overlap 2013 2013 for 2013 for 2014 for 2013 for 2014 for 2014 $1,120.00 $1,382.00 $3,936.00 $4,198.00 $1,190.00 $928.00 for Annual Annual Rent Note 8 Note 1 Note 1 Note 1 Note 4 n/a n/a n/a Expenditure covenants 25 (2012) Area km 2 Reduction date Note 14 Expiry date Grant or application date % owner- ship Tenement holder Fertoz Ltd 100% 30.07.2012 29.07.2018 29.07.2014 113.34 Fertoz Ltd 100% 30.07.2012 29.07.2018 29.07.2014 94.03 Fertoz Ltd 100% 08.10.2012 07.10.2018 07.10.2014 397.72 Tenement EL 29196 Note 9 EL 29197 Note 9 EL 29198 Note 9 10. SOLICITOR'S TENEMENT REPORT 210 - Environ- Environ- ment overlaps - - - Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period Native title andNative title Aboriginal Freehold Land Winnecke Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further Material contracts and Dealings OEP 207 Wiso OEP 207 Wiso Ltd – Oil Pty 100% overlap OEP 207 Wiso Ltd – Oil Pty 79% overlap OEP 205 Wiso Ltd – Oil Pty 21% overlap OEP 205 Wiso Ltd – Oil Pty 100% overlap (application) (application) Wiso Oil Pty Ltd – 98% overlap OEP 209 (application) Wiso Oil Pty Ltd – 2% Overlaps with tenements not Fertozheld by - OEP 208 - OEP for 2013 for 2014 for 2013 for 2014 for 2013 for 2014 $7,622.00 $9,742.00 $4,342.00 $8,422.00 $14,982.00 $19,222.00 Annual Annual Rent Note 8 Note 2 Note 4 for 2012: $125,000.00 Actual in 2012: $10,469.00 for 2012: $125,000.00 Actual in 2012: $6,974.10 for 2012: $65,000.00 Actual in 2012: $2,268.75 n/a Expenditure covenants 26 (2012) Area km 2 Winnecke Project (Northern Territory) (Northern Project Winnecke Reduction date Note 14 Expiry date Grant or application date % owner- ship Tenement holder Ltd 100% Fertoz 22.07.2015 22.07.2013 23.07.2009 Covenanted 600.88 Ltd 100% Fertoz 22.07.2015 22.07.2013 23.07.2009 Covenanted 773.28 Ltd Covenanted 100% 1276.48 Fertoz 01.11.2017 01.11.2013 02.11.2011 Fertoz Ltd 100% 29.11.2010 n/a n/a 1627.75 Tenement EL 26978 Note 10 EL 26981 Note 10 EL 28644 Note 10 EL 28476 application Note 10 211 LTD REPLACEMENT PROSPECTUS 2013 - - - Environ- Environ- ment overlaps Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. 31.10.2013. Native title andNative title Aboriginal Freehold Land Winnecke Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Material contracts and Dealings (application) (application) Wiso Oil Pty Ltd – 1% overlap OEP 210 (application) Wiso Oil Pty Ltd – 99% overlap (application) Wiso Oil Pty Ltd – 13% overlap OEP 209 (application) Wiso Oil Pty Ltd – 48% overlap OEP 206 (application) Wiso Oil Pty Ltd – 39% overlap (application) Wiso Oil Pty Ltd – 98% overlap OEP 209 (application) Wiso Oil Pty Ltd – 2% overlap Overlaps with tenements not Fertozheld by overlap details). on expire will - OEP 208 - OEP 208 - OEP 208 - OEP Annual Annual Rent Note 8 Note 2 Note 2 Note 2 Note 4 n/a n/a n/a Expenditure covenants 27 (2012) Area km 2 Reduction date Note 14 Expiry date Grant or application date % owner- ship Tenement holder Fertoz Ltd 100% 29.11.2010 n/a n/a Fertoz Ltd 1627.75 100% 29.11.2010 n/a n/a 1502.62 Fertoz Ltd 100% 29.11.2010 n/a n/a 1238.40 Tenement EL 28478 application Note 10 EL 28479 application Note 10 EL 28480 application Note 10 10. SOLICITOR'S TENEMENT REPORT 212 - - - - Environ- Environ- ment overlaps Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period Native title andNative title Aboriginal Freehold Land Winnecke Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further Material contracts and Dealings (application) (application) Wiso Oil Pty Ltd – 100% overlap (application) Wiso Oil Pty Ltd – 68% overlap OEP 210 (application) Wiso Oil Pty Ltd – 32% overlap (application) Wiso Oil Pty Ltd – 6% overlap OEP 206 (application) Wiso Oil Pty Ltd – 94% overlap (application) Wiso Oil Pty Ltd – 37% overlap OEP 210 (application) Wiso Oil Pty Overlaps with tenements not Fertozheld by - OEP 209 - OEP 208 - OEP 208 - OEP 208 - OEP Annual Annual Rent Note 8 Note 2 Note 2 Note 2 Note 2 Note 4 n/a n/a n/a n/a Expenditure covenants 28 (2012) Area km 2 Reduction date Note 14 Expiry date Grant or application date % owner- ship Tenement holder Fertoz Ltd 100% 29.11.2010 n/a n/a Fertoz Ltd 1353.29 100% 29.11.2010 n/a n/a Fertoz Ltd 1626.57 100% 29.11.2010 n/a n/a Fertoz Ltd 1584.23 100% 01.03.2011 n/a n/a 489.39 Tenement EL 28482 application Note 10 EL 28483 application Note 10 EL 28484 application Note 10 EL 28642 application Note 10 213 LTD REPLACEMENT PROSPECTUS 2013 - - - Environ- Environ- ment overlaps Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. Fertoz has submitted an exploration to the application relevant Land in Council with accordance the ALRA. The negotiation period on expire will 31.10.2013. 31.10.2013. Northern Territory Northern Territory and Oil Ltd: EP 127 128 ILUA registered on 15.04.2008 (overlaps 63.025% of the tenement). River Sandover a is NTD6069/01 that has claimant for been accepted registration (overlaps 99.84% of the tenement). Native title andNative title Aboriginal Freehold Land Winnecke Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). Winnecke Tenement Sale Agreement (refer to section 3.3 of Part B this Report for further details). details). on expire will Material contracts and Dealings EL 26915 Joint Venture and Farm-in Agreement (not registered) CEN with (refer to section 3.1 of Part B this Report for further details) (application) (application) Wiso Oil Pty Ltd – 94% overlap (application) Wiso Oil Pty Ltd – 100% overlap Overlaps with tenements not Fertozheld by Ltd – 63% overlap OEP 128 Petrofrontier (Australia) Pty Ltd – 64% overlap OEP 201 Wiso Ltd – Oil Pty 30% overlap OEP 263 Territory Gas Ltd – Aust Pty 6% overlap - OEP 209 - OEP 208 - OEP for 2013 for 2014 $9,695.00 $19,142.00 Annual Annual Rent Note 8 Note Note 2 Note 2 Note 4 n/a n/a Expenditure covenants for Covenant 2012: $100,000.00 Actual in 2012: $75,289.50 for Covenant 2013: $190,000.00 Actual in 2013: $8,834.86 15 29 Note 13 (2012) Area km 2 Barrow Creek Project (Northern Territory) Project (Northern Creek Barrow Reduction date Note 14 Expiry date Grant or application date % owner- ship Tenement holder Fertoz Ltd 100% 01.03.2011 n/a n/a Fertoz Ltd 1068.16 100% 01.03.2011 n/a n/a Ltd 666.26 100% Fertoz 08.04.200907.04.2015 07.04.2015 743.87 Tenement EL 28643 application Note 10 EL 28645 application Note 10 EL 26915 Note 12 10. SOLICITOR'S TENEMENT REPORT 214 - - Environ- Environ- ment overlaps Tanumbirini Tanumbirini Pastoral Lease NTD33/12 is a that has claimant not been accepted for registration (overlaps 98.35% of the tenement). At the time of grant, the area of tenement was to an subject Freehold Aboriginal Land claim. On 27.06.2012 a was determination made that native (non- title exists with exclusive) respect to the Vermelha Pastoral Lease NTD25/10 over part of the area determination (the determination area overlaps 100% of the tenement). Native title andNative title Aboriginal Freehold Land Dealing Dealing 93205 Registered on 23.08.2011 - Agreement Ebony with Ltd Iron Pty Dealing 93205 Registered on 23.08.2011. Agreement Ebony with Ltd Iron Pty Material contracts and Dealings Note 11 Ebony Tenement Acquisition Agreement (refer to section 3.2 of Part B this Report for further details). Note 11 Ebony Tenement Acquisition Agreement (refer to section 3.2 of Part B this Report. Pipeline Pipeline 17 Licence Northern Territory Oil Ltd – 1% overlap OEP 161 Tamboran Pty Resources Ltd – 100% overlap OEP 153 Jacaranda Minerals Limited & Minerals Australia Pty Ltd – 100% overlap Overlaps with tenements not Fertozheld by for 2013 for 2014 for 2013 for 2014 $1,022.00 $1,782.00 $4,782.00 $9,302.00 Annual Annual Rent Note 8 Note 4 for 2012: $250,000.00 Actual in 2012: $6,705.00 for 2012: $250,000.00 Actual in 2012: $5,976.10 Expenditure covenants 30 (2012) Area km 2 Roper Project (Northern Territory) Roper Project (Northern Hodgson Project (Northern Territory) Territory) (Northern Project Hodgson Reduction date Note 14 Expiry date Grant or application date % owner- ship Tenement holder Ltd 100% Fertoz 02.09.2015 02.09.2013 03.09.2009 62.58 Covenanted Ltd 100% Fertoz 02.09.2015 02.09.2013 03.09.2009 Covenanted 353.45 Tenement EL 27026 Note 3 EL 26969 Note 3 215 LTD REPLACEMENT PROSPECTUS 2013 Georgina and Diamantina Wild River Declaration 2011 Restricted Area 384 Environ- Environ- ment overlaps Indjalandji- People Dhidhanu had QC2009/003 their claim registered on 27.11.2009 of (overlaps 100% the tenement). The native title party a also obtained native title in determination Court the Federal of Australia on 18.12.2012. The outcome of the was determination that native title exists in parts of the determination area. Native title andNative title Aboriginal Freehold Land Agreement and Ancillary Agreement the with Indjalandji- Dhidhanu People Material contracts and Dealings - Section 31 31 - Section Overlaps with tenements not Fertozheld by Note 7 2013 2013 $0.00 for $11,566.60 for 2014 Annual Annual Rent Note 8 Note 5 Note 4 Expenditure covenants n/a 31 (2012) Area km 2 Sherrin North (Queensland) Sherrin North (Queensland) Reduction date Note 14 Expiry date Grant or application date 100% 100% 05.05.2016 05.05.2018 06.05.2013 221 % owner- ship Fertoz Limited Tenement holder Tenement EPM 19448 10. SOLICITOR'S TENEMENT REPORT 216 f this Report) and will be transferred to f this Report) and will e instructed that this previous agreement e instructed that this previous agreement Q, R, S, V, are subject to W of EL 26055 , G, H, J, L, M, N, O, Q, R, S, WV, have ed, enabling Fertoz until ed, enabling Fertoz to retain 236 blocks ) and will be transferred to Ebony after the ) and will garding expenditure covenants. expenditure garding ned from the Fertoz Information.ned from the Fertoz not contain details regarding expenditure expenditure regarding not contain details of Part B of this Report) and will be transferred to FSL of Part B this Report) and will 3.4 32 These tenements are subject to the Winnecke Tenement Sale Agreement with FSL Corporation Sale Agreement with Winnecke to the Tenement tenements are subject These 3.3 of Part B o (as detailed in section Dealing number 93205 relates to a previous iron ore agreement between Ebony and Fertoz (dated on or about 1 April 2011). We (dated on or about 1 April 2011). wer Fertoz and Ebony iron ore agreement between relates to a previous number 93205 Dealing This tenement is subject to a joint venture and farm-in agreement with is subject of Part B this Report). tenement section 3.1 This CEN (as detailed The expenditure covenants for 2012 have been obtained from the Minister’s Certificates for those tenements. the Minister’s obtained from covenants for 2012 have been The expenditure the end of next for reduction period the tenement, being 7 April 2015. covenants. These tenements were granted in the last 12 months. Accordingly, were details re These tenements Certificates do not contain Minister’s the relevant date of this Report. date of this Report. been transferred to FSL Corporation. the Barkly Tenement Sale Agreement. the Barkly Tenement Corporation upon completion of the agreement. Please note only sub-blocks SE 533075 K, P and SE 533076 F, G, H, J, L, M, N, O, F, SE 533076 P and SE 533075 K, completion of note only sub-blocks Corporation upon the agreement. Please These tenements are subject to the Barkly Tenement Sale Agreement with FSL Corporation with Agreement Sale are subject to the Barkly Tenement These tenements (as detailed in section FSL Corporation upon completion of the agreement. Corporation FSL has been superseded by the Ebony Tenement Acquisition Agreement and is no longer on foot. and is no Agreement Acquisition by the Ebony Tenement has been superseded The reduction dates were obtained from the Fertoz Information. the Fertoz obtained from reduction dates were The Certificate for this tenement. obtai in the Minister’s These details were not included for 2013 were covenants expenditure The On 7 May 2013 the Department confirmed that Fertoz’s application for a waiver of the reduction in area for EL 26915 was approv for EL 26915 was of the application for a reduction in area waiver 2013 the Department confirmed that Fertoz’s On 7 May the relevant Certificates do granted. Accordingly, Minister’s have not been stage and are in the application These tenements 3.2 of this Report Ebony (as detailed in section with Agreement Acquisition Tenement are subject to the Ebony These tenements covenants. tenements expenditure not include the does Tenement for the Queensland Report Enquiry The Public F K, P and SE 533076 SE 533075 sub-blocks Fertoz) will be reduced when by held tenement (i.e. the sub-blocks The area of this payment for EPM 19448 includes a one-off The rent amount bond. of $2,500 for environment financial assurance Information. and have been obtained from the Fertoz GST include The rent amounts Note 2: Note 3: Note 1: Note 1: Note 4: Note 4: Note 5: Note 6: Note 7: Note 10: Note 8: Note 9: Note 11: Note 12: Note 14: Note 15: Note 13: 217 LTD REPLACEMENT PROSPECTUS 2013
11. MATERIAL CONTRACTS
Set out below is a brief summary of certain contracts which have been entered into by the Company and which have been identified as material and relevant to potential investors.
11.1 LEAD MANAGER LETTER OF ENGAGEMENT The Offer is being managed by the Lead Manager, Blackwood Capital Limited, under a binding engagement letter (Engagement Letter) dated 24 April 2013 between the Company and the Lead Manager. Under the Engagement Letter, the Lead Manager was appointed to act as the exclusive equity placement agent to Fertoz to: a. raise seed capital of approximately $0.5 million at a price of $0.10 or less (Seed Raise); and b. arrange an IPO to raise between $3 million and $4 million through the issue of new shares at $0.20 per share. The material terms of the Engagement Letter are as follows: a. the Lead Manager will conduct the IPO on a best endeavours basis; b. unless the Lead Manager’s engagement is terminated in accordance with the Engagement Letter, the Lead Manager will be paid a transaction fee of 6.5% plus GST of gross proceeds raised from the Seed Raise and the Offer. The transaction fee will be payable by deduction from the gross proceeds of funds raised under the Seed Raise and the Offer; c. in addition to the transaction fee, the Company has agreed to reimburse the Lead Manager for certain out of pocket expenses incurred by the Lead Manager in relation to the Offer; d. upon Listing, the Lead Manager (or its nominees) will also be issued with 4 million Options exercisable at 25 cents per Share on a one for one basis with an exercise period of at least four years from the date of Listing; e. Fertoz may terminate the Engagement Letter in certain circumstances, for example:
i. where the Lead Manager fails to rectify any material breach of the Engagement Letter within 60 days of receiving written notice of the breach from Fertoz; and
ii. without cause, by giving the Lead Manager 90 days written notice (subject to certain conditions); f. in the event that Fertoz terminates the Engagement Letter, the Lead Manager will be entitled to be reimbursed for any incurred or accrued expenses up to the date of termination; g. subject to certain exclusions, including negligence and a breach of the Engagement Letter by the Lead Manager, Fertoz agrees to keep the Lead Manager and certain affiliated parties indemnified in respect of any losses or claims suffered in connection with the services provided by the Lead Manager; and h. the Engagement Letter contains additional provisions considered standard in an agreement of this type.
