Prospect Resources (ASX:PSC) Arcadia approved for Special Economic Zone status


by Jessica Amir

Prospect Resources (ASX:PSC) Managing Director, Sam Hosack talks about its flagship Arcadia lithium project in Zimbabwe being further endorsed and given special economic status.

Jessica Amir: Thanks for tuning in to the Finance News Network. I'm Jessica Amir. Joining us now from Perth is Prospect Resources (ASX:PSC) Managing Director, Sam Hosack. Hi Sam. Welcome back to the network.

Sam Hosack: Hi Jessica. Thank you.

Jessica Amir: First up, your Arcadia Lithium project has just been approved for special economic zone status. Congratulations. Now can you tell us all about it?

Sam Hosack: Thank you Jessica. Look, this is a tremendous coup for Prospect Resources and we are in the process of talking about what special economic zones are so I'm happy to take you through that. A special economic zone is an area in which business and trade laws are different from the rest of Zimbabwe and the government of Zimbabwe has set up SEZs special economic zones from the country's national borders and the aim is really to increase trade balance, improve investment appetite, job creation and for the purposes of Prospect at least an approved administrative ability.
 Zimbabwe's special economic zones are aiming to achieve a couple of key criteria. The first is to restore that economy's capacity to produce goods and services competitively, to create economies of scale significant enough for the promoter or the originator of the proposed SE zones to be internationally competitive and that's a big thing for us Jessica. 
It's to ensure inclusive growth and it's to maximize the economic benefits and attract investments. These are the things that Prospect have been very attracted to and focused on and it's great that we've been successful in this award.

Jessica Amir: The project already has national project status, so what does SEZ mean for the company and shareholders?

Sam Hosack: The national project status is really just an identification of projects of significance which is a great accolade in its own right. But over and above the national project status, the SEZs primarily provide some tax concessions so there's 0% corporate tax, corporate income tax for the first five years and 15% thereafter which is very competitive.
 We have a non-residence withholding tax reduced to nil which is great and the ability to hold funds offshore and operate essentially in any currency that suits the business. US dollars or rand whichever is geographically appropriate. Primarily the ease of implementation and exportation of goods to and from Zimbabwe.
This is particularly useful for Prospect given that we export large quantities of concentrated products every year. And the SEZ serves to streamline our logistics and enable us to deliver our products to our customers with greater ease.

Jessica Amir: And you also recently announced a significant project enhancement including cost savings. Just tell us about that.

Sam Hosack: Yeah sure, Jessica. The value engineering is a continuum for small businesses like ours. Value engineering has been undertaken throughout the last six months, and in this case it successfully demonstrated that the Arcadia Lithium project would utilise high pressure grinding roll technology. The use of HPGR significantly simplifies our flow sheet and replaces a number of tertiary and crushing requirements which is a great coup for us.
 The highlights of what HPGR is expected to deliver is a reduction in capital expenditure of $2.3 million at least, a reduction in operating expenditure by $7 per ton or around 2.5% of our total OPEX. That's very important, Jessica, for us to be within the lowest cost quartile of production and that's one of the Prospect ambitions.
And finally there's been an increased project, NPV10, it increases by $22 million which takes us just up to $533 million which improves the EBITDA by $3 million per year over the 12 year life.

Jessica Amir: Just lastly Sam, is there anything else that you wanted to add today?

Sam Hosack: We have got a couple of key focuses and securing the required finance to fund the Arcadia Project is primarily what our business is focused on. In conjunction with that conducting further value engineering around the logistics and the balance of the operating flow sheets is going to continue to deliver results. Obviously being ready to get our project ticked off in the event that we are financed which is our plan.

Jessica Amir: Sam Hosack, thanks for the update and thank you for your time.

Sam Hosack: Thank you Jessica.


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