MANAGEMENT'S DISCUSSION AND ANALYSIS - SIX-MONTH PERIOD ENDED JUNE 30, 2021
CASHFLOWS, LIQUIDITY AND CAPITAL MANAGEMENT .........................................................................
SUMMARY OF FINANCIAL ACTIVITIES FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 2021 ..
SUMMARY OF FINANCIAL ACTIVITIES FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2021 ........
APPLICATION OF NEW IFRS AND CRITICAL ACCOUNTING ESTIMATES ............................................
FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT................................
393 Racine St. East, Suite 200, Chicoutimi (Québec) G7H 1T2 Tel.: 418-549-7316 Fax: 418-549-5750 Email: info@arianne-inc.com www.arianne-inc.com
MANAGEMENT'S DISCUSSION AND ANALYSIS - SIX-MONTH PERIOD ENDED JUNE 30, 2021
This Management's Discussion and Analysis ("MD&A") presents an analysis of the financial situation and operations of Arianne Phosphate Inc. ("Arianne" or the "Company") for the period ended June 30, 2021. This report was prepared in compliance with the provisions of Form 51-102F1, approved by the Board of Directors and dated August 26, 2021. It should be read in conjunction with the audited consolidated financial statements for the period ended June 30, 2021 (the "financial statements").
The accounting policies followed in the financial statements are consistent with those applied in the Company's annual financial statements for the year ended December 31, 2020 and, where required, in Note 2 of the unaudited condensed interim consolidated financial statements for the six-month period ended June 30, 2021. The financial statements should be read in conjunction with the Company's consolidated and audited annual financial statements for the year ended December 31, 2020, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the IASB.
All amounts presented in the MD&A are in Canadian dollars (CAD) unless otherwise noted.
Certain statements in this MD&A about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements, or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "likely", "predicts", "estimates" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. Specific forward-looking statements in this MD&A include, but are not limited to, statements with respect to the general development of the business and the eventual start of commercial production and to the liquidity position of the Company. Forward- looking statements are based on information currently available to us and on estimates and assumptions made by us regarding, among other things, general economic conditions and the mining industry in general, in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances. Although reasonable, the statements can entail known and unknown risks and uncertainties and, accordingly, actual results and future events could differ materially from those anticipated in such statements.
Arianne ensures to comply with all relevant environmental and social laws, regulations and permits in all material respects.
Arianne is a company focused on the development of the Lac à Paul phosphate project (Lac à Paul) located in the Saguenay-Lac-St-Jean area, in the province of Quebec. The Company's shares are listed on the TSX Venture Exchange (symbol DAN), on the Frankfurt exchange (symbol JE9N) and on the US Stock Exchange Over-the-Counter (OTC) (symbol DRRSF). The registered office of the Company is located at 393 Racine Street East, Suite 200, Chicoutimi, Québec, Canada G7H 1T2.
393 Racine St. East, Suite 200, Chicoutimi (Québec) G7H 1T2 Tel.: 418-549-7316 Fax: 418-549-5750 Email: info@arianne-inc.com www.arianne-inc.com
MANAGEMENT'S DISCUSSION AND ANALYSIS - SIX-MONTH PERIOD ENDED JUNE 30, 2021
During the quarter, the Company performed work associated with its ongoing due diligence process involving potential partners. As well, as mandated by our permit, we appointed an archeology firm to perform research this fall regarding the path of the power line. Lastly, the Company was active in participating in several meetings with the AMQ (Association Minière du Québec), the regional mining commission, the MRC (Municipalité Régional de Compté) and local municipalities.
In September and December 2018, the Company announced the formal execution of two off-take agreements. Under the terms of those agreements, the buyers have entered into long-term contracts to purchase Arianne's high-purity phosphate concentrate which will be shipped to the buyers' processing plant for further processing into downstream phosphate products. The off-take agreements also have a
393 Racine St. East, Suite 200, Chicoutimi (Québec) G7H 1T2 Tel.: 418-549-7316 Fax: 418-549-5750 Email: info@arianne-inc.com www.arianne-inc.com
MANAGEMENT'S DISCUSSION AND ANALYSIS - SIX-MONTH PERIOD ENDED JUNE 30, 2021
mechanism whereby it can be extended beyond the initial contract period and applies pricing that accounts for the high quality of Arianne's concentrate. The Company is conducting ongoing discussion and negotiations with addition potential customers and off-takers.
In March 2019, Arianne entered into an agency agreement with Compagnie Indo Française de Commerce ("CIFC") to market and sell Arianne's high-purity,low-contaminant phosphate concentrate into the Indian market. Based in New Delhi, India, Compagnie Indo Française de Commerce Pvt. Ltd. is a private company. CIFC's business includes the trading, sale, marketing and supply of critical raw materials to India, including fertilizers, agricultural chemicals and animal feeds.
Downstream production of phosphoric acid
In October 2019, Arianne received the final report regarding a downstream phosphoric acid facility. Arianne phosphate concentrate responded extremely well during the process and was capable of producing a 60% P2O5 Merchant Grade Acid ("MGA") and opposed to usual 52% MGA and, therefore, should be able to be sold at higher margin. Further, because of the high-quality nature of the Arianne phosphate concentrate input, the gypsum by-product produced during the process appears to have commercial value, as opposed to the typical contaminated waste generated by using traditional phosphate rock sources. These tests should now allow us to continue discussions with several groups that have indicated an interest in the possibilities of a phosphoric acid facility. With the right partner, the facility can have numerous advantages; control of its own rock source will provide an economic benefit as well as allow for greater security of supply. In addition, it will also provide a buyer for roughly 40% of Arianne future mine production. The Company has partnered with the Province of New Brunswick for the review of constructing a phosphoric acid plant in Belledune, New Brunswick.
Proven and Probable (P&P) reserves estimated in the Feasability study published in October 2013 are presented in the next table.
Through further exploration activities completed in 2014, additional resources were estimated on the project. All the up-to-date resources of the Lac à Paul project are presented in the next table.
393 Racine St. East, Suite 200, Chicoutimi (Québec) G7H 1T2 Tel.: 418-549-7316 Fax: 418-549-5750 Email: info@arianne-inc.com www.arianne-inc.com
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