11.2 WAPITI AGREEMENT On 9 March 2012, Fertoz International and Johan Thom Shearer (Shearer) entered into a binding letter of intent (the Wapiti Option) under which Fertoz International is entitled to an option to earn an undivided 100% interest in a property located southeast of the town of Tumbler Ridge, British Columbia (the Wapiti Property) comprising certain mining claims owned by Shearer.
Under the Wapiti Option, Fertoz International is required to: a. make a cash payment to Shearer in the amount of CAN$5,000 upon completion of due diligence on or before March 10 2012, which due diligence was completed on March 10 2012 (the Effective Date) and which amount has been paid; b. incur, on or before the date that is two years following the Effective Date (the Expenditure Period), exploration expenditures in the amount of CAN$200,000 on the Wapiti Property, which has occurred, 11. MATERIAL CONTRACTS 218
resulting in the transfer of the Wapiti Property to Fertoz International in April 2013; and c. pay to Shearer a royalty of CAN$2.50 per tonne in respect of any ore shipped from the Wapiti Property after any beneficiation processes which are undertaken on site as Fertoz International may determine in its sole discretion, provided that such royalty payments in any year shall not exceed 5% of Fertoz International’s earnings (before interest and taxes) attributable to the operations of Fertoz International with respect to ore mined at the Wapiti Property as evidenced by audited financial statements of Fertoz International; and d. upon completion by Fertoz International of a feasibility study, and a determination by Fertoz International to proceed with commercial operations on the Wapiti Property, Fertoz International shall make a lump sum cash payment in the amount of CAN$50,000 to Shearer.
11.3 CENTRAL AUSTRALIAN PHOSPHATE LIMITED – FARM-IN AND JOINT VENTURE AGREEMENT On 3 May 2012, Fertoz entered into a binding Farm-in and Joint Venture Agreement with Central Australian Phosphate Limited (formerly known as NuPower Resources Ltd) A.C.N. 120 787 859 in relation to EL 26915 in the Northern Territory. Fertoz currently holds a 100% interest in EL 26915.
Please refer to Section 3.1 of Part B of the Solicitor’s Tenement Report (included in Section 10 of this Prospectus) for a summary of the material terms of this agreement. The agreement also contains additional provisions considered standard in an agreement of this type.
11.4 EBONY IRON PTY LTD - TENEMENT ACQUISITION AGREEMENT Fertoz entered into a binding Tenement Acquisition Agreement on 29 November 2012, under which Fertoz has agreed to transfer EL 27026 and EL 26969 to Ebony Iron Pty Ltd A.C.N. 147 618 148.
Please refer to Section 3.2 of Part B of the Solicitor’s Tenement (included in Section 10 of this Prospectus) for a summary of the material terms of this agreement. The agreement also contains additional provisions considered standard in an agreement of this type.
11.5 WINNECKE TENEMENT SALE AGREEMENT Fertoz entered into a binding Tenement Sale Agreement on 13 May 2013, under which Fertoz has agreed to transfer EL 26978, EL 26981, EL 28644, EL 28476 (Application), EL 28478 (Application), EL 28479 (Application), EL 28480 (Application), EL 28482 (Application), EL 28483 (Application), EL 28484 (Application), EL 28642 (Application), EL 28643 (Application) and EL 28645 (Application) to FSL Corporation Pty Ltd A.C.N. 163 612 575 (FSL Corporation).
Please refer to Section 3.3 of Part B of the Solicitor’s Tenement Report (included in Section 10 of this Prospectus) for a summary of the material terms of this agreement. The agreement also contains additional provisions considered standard in an agreement of this type.
11.6 BARKLY TENEMENT SALE AGREEMENT Fertoz entered into a binding Tenement Sale Agreement on 13 May 2013, under which Fertoz has agreed to transfer EL 29193, EL 29194, EL 29195, EL 29196, EL 29197, EL 29198 and sub-blocks SE 533075 K, P and SE 533076 F, G, H, J, L, M, N, O, Q, R, S, V, W (which at the agreement date each form part of EL 26055) to FSL Corporation.
Please refer to Section 3.4 of Part B of the Solicitor’s Tenement Report (included in Section 10 of this Prospectus) for a summary of the material terms of this agreement. The agreement also contains additional provisions considered standard in an agreement of this type. 219 LTD REPLACEMENT PROSPECTUS 2013
11.7 SULFATE RESOURCES EXCLUSIVITY DEED Fertoz International entered into a binding Exclusivity Deed with Sulfate Resources LLC (an Arizona limited liability company) on 21 June 2013. Fertoz International has an interest in investigating and conducting due diligence in respect of certain phosphate mineral exploration assets situated in Caribou County, Idaho, USA.
Sulfate Resources LLC is currently negotiating the terms of an exploration and option to purchase agreement (the Option Agreement) with Rhodia Inc (the Owner) regarding the proposed grant by the Owner to Sulfate Resources LLC of certain exploration rights and an exclusive option (the Option) to purchase all of the Owner’s legal and beneficial interest in and to Phosphate Lease I-07238, (the Option Agreement), being a mining lease entered between the United States federal government and the Owner’s predecessor-in-interest, concerning the extraction of certain minerals from certain federal public lands situated in Caribou County, Idaho, USA (the Lease) including any of the following in which Owner may have an interest: any minerals and mineral deposits, ores, concentrates, metals, materials, tailings, dumps and mine wastes in, on, and under the property the Lease encompasses (the Property); any mining rights appurtenant to the Property; any surface and water rights appurtenant to the Property; and any buildings, structures, fences, fixtures, and other improvements affixed to the Property.
The material terms of the Exclusivity Deed are summarised as follows: a. During the period commencing on the date of the Exclusivity Deed and expiring at 5pm on 31 October 2013 (the Exclusivity Period), Sulfate Resources LLC must (among other things):
ɒ on and from the date on which Sulfate Resources LLC provides Fertoz International with a true, correct and complete copy of the Option Agreement (on terms that are satisfactory to Fertoz International in its sole and absolute discretion) duly executed by the Owner and Sulfate Resources LLC, provide Fertoz International with access to certain records and information, and provide written answers to all reasonable enquiries submitted by Fertoz International as part of its due diligence investigations;
ɒ negotiate exclusively with Fertoz International with respect to the terms of a possible acquisition regarding the Lease and the Property, the subject of the Option (if granted by the Owner to Sulfate Resources LLC) (the Proposed Transaction) and any similar transaction;
ɒ not directly or indirectly do or omit to do any act, matter or thing that will, or is likely to, result in the termination of the Option Agreement (if entered into by Sulfate Resources LLC) or the lapsing, surrender or forfeiture of the Option, (if granted by the Owner to Sulfate Resources LLC) without the prior written consent of Fertoz International (which may be given or withheld in Fertoz International’s sole and absolute discretion); and
ɒ if the Option Agreement is entered into by Sulfate Resources LLC, not terminate the Option Agreement (or agree to do so), amend the terms of the Option Agreement (or agree to do so) or waive or dispose of any of its rights under the Option Agreement (or agree to do so), without the prior written consent of Fertoz International (which may be given or withheld in Fertoz International’s sole and absolute discretion). b. Fertoz International has agreed to pay the sum of US$25,000 to Sulfate Resources LLC (the Exclusivity Fee) if Sulfate Resources LLC enters into the Option Agreement (on terms acceptable to Fertoz International in its sole and absolute discretion). c. The Exclusivity Fee (if paid) may only be used by Sulfate Resources LLC for the sole purpose of payment to the Owner for the purpose of acquiring the Option. The Exclusivity Fee is non-refundable to Fertoz International except where Sulfate Resources LLC breaches any of its obligations under the Exclusivity Deed or the Owner does not give its consent with respect to the Proposed Transaction (including but not limited to the assignment of the Option Agreement to Fertoz International), in which case Sulfate Resources LLC must immediately refund the Exclusivity Fee to Fertoz International without deduction or set-off. d. During the Exclusivity Period the parties have agreed to negotiate in good faith, in respect of the Proposed Transaction, provided always that nothing in the Exclusivity Deed obliges either party to negotiate contrary to their respective commercial interests. Fertoz International is not bound to acquire the Lease or the Property or enter into the Proposed Transaction. 11. MATERIAL CONTRACTS 220
The use of proceeds set out in Section 4.3 does not include the costs of Fertoz acquiring the phosphate lease as proposed under the Option Agreement (or any exploration costs associated with the phosphate lease, if acquired). Fertoz proposes to finance any proposed acquisition under the Sulfate Resources Exclusivity Deed by way of a combination of payment in cash and the issue of shares in the Company (in accordance with the Corporations Act and the ASX Listing Rules). The Company considers that any such acquisition will not constitute a significant change to the scale of the Company’s activities and will not trigger ASX Listing Rules 11.1.2 or 11.1.3. You should be aware that if Fertoz issues additional equity to acquire the phosphate lease, existing Shareholders will have their interest in the Company diluted.
