Geolsec Phosphate Operations Pty Ltd (GEOLSEC) is the operator of the GeolSec project. Australian government agency, Bureau of Mineral Economics estimated that Geolsec project, which is located 65 km from Darwin, contains approximately 1.3 million tons of rock phosphate grading up to 39% P2O5 and with an average grade of 12% P2O5.

GEOLSEC’S mission is to become a preferred supplier of environmentally-friendly organic products to the agricultural sector in the Northern Territory and beyond and thus support further expansion of sustainable agriculture. Geolsec products such as organic phosphate rock and rock dust supplements have many environmental benefits (see more details below).

This has a potential to provide substantial ongoing benefits to the environment and the community as well as to generate an early income for Korab and Korab’s shareholders. Because of the deposit’s location, its structure and its characteristics, the development of the GeolSec project should have a negligible environmental impact.

GEOLSEC is looking at commencing production of the organic fertiliser in 2010 subject to receiving all regulatory approvals. It estimates that the mining and processing costs for this operation would be under A$100 per tone of bagged product. Ground-up rock phosphate retails for around A$1,000 and A$1,200 per tone. The start-up costs are estimated at between A$300,000 and A$400,000. The working capital requirements are estimated to be in the order of A$300,000 and A$600,000.

Initially, the rock quarrying operations at GEOLSEC would be conducted on a campaign basis (4-6 weeks a year) targeting a first year output of approximately 15,000 tones pa to generate a projected 1st year pre-tax gross profit of around $5-$6 million, or between 7.3 and 8.8 cents a share. GEOLSEC will be targeting a 2nd year profit of $9 million, and $12 million in the 3rd year of operation.

This represents a targeted gross profit of $26-$27 million over 3 years commencing 2010 . Subject to there being no capital dilution and to meeting the targeted sales revenue and operating expenses, this revenue stream represents a potential gross profit of between 38 and 40 cents per share over 3 years. There is a potential for the project to operate for at least 5 years at a rate of 30,000 tpa.

Company has commenced the marketing of GEOLSEC organic fertiliser with the initial focus on pastoralists and organic farmers in the Northern Territory and selected niche markets in Western Australia.

GEOLSEC's benefits

Organic fertilisers based on ground-up rock phosphate such as GEOLSEC  offer several advantages over chemically processed soluble fertilisers such as DAP, MAP or superphosphate:

• Organic fertilisers slowly release nutrients into the soil matching the speed at which the nutrients are being absorbed by the plants.
• Phosphate rocks are natural minerals requiring minimum metallurgical processing. Their direct application avoids the production of polluting wastes such as phospho-gypsum and greenhouse gases, thus resulting in energy conservation and protection of environment from industrial pollution.
• Phosphate rocks for direct application can be more efficient than artificial fertilizers in terms of phosphorus (P) recovery by plants under certain conditions. Based on the unit cost of P, natural phosphate rock is usually the cheapest.
  
• Use of organic phosphate rock reduces the risk of harmful accumulation of nutrients in the soil and reduces soil salinity problems
• Use of organic phosphate instead of chemically processed phosphate avoids the serious environmental degradation caused by increased concentrations of fertilisers in the ground water, the rivers and the coastal waters.
  
• GEOLSEC rock has the ability to restore microelemental and microbial soil balance which in turn leads to less reliance on artificial fertilisers and better crop yields.
  
• Plants grown on GEOLSEC organic phosphate rock fertiliser have a better nutritional quality.
• Because of GEOLSEC's unique chemical composition, incorporation of Geolsec into the soil enhances its biological activity and increases soil carbon (C) accumulation, leading to improved soil fertility and restoration of its physical and chemical properties.
• GEOLSEC organic phosphate rock is a source of several nutrients other than P. Rock phosphates are usually applied to replenish soil P status, but GEOLSEC also provides other nutrients present in our rock. Application of GEOLSEC organic phosphate has a potential trigger effect on plant growth and crop yields as a result not only of P release but also of GEOLSEC's effect on increasing exchangeable calcium (Ca) and reducing Al saturation.

GEOLSEC and organic farming in Australia

The diagram on the right shows the top 10 countries globally with the largest area of land dedicated to organic farming. In 2007, Australia had 12 million hectares of land being used for organic farming This constituted 38% of the total world organic farmland. The Australian organic farming sector offers Korab a very substantial marketing opportunity and a potential for strong sustainable growth.