Potash West (ASX:PWN) has upgraded its phosphate resource at its Dinner Hill Project in Western Australia to the higher confidence Indicated resource to 250 million tonnes at 2.9% P2O5, a 108% tonnage and 4% grade increase.
Dinner Hill is part of the Dandaragan Trough Project area - one of the world's largest glauconite deposits.
The resource upgrade is based on 90 holes drilled in 2014 and 2015 that has identified higher phosphate grades in the north.
These results will form the basis of pit design and mine scheduling studies carried out as part of the planned feasibility study into phosphate production at Dinner Hill.
Principal potash mineralisation occurs within the Molecap Greensand, which is now estimated to contain 175 million tonnes at 4% K2O, a 43% increase in tonnes and a 12% grade reduction.
"These are very pleasing results, which have further highlighted the world class size and prospectivity of our Dandaragan Trough Project," managing director Patrick McManus said.
He added the drilling had achieved all its objectives:
- Identifying the extent of mineralisation, to allow a definition of the deposit sufficient to delineate an area that will be affected by mining, for permitting purposes;
- Obtaining samples to complete metallurgical and process development testwork, sufficient for feasibility studies; and
- Drilling a sample area of the deposit to confirm the drill density that will be required to report a JORC resource to a Measured Resource category.
"Importantly, the mineral inventory for phosphate production has increased substantially, and there is still a significant area of the prospective Dinner Hill tenement to be explored," he said.
"Phosphate and potash mineralisation are open to the east and to the south, which offers considerable upside at Dinner Hill for increased project life, or capacity increases."
The Indicated Resource will now be used to develop an optimised mining plan which will be the basis for a new scoping study model for mining Dinner Hill.
Two development options will be modelled:
- Model 1: Mining the phosphate rich parts of the deposit, to produce single superphosphate, for the life of the Indicated Resource;
- Model 2: Using the phosphate mining project as a "springboard" to generate cashflows, some of which would be used to complete the development work for Potash West's unique KMax process. In this model the K-Max operation commences about 5 years after the phosphate project.
This work will be completed within the next two months and will then feed into a revised financial model.
The samples collected for metallurgical studies will be used for work to establish:
- The best processing route, including grades, recoveries and separation parameters;
- The variability of the deposit, in terms of key criteria such as mineralogy, particle size, ore hardness and grade.
This work will commence as soon as possible and will generate process information continuously over a period of approximately 6 months.
The 22 square kilometre Dinner Hill project is located 175 kilometres north of Perth and forms part of the broader Dandaragan Trough Project area.
It covers two virtually horizontal greensand formations within the Cretaceous Coolyena Group: the Poison Hill Greensand and the Molecap Greensand.
Over most of the area of the deposit they are separated by the Gingin Chalk and in places are underlain by a thin pebble horizon containing phosphatic nodules.
An average thickness of about 11m of surficial, mostly sandy, cover overlies the greensand units.
The greensands and the chalk contain significant amounts of phosphate as grains and nodules of fluorapatite. They also contain significant potash within the mineral glauconite.
Additional work to extend the range of bulk density measured is planned.
Portions of the resource will be infill drilled to elevate those areas to the Measured Mineral Resource category.
Dinner Hill has low capex and low risk to cashflow through phosphate production first.
The proposed 4.2 million tonne per annum phosphate plant has estimated NPV of A$331 million, IRR of 29.5%, capital costs of A$200 million, operating costs of A$200 per tonne and revenue of A$370 per tonne.
It will produce 390,000 tonnes of single superphosphate with a commodity grade of 18% P2O5 and a 20 year mine life.
Potash West expects to start the phosphate production feasibility study in the third quarter of this year with construction expected to start in 2017. Production could start in the second half of 2018.
The 2,500 square kilometre Dandaragan Trough Project area has about 150 kilometres of strike that is about 20 kilometres wide and has existing rail, power, gas and water infrastructure.
The project is also close to local markets in Western Australia while its proximity to export ports places it within reach of markets in South East Asia.
The upgraded resources at Dinner Hill have highlighted the world class size and prospectivity of our Dandaragan Trough Project.
Particularly, the increase in the phosphate resource will form the basis of pit design and mine scheduling studies that carried out as part of the planned phosphate production feasibility study, which could begin in the third quarter of 2015.
Given that the previous Indicated Resource is already sufficient for a mine life of more than 20 years, this work could include a revision of throughput.
In addition, the unconsolidated sand near surface will allow for rapid and low cost infill drilling that will be carried out as part of the final work for the feasibility study.
This could result in the defining of a Measured Resource enough for about 10 years of mining.
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- Optimised mining plan to be completed within the next two months; and
- Start of Feasibility Study in the third quarter.
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