11.8 EXECUTIVE AGREEMENT – LES SZONYI
Fertoz entered into a binding Executive Agreement with Les Szonyi on 21 January 2011. Under the Executive Agreement, Les Szonyi is appointed as the Chief Executive Officer of the Company. The material terms of the Executive Agreement are as follows: a. Dr Szonyi’s appointment commenced on 4 April 2011 and will continue until terminated by either party (see below); b. Dr Szonyi is required to:
i. undertake such duties and exercise such powers in relation to the Company and its business as the Board shall from time to time assign to or vest in him;
ii. in the discharge of such duties and in the exercise of such powers conform to, observe and comply with all resolutions, regulations and lawful directions from time to time made or given by the Board;
iii. devote substantially the whole of his time and attention during business hours to the discharge of his duties;
iv. conform to such hours of work as may from time to time reasonably be required of him and not be entitled to receive any remuneration for work performed outside his normal hours; and
v. perform such services for subsidiary companies of the Company and (without further remuneration unless otherwise agreed) accept such offices in such subsidiary companies as the Board may from time to time reasonably require. c. the Company currently pays Dr Szonyi remuneration of $330,000 per year (including statutory superannuation). Dr Szonyi’s remuneration is to be reviewed annually in accordance with increases in the Consumer Price Index; d. the Company must reimburse Dr Szonyi for all reasonable out of pocket expenses and imposts and all reasonable travel and accommodation costs incurred by him during the term of his appointment; e. Dr Szonyi may terminate the Executive Agreement at any time by giving Fertoz not less than 6 months written notice; f. Fertoz may terminate the Executive Agreement:
i. at any time by giving Dr Szonyi 12 months written notice, or payment in lieu of that notice; and
ii. without prior notice in certain prescribed circumstances, including where Dr Szonyi commits a serious or persistent breach of the Executive Agreement; g. Dr Szonyi must not during the term of the Executive Agreement and for a period of one year after the termination of his appointment as Chief Executive Officer:
i. carry on or be engaged or concerned or take part in a business within Australia that competes with Fertoz or any related body corporate of Fertoz; or
ii. contact, solicit the custom of, or endeavour to entice away from Fertoz or any related body corporate of Fertoz any person firm or company who at any time during or at the termination of his appointment was an employee, client or customer of, or in the habit of dealing with Fertoz; h. the Company indemnifies Dr Szonyi to the extent permitted by law from and against all claims, losses and 221 LTD REPLACEMENT PROSPECTUS 2013
expenses that Dr Szonyi becomes liable for in respect of carrying out his obligations under the Executive Agreement, except those that result from his wilful default or wrongful act or omission of his obligations and duties under the Executive Agreement; i. Fertoz is required to take out and maintain a directors’ and officers’ insurance policy for a period of time not less than 7 years after the date on which the Chief Executive Officer shall have ceased to be an officer of Fertoz; and j. the Executive Agreement contains additional provisions considered standard in an agreement of this type. Fertoz considers that the above contract constitutes reasonable remuneration and reimbursement.
11.9 EXECUTIVE DIRECTOR – LETTER OF ENGAGEMENT Les Szonyi was appointed as the Managing Director of Fertoz on 29 May 2012. The terms of his appointment are governed by a Letter of Engagement (“ED Letter”).
The material terms of the ED Letter are as follows: a. the appointment of Les Szonyi, as executive Director, will continue subject to the Corporations Act and the Constitution (including retirement and successful re-election by the Company’s Shareholders under the Constitution); b. Dr Szonyi is required to satisfy all legal duties imposed by the Corporations Act and the general law, and to assist the board in fulfilling its functions and obligations; c. Dr Szonyi may terminate his appointment at any time by giving written notice to the Company Secretary and each other Director; d. Dr Szonyi is not entitled under the ED Letter to receive any additional remuneration for the performance of his directorial services; e. the Company must reimburse Dr Szonyi for certain reasonable expenses incurred in carrying out his role as Director, subject to certain conditions (for example, providing documentary evidence of those expenses); f. if, with the approval of the Directors, Dr Szonyi performs extra services or makes any special exertion for the benefit of the Company, then the Directors may (in accordance with the Constitution) approve the payment of special and additional remuneration in relation to such services; g. Dr Szonyi must disclose any actual or potential conflict of interest between the Company and his duties, as soon as practicable after the interest is perceived; h. the Company must maintain appropriate director’s and officer’s liability insurance for Dr Szonyi; and i. the ED Letter also contains additional provisions considered standard in an agreement of this type.
11.10 NON-EXECUTIVE DIRECTORS – LETTERS OF ENGAGEMENT Each of Adrian Byass, James Chisholm and Peter Bennetto have entered into separate Letters of Engagement, dated 31 May 2013 (“NED Letters”).
The material terms of the NED Letters are as follows: a. the appointment of each non-executive Director will continue subject to the Corporations Act and the Constitution (including retirement and successful re-election by the Company’s Shareholders under the Constitution); b. each non-executive Director is required to satisfy all legal duties imposed by the Corporations Act and the general law, and to assist the board in fulfilling its functions and obligations; c. each non-executive Director may terminate their appointment at any time by giving written notice to the 11. MATERIAL CONTRACTS 222
Company Secretary and each other Director; d. the Company must pay each non-executive Director a fee of $36,000 per annum commencing on the date Fertoz is admitted to the Official List (such fee to be reviewed annually); e. the Company must reimburse each non-executive Director for certain reasonable expenses incurred in carrying out their role as Director, subject to certain conditions (for example, the Director providing documentary evidence of those expenses); f. if, with the approval of the Directors, a non-executive Director performs extra services or makes any special exertion for the benefit of the Company, then the Directors may (in accordance with the Constitution) approve the payment of special and additional remuneration in relation to such services; g. the non-executive directors must disclose any actual or potential conflict of interest between the Company and that Director’s duties, as soon as practicable after the interest is perceived; h. the Company must maintain appropriate director’s and officer’s liability insurance for each non-executive Director; i. the NED Letters also contain additional provisions considered standard in an agreement of this type. Fertoz considers that the NED Letters constitutes reasonable remuneration and reimbursement.
11.11 VOLUNTARY ESCROW AGREEMENTS The Company has or proposes to enter into voluntary escrow agreements with certain Shareholders for the escrow of a total of 7,982,852 Shares (Escrow Shares). Under these agreements the relevant Escrow Shares are escrowed for a period of 12 months commencing on Official Quotation.
