Potash West (ASX: PWN) has revised upward the phosphate Indicated resource to 90 million tonnes at the Dinner Hill project, using a lower 1.85% cut-off than the earlier 3% P2O5 used at the project in Western Australia.
Earlier, an Indicated Resource of 58 million tonnes at 3% P2O5 has been estimated at Dinner Hill.
Revised estimate results from preliminary mining optimisation studies providing increased detail on economics.
All of the resource is in the Indicated Category and the importantly, the mineralisation remains open to the north and the east.
The resource resides in an area of postulated basin closure thought to present favourable conditions for the development of nodular phosphate within the Cretaceous Coolyena Group.
On 17 September 2013 the Company released positive results from a Scoping Study examining the production of superphosphate from the greensands at Dinner Hill.
Key takeaways from recent Scoping Study results
These are based on the Dinner Hill phosphate resources supporting production of 340,000 tonnes per annum of SSP for over 20 years, are:
- Ability to produce commodity grade SSP confirmed;
- Average revenues per year of A$131 million;
- Estimated average total annual cash costs of A$97.6 million;
- IRR of 26%;
- NPV of A$218 million;
- Low capital costs of $144M, inclusive of indirect costs; and
- Payback in under four years.
High recoveries and grades
Significantly, Phosphate concentrates responded well to conventional anionic flotation and high recoveries and grades (>30% P2O5) were achieved.
Managing director Patrick McManus
Managing director Patrick McManus recently told Proactive Investors, the company will likely push the independent superphosphate project at Dinner Hill given that it has no technology risk, a large resource with strong upside and a small capital requirement.
"All of which is more palatable in this investment environment," he added.
"This doesn't mean we'll abandon the K-Max project, which produces Potash and Alum as well as phosphate, but we will look to progress it in parallel.
"An advantage is that the two projects would share a common front-end, with identical mining and primary beneficiation plants.
"So we could build the phosphate project and later add the K-Max chemical plant, essentially treating part of the reject stream from the Phosphate concentrator."
McManus noted that while the K-Max project, which would produce potash, phosphate, alum and iron oxide, had a much higher NPV with great opportunities to grow the output, it would also require higher capex to get started.
He had said in a statement that capturing the full value of the phosphate allows a viable independent phosphate facility to be considered, in addition to providing major improvements to the economics of a K-Max plant.
"For a small company like Potash West, the lower capital requirement and proven established process technology required for the superphosphate plant will provide a route to positive cashflow that will reduce dilution for existing shareholders," he added.
"Our next steps are to move quickly to a definitive feasibility study on the phosphate resource."
The company added there opportunities for metallurgical recovery improvements and scope to increase the scale of the project as operations are established and markets grow in the region.
It could also build a combined phosphate plant and K-max plant to produce potash and alum products from the same feed material, which would increase phosphate production by more than 50% while having lower capital and operating costs compared to two separate plants.
Future work and upside potential
McManus said the main work programs will now revolve around engineering studies to improve Capex and Opex, permitting and market analysis.
He added that while the current Indicated Resource will need to be upgraded to the Measured category for the Feasibility Study, it would require just wide-spaced and low cost aircore drilling.
"The Dandaragan Trough has numerous thick intersections of Greensands, so the potential to increase the resource is very large," McManus noted.
"Within Dinner Hill the K-Max resource and the phosphate resource are virtually co-incident and cover only 10 square kilometres.
"The prospective area at Dinner Hill is about 60 square kilometres and the independent geologist has announced an exploration target of 1 billion to 1.5 billion tonnes on the remaining 50 square kilometres, about 10 times the existing high grade K-Max resource which, in turn lasts over 60 years at the scoping study scale.
"We don't know the target for the phosphate resource, but we are confident the resource will grow."
The Scoping Study has highlighted what Potash West has long believed, that its Dandaragan Trough Project represents an attractive project with ready access to infrastructure and markets.
The proposed independent superphosphate operation at Dinner Hill will enjoy low capital costs - making it more palatable to financiers, low mining costs, a simple processing route, acceptable recoveries and cheap acid supply.
Attention must also be paid to the considerable scope to enhance the project metallurgical recovery improvements and construction of a combined phosphate plant and K-max plant to produce potash and alum products from the same feed material.
This will not only result in higher phosphate production, but also lower costs.
Taken together, this provides the company with the confidence to move forwards towards a Definitive Feasibility Study.
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