AsiaPhos receives request for undertaking to vacate two mines in Sichuan; does not intend to sign

CATALIST-LISTED company AsiaPhos Limited on Friday released a statement in relation to a request for undertaking it received around Nov 21 to vacate and rehabilitate two of its mining sites within the Jiudingshan Nature Reserve in China's Sichuan Province. AsiaPhos said it does not intend to sign the request for undertaking.

In a pre-market exchange filing on Friday, the phosphate-mining firm said that the mines in question - Mine 2 and the Feng Tai mine - were to be fully vacated by Nov 30 with the possibility of compensation.

"The board has been advised by its legal advisers that the request for undertaking is not an official request from the Department of Land and Resources of Sichuan Province, the relevant authority which issued the group's mining and exploration licenses," AsiaPhos said.

It also noted that this request "may be a prelude to formal negotiations on the withdrawal of the mining and exploration licences" for Mine 2 and the Feng Tai mine.

According to a notice made by the Mianzhu Forestry Bureau, the rehabilitation of the mines must be completed by Nov 25 and with the rehabilitation set to cost Asiaphos approximately 2.2 million yuan (S$449,680).

The cost amount will be deducted from the compensation due, if rehabilitation works are not completed by 30 Nov, AsiaPhos said.

"The company is of the view that the likelihood of completing the rehabilitation on or before 30 Nov is low," it added.

AsiaPhos also said that it has not received any updates or formal notification in respect of the withdrawal of the mining licence for another mine located outside the Jiudingshan Nature Reserve. In the company's application to renew the licence, it was advised by the Sichuan Provincial Authority that the a mine could be inside an area earmarked for a proposed panda reserve. The licence for that mine is valid until February 2018.

AsiaPhos said it has sufficient inventories of phosphate rocks and yellow phosphorous to cover its operational needs up to March 31, 2018. It has also commenced sourcing and will continue to source rocks from other suppliers.

The company said its board believes that even if the mining licences of the two mines within the Jiudingshan Nature Reserve are withdrawn, "the group will be able to continue operating its downstream business effectively, which will mitigate the effects of the downturn as a result of the licence withdrawal."