Under these agreements the relevant Shares are escrowed for a period of 12 months commencing on Official Quotation. The escrow will cease to apply: a. to the extent necessary to allow the Shareholder to accept a takeover bid for the Company, provided that holders of not less than 50% of the Shares in the Company not subject to escrow have accepted the takeover bid (and if the bid does not become unconditional, the escrow provisions will continue to apply for any Escrow Shares that are not acquired under the takeover bid); and b. to the extent necessary to allow the Escrow Shares to be acquired under a scheme of arrangement under Part 5.1 of the Corporations Act or other reorganisation or acquisition of share capital. The Company anticipates that, post-Completion of the Offer: a. based on the Minimum Subscription, approximately 19.95% of its Shares will be subject to voluntary escrow agreements; and b. based on the Maximum Subscription, approximately 17.74% of its Shares will be subject to voluntary escrow agreements. 223 LTD REPLACEMENT PROSPECTUS 2013
12. ADDITIONAL INFORMATION
12.1 RIGHTS ATTACHING TO SHARES Full details of the rights and liabilities attaching to the Shares are:
ɒ detailed in the Constitution, a copy of which can be inspected, free of charge, at the registered office of the Company during normal business hours; and ɒ in certain circumstances, regulated by the Corporations Act, the Listing Rules and the general law. The following is a summary of the more significant rights and liabilities attaching to the Shares. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of Shareholders. To obtain such a statement, persons should seek independent legal advice.
12.1.1 Voting Rights Subject to any rights or restrictions for the time being attached to any class or classes of shares, at a general meeting of members every member has one vote on a show of hands and one vote per Share on a poll. The person who holds a share which is not fully paid shall be entitled to a fraction of a vote equal to that proportion of a vote that the amount paid on the relevant share bears to the total issue price of the share. Voting may be in person or by proxy, attorney or representative.
12.1.2 Dividends Subject to the rights of holders of shares issued with any special rights (at present there are none), the profits of the Company which the Board may from time to time determine to distribute by way of dividend are divisible to each share of a class on which the Board resolves to pay a dividend in proportion to the amount for the time being paid on a share bears to the total issue price of the share. All Shares currently on issue and the shares to be issued under this Prospectus are fully paid Shares.
12.1.3 Future Issue of Securities Subject to the Corporations Act and the Listing Rules, the Directors may issue, grant options over, or otherwise dispose of unissued shares in the Company at the times and on the terms that the Directors think proper and a share may be issued with preferential or special rights.
12.1.4 Transfer of Shares A shareholder may transfer Shares by a market transfer in accordance with any computerised or electronic system established or recognised by ASX for the purpose of facilitating transfers in Shares or by an instrument in writing in a form approved by ASX or the Board.
12.1.5 Meetings and Notices Each shareholder is entitled to receive notice of, and to attend, general meetings for the Company and to receive all notices, accounts and other documents required to be sent to shareholders under the Constitution, the Corporations Act or the Listing Rules. Shareholders may requisition meetings in accordance with the Corporations Act.
12.1.6 Election of Directors There must be a minimum of 3 Directors. At every annual general meeting one third of the Directors (rounded to the nearest whole number) must retire from office. If the Company has less than 3 Directors, one Director must retire from office together with any Director who would have held office for more than 3 years if that Director remains in office until the next general meeting. These retirement rules do not apply to certain appointments including the managing director.
12.1.7 Indemnities and Insurance To the extent permitted by law the Company must indemnify each past and present Director and secretary against any liability incurred by that person as an officer of the Company and any legal costs incurred in defending an action in respect of such liability. The Company may also pay insurance premiums for current and past Directors in certain designated circumstances. See Section 5.4.1 for a summary of the Deeds of Access, Indemnity and Insurance entered into by the Company with each Director. 12. ADDITIONAL INFORMATION 224
12.1.8 Winding Up If the Company is wound up, the liquidator may, with the sanction of a special resolution of the shareholders:
ɒ divide the assets of the Company among the Shareholders in kind; ɒ for that purpose fix the value of assets and decide how the division is to be carried out as between the Shareholders and different classes of Shareholders; and ɒ vest assets of the Company in trustees on any trusts for the benefit of the Shareholders as the liquidator thinks appropriate.
12.1.9 Remuneration of Directors See Section 5.3 for details relating to the remuneration of Directors.
12.1.10 Interests of Directors A director is disallowed from being present or voting on a contract, proposed contract or arrangement in which he or she has a material personal interest, except where permitted by the Corporations Act or any other relevant law.
12.1.11 Variation of Rights The rights attached to any class of security may, unless the terms of issue state otherwise, be varied with the written consent of the holders of 75% of the securities of the class or by a special resolution passed at a separate meeting of the holders of securities of the class.
12.1.12 No Share Certificates Subject to the Listing Rules and Corporations Act (and other applicable laws), the Company need not issue share certificates.
12.2 RIGHTS ATTACHING TO OPTIONS The Options entitle the holder to subscribe for one Share on the exercise of each Option
12.2.1 Exercise Price The Options have an exercise price of 25 cents, 35 cents, 45 cents or 55 cents (refer to Section 5.2 for full details of the holders of Options, the number of Options held and the exercise price).
12.2.2 Expiry Date Options have a four year term from the date of Listing. The Expiry Date for each Option will be the date that is four years after the date of Listing.
12.2.3 Exercise Period An Option may be exercised at any time prior or up to the Expiry Date.
12.2.4 Expiry If an Option is not exercised on or before the Expiry Date, that Option will lapse and be of no further effect immediately after the passing of the Expiry Date.
12.2.5 Notice of Exercise An Option may be exercised at any time within the Exercise Period by the Option holder giving the Company an Exercise Notice specifying the number of Options the Option holder is exercising and a proposed Completion Date (which must be at least 7 Business Days after the date of the Exercise Notice).
12.2.6 Shares Issued on Exercise Shares issued on exercise of the Options will rank equally in all respects with all other issued Ordinary Shares.
12.2.7 Quotation of Shares on Exercise Application will be made by the Company to the ASX for Official Quotation of the Shares issued on the exercise of the Options.
12.2.8 Timing of Issue of Shares Completion of the allotment and issue of the Option Shares relating to the Exercise Notice will occur at 2.00pm (Sydney time) on the Completion Date or such other time and place as the Company and the Option Holder may agree.
12.2.9 Options Non Transferable The Options are not transferable without the prior written consent of the Company.
12.2.10 Participation in New Issues The Options will only entitle the Option holder to participate in any new issues of securities by the Company to the extent that the Options have been exercised and the Option Shares have been issued in respect of those Options before the closing date for determining entitlements under that new issue.
The Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 10 Business Days after the opening of the offer period associated with the new issue, in order to give the Option Holder the opportunity to exercise some or all of the Options prior to the date for determining entitlements to participate in any such issue.
12.2.11 Bonus Issues If after the Listing the Company makes a bonus issue of Ordinary Shares or other securities to its shareholders (or pays a dividend to shareholders in the form of newly issued Ordinary Shares or other securities) (Bonus Issue) before some or all of the Options held by the Option holder have been exercised, then the number of Option Shares to be issued on exercising those Options is to be increased by the number of Option Shares to which the Option holder would have been entitled had the Options held by the Option holder at the record time for the Bonus Issue been exercised (and Option Shares issued) before the record time for the Bonus Issue.
Where a Bonus Issue occurs, no change will be made to the Exercise Price of the Outstanding Options.
12.2.12 Adjustment for Rights Issue If after it is listed the Company makes a pro rata issue of Ordinary Shares (other than a Bonus Issue) to existing holders of Ordinary Shares, the Exercise Price of each Outstanding Option will be reduced according to the following formula:
E [P - (S + D)] New Exercise Price = O - N + 1
O = the old Exercise Price of the Option; E = the number of underlying Option Shares to which one Option is exercisable; 12. ADDITIONAL INFORMATION 226
P = the average market price per Ordinary Share (weighted by reference to the volume) of the underlying Ordinary Shares during the 5 trading days ending on the day before the ex-rights date or ex entitlements date; S = the subscription price of an Ordinary Share under the pro rata issue; D = any dividend per Ordinary Share due but not yet paid on the existing Ordinary Shares (except those to be issued under the pro rata issue); and N = the number of Ordinary Shares with rights or entitlements that must be held to receive a right to one new Ordinary Share under the pro rata issue.
