The valuation is based on the potash production estimates from the Dandaragan Trough Project in Western Australia.
The following is an extract from the report.
Potash West NL is an Australian-based mineral exploration company focused on developing potassium-rich glauconite deposits ¡n West Australia's Perth Basin.
The company's flagship project, the Dandaragan Trough Project, is one of the world's largest glauconite deposits, mixed with silica, in a deposit of greensand.
The greensands contain significant potash within the glauconite and phosphate. Besides rights to glauconite and phosphate minerals within the tenements, Potash West holds rights to by-products produced by processing these minerals.
In October 2012, the Company completed a 3,215m drilling program in the Dinner Hill Prospect, which resulted in a JORC compliant resource estimate of 244MMT @3.0% K2O.
The mineralization displays strong geological continuity, providing scope for additional resources to be delineated with further drilling.
In January 2013, the company announced results of an Initial Scoping Study of the Dandaragan Trough Project.
The scoping study was based on the JORC-compliant resource at the Dinner Hill area and considered scenarios of 4.0Mtpa and 2.4Mtpa mining rate.
The study suggested technical and financial viability of the project, with an NPV of AU$808MM and an IRR of 21.0% (at mining rate of 2.4Mtpa).
After completion of the Scoping Study, the company aims to increase its resource base by conducting further drilling.
Besides, it seeks to define a measured resource estimate over a part of the deposit to support the Bankable Feasibility Study (NYSE:BFS).
The company plans to commence and complete the BFS in 2015, and aims to start production by mid-2018.
The company has also developed a flowsheet, called K-Max, to extract Sulphate of Potash (NYSEARCA:SOP) and other co-products. In December 2012, the company announced that it had applied for a patent over K-Max.
The company plans to further enhance its knowledge in greensand processing, and apply K-Max process to other deposits.
Potash West enjoys a unique location advantage in terms of excellent connectivity to transport facilities, infrastructure and proximity to the local markets.
The grant of K-Max patent is expected to further strengthen the company's position.
Given the due diligence and valuation estimations based on the discounted cash flow method, Arrowhead believes that Potash West NL's fair share value lies between AU$0.44 to AU$3.08.
The current valuation is based on the potash production estimates from the Dandaragan Trough potash project, and does not factor in the potential value of the company's future projects.
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