12.2.13 Reorganisations In the event of: a. a consolidation, subdivision or pro rata cancellation of the issued ordinary share capital of the Company (whether before or after it is Listed), the number of outstanding Options held by the Option holder will be reduced or increased in the same proportion as the issued capital of the Company is consolidated, subdivided or cancelled and an inverse adjustment will be made to the Exercise Price (as reasonably determined by the Company), to the effect that the total amount payable on the exercise of all outstanding Options by the Option holder will not alter; b. a return of any of the issued ordinary share capital of the Company, the number of outstanding Options must remain the same, and the Exercise Price of each outstanding Option must be reduced by the same amount as the amount returned in relation to each Ordinary Share; c. a reduction of any of the issued ordinary share capital of the Company by cancellation of paid up capital that is lost or not represented by available assets (when no Ordinary Shares or other securities are cancelled), the number of outstanding Options and the Exercise Price of each outstanding Option must remain unaltered; or d. any other type of reorganisation of the Company in respect of its issued ordinary share capital, the number of outstanding Options or the Exercise Price, or both, must be reorganised so that the Option holder will not receive a benefit that the holders of Ordinary Shares do not receive. Any adjustments made under this clause will be subject to the same provisions with respect to rounding of entitlements as sanctioned by the meeting of shareholders approving the reorganisation.
12.2.14 Adjustments for reorganisations If any reorganisation of the Company occurs whilst the Company is Listed and these terms do not allow the Options to be treated in accordance with the rules of the relevant Financial Market, then the rights of the Option holder may be varied by the Company to comply with the listing rules of the relevant Financial Market which apply to the reorganisation at the time of the reorganisation.
12.3 SHARES ON ISSUE The number of Shares on issue prior to the Offer is 25,009,595. Capital raisings have taken place in the 6 months prior to the date of this Prospectus and are summarised as follows.
Fertoz raised $756,000 under a non-renounceable rights issue in February 2013 – the offer was made whereby each shareholder was offered 64 new shares for every 100 shares held (‘Rights Issue’). The Rights Issue was carried out at 3 cents per share which equates to 9.75 cents per share (after a 3.25 to 1 share consolidation which occurred on 1 May 2013) which reflects a 51.25% discount to the issue price under the Offer.
The Rights Issue price was determined in order to provide a reasonable incentive to investors to ensure sufficient proceeds were received that could be applied towards: the repayment of certain creditors, and the repayment of loans and tenement rents, and certain targeted exploration activities; and given that at the time of the Rights Issue: the Company’s shares were not listed on any stock exchange and there was and is no assurance of any such listing; and there was not and may not be a ready market or liquidity, for such shares. 227 LTD REPLACEMENT PROSPECTUS 2013
The proceeds of the Rights Issue were applied towards those items for which the proceeds were raised (referred to above).
In May 2013 Fertoz raised $500,000 from certain sophisticated and professional investors in accordance with Sections 708(8) and 708(11) of the Corporations Act, approximately half of this amount was raised from persons who were not shareholders of the Company at the date of such raising. The pricing of this capital raising was the same as the completed Rights Issue, which reflects a 51.25% discount to the issue price under the Offer.
This issue price was determined in order to provide a reasonable incentive to the investors to ensure proceeds were received to provide Fertoz with sufficient funds to continue exploration on its Canadian based assets in June 2013, and given that at the time of the raising: the Company’s shares were not listed on any stock exchange, there was and is no assurance of any such listing; and there was not and may not be a ready market or liquidity, for such shares. Part of the proceeds received have been used and are to be used to fund scheduled works for June and July 2013 on Fertoz’s Canadian assets of approximately $300,000. To date approximately $145,000 of the proceeds has been expended on exploration on Fertoz’s Canadian assets.
12.4 AUSTRALIAN TAX CONSIDERATIONS The acquisition and disposal of Shares in the Company will have tax consequences, which will differ depending on the individual financial affairs of each investor. The Company urges you to obtain independent financial advice about the consequences of acquiring Shares from a taxation viewpoint.
To the maximum extent permitted by law, the Company, its officers and each of their respective advisers, accept no liability and responsibility with respect to the taxation consequences of subscribing for Shares under this Prospectus as a consequence of Shares subscribed for under this Prospectus.
12.5 LITIGATION As far as the Directors are aware, there are no current or threatened civil litigation, arbitration proceedings or administrative appeals, or criminal or governmental prosecutions of a material nature in which the Company is directly or indirectly concerned which are likely to have a material adverse effect on the business or financial position of the Company.
12.6 COMPETENT PERSONS STATEMENT Information relating to the Sherrin North exploration target outlined in this Prospectus and in the Independent Geologist’s Report in Section 7 of this Prospectus is based on information compiled under the guidance of Mr Stefan Mujdrica who is a Chartered Professional member of the Australasian Institute of Mining and Metallurgy. At the time this Prospectus and the Independent Geologist’s Report were produced, Mr Mujdrica was a full time employee of Xstract Mining Consultants Pty Ltd. Mr Mujdrica has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the JORC Code. Mr Mujdrica consents to the inclusion in the Prospectus and the Independent Geologist’s Report (in Section 7 of this Prospectus) of the matters based on his information in the form and context in which it appears.
Information pertaining to exploration results in all other tenements outlined in this Prospectus and in the Independent Geologist’s Report in Section 7 of this Prospectus is based on information compiled under the guidance of Mr Jeames McKibben who is a Chartered Professional member of the Australasian Institute of Mining and Metallurgy and a member of the Australian Institute of Geoscientists. At the time this Prospectus and the Independent Geologist’s Report were produced, Mr McKibben was a full time employee of Xstract Mining Consultants Pty Ltd. Mr McKibben has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the JORC Code. Mr McKibben consents to the inclusion in the Prospectus and the Independent Geologist’s Report (in Section 7 of this Prospectus) of the matters based on his information in the form and context in which it appears. 12. ADDITIONAL INFORMATION 228
12.7 JORC CODE 2004 AND VALMIN CODE 2005 The Independent Geologist’s Report by Xstract Mining Consultants Pty Ltd (set out in Section 7 of this Prospectus) has been prepared in accordance with the JORC Code 2004 and Valmin Code 2005 which is binding upon members of the Australasian Institute of Mining and Metallurgy (AusIMM) and Australian Institute of Geoscientists (AIG) and the rules and guidelines relating to Independent Expert Reports set by ASIC and ASX.
12.8 INTERESTS OF ADVISERS AND NAMED PERSONS This section applies to persons named in the Prospectus as performing a function as a financial services licensee or in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus or promoters of the Company (each a Prescribed Person).
Other than as set out below or elsewhere in this Prospectus, no Prescribed Person holds at the date of lodgement of this Prospectus with ASIC, or has held in the two years before lodgement of this Prospectus with ASIC, any interest in: a. the formation or promotion of the Company; b. any property acquired or proposed to be acquired by the Company in connection with its formation or promotion, or in connection with the Offer; or c. the Offer, and no amount (whether in cash, Shares or otherwise) has been paid or agreed to be paid, nor any benefit been given or agreed to be given, to a Prescribed Person for services rendered by the Prescribed Person in conjunction with the promotion or formation of the Company or the Offer.
The Company has engaged the following professional advisers and service providers:
ɒ BDO Audit Pty Ltd will receive professional fees of approximately $23,500 (excluding GST) for accounting services provided in connection with this Prospectus including the provision of the Investigating Accountant’s Report included in Section 8 of this Prospectus and the financial information included in Section 9 of this Prospectus.
ɒ Blackwood Capital is acting as Lead Manager in connection with the Offer. The Company has agreed to pay the Lead Manager the fees described in Section 11.1 for these services.
ɒ Porter Davies Lawyers has acted as Australian corporate legal counsel (other than in respect of tax and stamp duty matters) to the Company in respect of the Offer, has performed work in relation to the Australian due diligence enquiries on corporate matters, has advised the Company generally in relation to its admission to the Official List and has prepared the Australian Solicitor’s Tenement Report included in Section 10 of this Prospectus. The Company has agreed to pay professional fees of approximately $94,000 (excluding GST) for these services.
ɒ ASKD Law (Vancouver) will receive professional fees of approximately $7,000 (excluding HST) for legal work undertaken in connection with this Prospectus and the Offer including the preparation of the Solicitor’s Report on the Canadian Tenements. They have received approximately $7,050 (excluding HST) in October 2012 for its previous assessment of the Canadian tenements.
ɒ Peterson Law will receive professional fees of approximately $3,500 (excluding HST) for legal work undertaken in connection with this Prospectus and the Offer including advice regarding Fertoz International. They have received approximately $10,500 (excluding HST) for its previous assessment of the Canadian tenements.
ɒ Xstract Mining Consultants will receive professional fees of approximately $10,000 (excluding GST) for the provision of the Independent Geologist’s Report and for the services of Jeames McKibben and Stefan Mujdrica as the Competent Person in conjunction with this Prospectus and the Offer. They have received professional fees of approximately $83,000 (excluding GST) for previous independent assessment work carried out between September 2011 and August 2012. 229 LTD REPLACEMENT PROSPECTUS 2013
These amounts, and other expenses of the Offer, will be paid by the Company out of funds raised under the Offer or available cash. Further information on the use of proceeds and payment of expenses of the Offer is set out in Section 4 (Details of the Offer).
12.9 CONSENTS Each party referred to in this section:
ɒ Does not make, or purport to make, any statement in this Prospectus or any statement on which a statement made in the Prospectus is based other than as specified in this section; and
ɒ To the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this section. Written consents to the issue of this Prospectus have been given and, at the time of lodgement of this Prospectus with ASIC, had not been withdrawn by the following parties:
ɒ Xstract Mining Consultants has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as the Independent Geologist to the Company in relation to the Offer, in the form and context in which it is named and has also given and not withdrawn its consent to the inclusion in this Prospectus of its Independent Geologist’s Report (included in Section 7 of this Prospectus) in the form and context in which it is included in this Prospectus.
ɒ Porter Davies Lawyers has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as solicitors to the Company in Australia relation to the Offer, in the form and context in which it is named and has also given and not withdrawn its consent to the inclusion in this Prospectus of the Solicitor’s Tenement Report on the Australian Tenements (included in Section 10 of this Prospectus) in the form and context in which it is included in this Prospectus.
ɒ ASKD Law has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as solicitors to the Company in Canada in relation to preparation of the Solicitor’s Tenement Report on the Canadian tenements (included in Section 10 of this Prospectus), in the form and context in which it is named and has also given and not withdrawn its consent to the inclusion in the Prospectus of the Solicitor’s Tenement Report on the Canadian tenements in the form and context in which it is included in this Prospectus.
ɒ BDO Audit Pty Ltd has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as the Investigating Accountant to the Company, in the form and context in which it is named and has also given and not withdrawn its consent to the inclusion in this Prospectus of the Investigating Accountant’s Report (included in Section 8 of this Prospectus) and the Financial information (included in Section 9 of this Prospectus) in the form and context in which it is included in this Prospectus.
ɒ Blackwood Capital has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as Lead Manager to the Offer in the form and context in which it is named.
ɒ Jeames McKibben has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as a Competent Person in the form and context in which he is named.
ɒ Stefan Mujdrica has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as a Competent Person in the form and context in which he is named.
ɒ Peterson Law has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as solicitors for Fertoz International Inc. in the form and context in which it is named.
ɒ Computershare Investor Services Pty Limited have given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, their written consent to be named in this Prospectus as the Share Registry in 12. ADDITIONAL INFORMATION 230
the form and context in which it is named.
ɒ Each member of management and each Director who has been named in this Prospectus has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as a Director or member of management, in the form and context in which they are so named. There are a number of persons and entities referred to elsewhere in this Prospectus who have not made statements included in this Prospectus nor are there any statements made in this Prospectus on the basis of any statements made by those persons or entities. These persons and entities did not consent to being named in this Prospectus and did not authorise or cause the issue of this Prospectus.
12.10 GOVERNING LAW This Prospectus and the contracts that arise from the acceptance of the Applications are governed by the law applicable in Queensland and each Applicant submits to the exclusive jurisdiction of the courts of Queensland.
12.11 ASIC CLASS ORDER 03/634 The Company has relied on Class Order 03/634 in relation to any Shares the subject of voluntary escrow agreements as set out in Section 11.11.
231 LTD REPLACEMENT PROSPECTUS 2013
13. DIRECTORS RESPONSIBILITY & CONSENT The Directors state that they have made all reasonable enquiries and on that basis have reasonable grounds to believe that any statements made by the Directors in this Prospectus are not misleading or deceptive and that in respect to any other statements made in the Prospectus by persons other than Directors, the Directors have made reasonable enquiries and on that basis have reasonable grounds to believe that persons making the statement or statements were competent to make such statements, those persons have given their consent to the statements being included in this Prospectus in the form and context in which they are included and have not withdrawn that consent before lodgement of this Prospectus with ASIC, or to the Directors knowledge, before any issue of the Shares pursuant to this Prospectus.
Each Director has consented to the lodgement of this Prospectus with ASIC and has not withdrawn that consent.
Dated: 15 July 2013
Signed for and on behalf of Fertoz Limited by:
Mr James Chisholm CHAIRMAN 14. GLOSSARY 232
14. GLOSSARY
TERM MEANING Applicant A person applying for Shares under this Prospectus Application The lodgement of an Application Form Application Form The application form for Shares attached to or accompanying this Prospectus relating to the Offer Application Monies The Offer Price multiplied by the number of Shares applied for. AEST Australian Eastern Standard Time ASIC Australian Securities and Investments Commission ASKD Law Anfield Sujir Kennedy & Durno LLP barristers and solicitors ASX ASX Limited (can 008 624 691) or the financial market operated by it, as the context requires ASX Listing Rules The listing rules of the ASX ASX Settlement Operating Rules The rules of ASX Settlement Pty Ltd AUD or $ Australian dollars unless otherwise specified Australian Accounting Standards Australian Accounting Standards issued by the Australian Accounting Standards Board beneficiation Improvement of the grade of ore by milling, flotation, sintering, gravity concentration or other processes Board The board of Directors of the Company as constituted from time to time CAD Canadian dollars CHESS Clearing House Electronic Sub-register System Closing Date The date by which valid Applications must be received by the Share Registry being 5:00pm AEST on 16 August 2013 or such other date and time determined by the Board Company or Fertoz Fertoz Ltd (ACN 451 951 622) Competent Person Under the JORC Code a person who has relevant skills and qualifications to estimate Mineral Resources and Ore Reserves Completion or Completion of the Offer Allotment of Shares under the Offer which will only occur if the Minimum Subscription is achieved Constitution The constitution of the Company Corporations Act The Corporations Act 2001 (Cth) diamond drilling A method of exploratory drilling to extract core samples using a diamond encrusted drill bit DAP Di Ammonium Phosphate Director A director of Fertoz Direct Shipping Ore or DSO Ore which may be mined and used by a customer with little or no processing Exposure Period Period commencing on the date of lodgement of the Original Prospectus with ASIC, being 26 June 2013, and ending 14 days after lodgement, being 10 July 2013 Fertoz The Company or Fertoz Ltd (ACN 145 951 622) Fertoz International Fertoz International Inc. (OCN 2318541) a 100% owned subsidiary of Fertoz registered in Canada FOB Free on Board Group Fertoz and Fertoz International GST Goods and Services Tax ha Hectares Independent Geologist’s Report The Independent Geologist’s Report prepared by Xstract Mining Consultants Pty Ltd as set out in Section 7 JORC Joint Ore Reserves Committee JORC Code Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 Edition) 233 LTD REPLACEMENT PROSPECTUS 2013
TERM MEANING Jurassic A geological time period spanning from 199.6 to 145.5 million years ago Lead Manager Blackwood Capital Limited ACN 101 849 110 Listing Admission of the Company to the Official List MAP Mono Ammonium Phosphate Mineral Resource A phosphate occurrence in such form, quantity and quality that there are reasonable prospects for eventual economic extraction. Mineral Resources are sub-divided in order of increasing geological confidence into Inferred, Indicated and Measured categories as defined in the JORC Code. Minimum Subscription 15,000,000 Shares, representing approximately $3,000,000 of Application Monies Maximum Subscription 20,000,000 Shares, representing approximately $4,000,000 of Application Monies Mt Million metric tons Offer The initial public offering of Shares in the Company pursuant to this Prospectus Offer Price $0.20 per Share Official List The official list of the ASX Official Quotation The official quotation by ASX in accordance with the ASX Listing Rules Opening Date 22 July 2013 Option An option in the Company Phosphate rock An ore containing phosphorus expressed in % P₂O₅ Phosphorite A sedimentary rock which contains high amounts of phosphate bearing minerals P₂O₅ The chemical symbol for phosphorus pentoxide Prescribed person A person named in the Prospectus as performing a function as a financial services licensee or in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus or Promoters of the Company Promoter Has the same meaning given to that term in the ASX Listing Rules Prospectus This document (including the electronic form of this Prospectus) and any supplementary or replacement prospectus in relation to this document section A section of this Prospectus Share An ordinary fully paid share in the Company Shareholder A shareholder of the Company Share Registry Computershare Investor Services Pty Limited tpa Metric tons per annum UN United Nations USD United States dollars US Person Has the meaning given in the US Securities Act of 1933 Valmin Code Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports 2005 Yttrium A rare earth element FERTOZ Ltd ABN 86 145 951 622 Application Form This is an Application Form for Shares in Fertoz Ltd Registry Use Only under the Offer on the terms set out in the Replacement Prospectus dated 16 July 2013. If you are in doubt as to how to deal with it, please contact your stockbroker or professional adviser without delay. You should read the entire prospectus carefully before completing this form. To meet the requirements of the Corporations Act, this Application Form must not be distributed unless Broker Code Adviser Code included in, or accompanied by, the prospectus.
A I/we apply for B I/we lodge full Application Money A$ .
Number of Shares in Fertoz Ltd at $0.20 per Share or such lesser number of Shares which may be allocated to me/us C Individual/Joint applications - refer to naming standards overleaf for correct forms of registrable title(s) Title or Company Name Given Name(s) Surname
Joint Applicant 2 or Account Designation
Joint Applicant 3 or Account Designation
D Enter your postal address - Include State and Postcode Unit Street Number Street Name or PO Box /Other Information
City / Suburb / Town State Postcode
E Enter your contact details Contact Name Telephone Number - Business Hours / After Hours ()
F CHESS Participant Please note that if you supply a CHESS HIN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your Holder Identification Number (HIN) application will be deemed to be made without the CHESS HIN, and any securities X issued as a result of the IPO will be held on the Issuer Sponsored subregister.
Payment details - Please note that funds are unable to be directly debited from your bank account G Drawer Cheque Number BSB Number Account Number Amount of Cheque A$ Make your cheque or bank draft payable to Fertoz Ltd By submitting this Application Form, I/we declare that this application is completed and lodged according to the Replacement Prospectus and the declarations/statements on the reverse of this Application form and I/we declare that all details and statements made by me/us (including the declaration on the reverse of this Application Form) are complete and accurate. I/we agree to be bound by the Constitution of the Company. The Replacement Prospectus contains important information about investing in the Shares of the Company and you should read this document before applying for Shares.
See back of form for completion guidelines How to complete this form A Shares Applied for F CHESS Enter the number of Shares you wish to apply for. The application must Fertoz Ltd (the Company) will apply to the ASX to participate in CHESS, be for a minimum of 10,000. Applications for greater than 10,000 Shares operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly must be in multiples of 1,000 Shares. owned subsidiary of Australian Securities Exchange Limited. In CHESS, the company will operate an electronic CHESS Subregister of security holdings B Application Monies and an electronic Issuer Sponsored Subregister of security holdings. Enter the amount of Application Monies. To calculate the amount, Together the two Subregisters will make up the Company’s principal register multiply the number of Shares by the price per Share. of securities. The Company will not be issuing certificates to applicants in respect of Shares allotted. If you are a CHESS participant (or are sponsored C Applicant Name(s) by a CHESS participant) and you wish to hold Shares allotted to you Enter the full name you wish to appear on the statement of share under this Application on the CHESS Subregister, enter your CHESS HIN. holding. This must be either your own name or the name of a company. Otherwise, leave this section blank and on allotment, you will be sponsored Up to 3 joint Applicants may register. You should refer to the table below by the Company and allocated a Securityholder Reference Number (SRN). for the correct forms of registrable title. Applications using the wrong form of names may be rejected. Clearing House Electronic Subregister G Payment System (CHESS) participants should complete their name identically to Make your cheque or bank draft payable to Fertoz Ltd in Australian currency that presently registered in the CHESS system. and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian Bank. D Postal Address Enter your postal address for all correspondence. All communications Complete the cheque details in the boxes provided. The total amount must to you from the Registry will be mailed to the person(s) and address as agree with the amount shown in box B. Please note that funds are unable to shown. For joint Applicants, only one address can be entered. be directly debited from your bank account. E Contact Details Cheques will be processed on the day of receipt and as such, sufficient Enter your contact details. These are not compulsory but will assist us if cleared funds must be held in your account as cheques returned unpaid we need to contact you. may not be re-presented and may result in your Application being rejected. Paperclip (do not staple) your cheque(s) to the Application Form where indicated. Cash will not be accepted. Receipt for payment will not be forwarded.
TThe Shares to which this Application Form relates are Fertoz Ltd Shares. Further details about the Shares are contained in the Replacement Prospectus dated 16 July 2013 issued by Fertoz Ltd. The Prospectus will expire on 25 July 2014. While the Prospectus is current, Fertoz will send paper copies of the Prospectus, any supplementary documentation and the Application Form, free of charge on request. ASIC requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant Prospectus. This Application Form is included in the Replacement Prospectus. Before completing the Application Form the applicant(s) should read this prospectus to which this application relates. By lodging the Application Form, the applicant agrees that this application for Shares in Fertoz Ltd is upon and subject to the terms of the prospectus and the Constitution of Fertoz Ltd agrees to take any number of Shares that may be allotted to the Applicant(s) pursuant to the prospectus and declares that all details and statements made are complete and accurate. It is not necessary to sign the Application Form.
Lodgement of Application Application Forms must be received by Computershare Investor Services Pty Limited Melbourne by no later than 5pm AEST on 16 August 2013. You should allow sufficient time for this to occur. Return the Application Form with cheque(s) attached to:
Computershare Investor Services Neither CIS nor the Company accepts any responsibility if you lodge the Application Form at any other Pty Limited address or by any other means. GPO Box 52 MELBOURNE VIC 8060
Privacy Statement Personal information is collected on this form by Computershare Investor Services Pty Limited (“CIS”), as registrar for securities issuers (“the issuer”), for the purpose of maintaining registers of security holders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to our related bodies corporate, to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or e-mail [email protected] If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold Shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.
TYPE OF INVESTOR CORRECT FORM OF REGISTRATION INCORRECT FORM OF REGISTRATION Individual - Use given name(s) in full, not initials Mr John Alfred Smith J.A Smith Joint - Use given name(s) in full, not initials Mr John Alfred Smith & Mrs Janet Marie Smith John Alfred & Janet Marie Smith Company - Use company title, not abbreviations ABC Pty Ltd ABC P/L , ABC Co Trusts Ms Penny Smith Penny Smith Family Trust - Use trustee(s) personal name(s)