Western Potash PFS imminent, fast-tracks search for partner
westernpotash.com • 604.689.9378
John Costigan
VP Corporate Development
The recent $39-billion hostile takeover attempt on the world's largest producer of potash is testament to the growing role this once obscure fertilizer plays today. It will continue to play a key role in the coming years, when the world's population swells to more than 8 billion by 2025. Western Potash's (TSXV: WPX) wholly owned Milestone property in Saskatchewan is expected to pitch in 2.5 million tonnes of potash a year to the global supply when it comes on stream sometime in early 2015. "The world needs food and food needs fertilizer. We need to intensify the production of agricultural commodities in order to feed the world's rapidly growing population and that requires increasing amounts of compound fertilizers, of which potash is a key element," said Western Potash's vice-president for Corporate Development, John Costigan. He discusses Western Potash's progress and competitive edge.
Resource Intelligence: Your Milestone potash project is a giant deposit with an astounding in-situ valuation. What progress have you made there recently?
John Costigan: After raising $20 million in December last year, we advanced to the pre-feasibility study (PFS) stage in January. We have about $30 million in the bank now, so we're fully cashed up to complete this step. We're expecting the pre-feasibility stage to take between eight and nine months. After that we'll move directly to the feasibility study stage.
RI: What is the potential value of the Milestone project?
JC: Currently we have about 750 million tonnes of potash in all categories, which we hope to move closer to one billion tonnes once we update our NI 43-101 mineral resource calculation. That would give us an in-situ asset value of close to $400 billion at current prices. Based on our preliminary economic assessment, our initial capital costs would be around $2.5 billion with a mine capacity of 2.5 million tonnes a year based on two streams of production. At today's prices, that would generate over $500 million in cash flow annually.
RI: Based on the size of this project, it's not surprising that you're looking for a partner to help advance Milestone. What avenues have you taken in your search?
JC: We just recently launched our partner initiative. We want to engage a strategic partner in the near term, to become part of the feasibility study process. What we're looking for is not just a partner with deep pockets but also one with experience in engineering, fabricating and access to the potash market as well. A solution mine, for example, requires hundreds of kilometers of steel piping, so a company with steel fabrication experience would make an interesting partner. So, to that end, in March we'll be traveling for meetings to India, which has the largest fertilizer company in the world.
RI: Why is solution mining the way to go for this project?
JC: We believe it's the best way to develop a mine here because large-scale potash projects are becoming so cost-prohibitive. If we were to conventionally mine this, it could cost $1,500 a tonne, but solution mining capital costs would be closer to $1,000 a tonne.
Also, the Milestone property is situated on a significant heat anomaly, which our studies have shown would reduce our operating costs by 8.5%. This is because solution mining is easier and more efficient with hotter formation temperatures.
Lastly, solution mining gives us access to premium deposits that have never been accessed before, and reduces the engineering risk. Any major producer would tell you that one of the biggest technical risks to conventional mining of potash is flooding. We eliminate that risk by designing the utilization of water, as opposed to conventional mining where we have to keep everything virtually water-proofed.
Also, solution mining has a smaller environmental footprint. We are even evaluating the re-injection of a solution back into the formation to further reduce our environmental footprint.
RI: In the short term, what can investors expect from Western Potash?
JC: What they can expect is a really solid technical approach to prepare for the construction of a potash mine.
The other thing is the expansion of our resource, which was approximately 750 million tonnes as of June 2010. Since then, we've acquired additional land. Our life of mine is now capped at 40 years, but once we update our resource calculation we anticipate expanding the life of the mine substantially.
Last but not least we will be moving off the Venture Exchange to the TSX, which will improve our global visibility and typically increases liquidity, as well.
RI: How should potential partners in your Milestone potash project evaluate Western Potash and the project?
JC: The Milestone project is the only independent potash project of significant size and scope left in Canada. We also have a strong technical team backing up this world-class, tier-1 asset. This kind of leverage will not exist much longer for the major players engaged in potash. We are able to offer them independence from the forced pricing dictated by the six companies that control 85% of the world's production.
RI: Is there anything else that investors should know?
JC: Investors should understand that, compared with other potash juniors that have been acquired in Saskatchewan, we're priced with a great deal of share price upside remaining. Western Potash is a very low-cost operation in a politically stable and mine friendly jurisdiction. With access to Saskatchewan's excellent infrastructure and talent pool our Milestone project has excellent grades and mineral composition. As such, this has great potential to be not just a profitable, world-class mine, but also one of the most environmentally friendly mines of its kind.
Investor Highlights:
John Costigan
VP Corporate Development
The recent $39-billion hostile takeover attempt on the world's largest producer of potash is testament to the growing role this once obscure fertilizer plays today. It will continue to play a key role in the coming years, when the world's population swells to more than 8 billion by 2025. Western Potash's (TSXV: WPX) wholly owned Milestone property in Saskatchewan is expected to pitch in 2.5 million tonnes of potash a year to the global supply when it comes on stream sometime in early 2015. "The world needs food and food needs fertilizer. We need to intensify the production of agricultural commodities in order to feed the world's rapidly growing population and that requires increasing amounts of compound fertilizers, of which potash is a key element," said Western Potash's vice-president for Corporate Development, John Costigan. He discusses Western Potash's progress and competitive edge.
Resource Intelligence: Your Milestone potash project is a giant deposit with an astounding in-situ valuation. What progress have you made there recently?
John Costigan: After raising $20 million in December last year, we advanced to the pre-feasibility study (PFS) stage in January. We have about $30 million in the bank now, so we're fully cashed up to complete this step. We're expecting the pre-feasibility stage to take between eight and nine months. After that we'll move directly to the feasibility study stage.
RI: What is the potential value of the Milestone project?
JC: Currently we have about 750 million tonnes of potash in all categories, which we hope to move closer to one billion tonnes once we update our NI 43-101 mineral resource calculation. That would give us an in-situ asset value of close to $400 billion at current prices. Based on our preliminary economic assessment, our initial capital costs would be around $2.5 billion with a mine capacity of 2.5 million tonnes a year based on two streams of production. At today's prices, that would generate over $500 million in cash flow annually.
RI: Based on the size of this project, it's not surprising that you're looking for a partner to help advance Milestone. What avenues have you taken in your search?
JC: We just recently launched our partner initiative. We want to engage a strategic partner in the near term, to become part of the feasibility study process. What we're looking for is not just a partner with deep pockets but also one with experience in engineering, fabricating and access to the potash market as well. A solution mine, for example, requires hundreds of kilometers of steel piping, so a company with steel fabrication experience would make an interesting partner. So, to that end, in March we'll be traveling for meetings to India, which has the largest fertilizer company in the world.
RI: Why is solution mining the way to go for this project?
JC: We believe it's the best way to develop a mine here because large-scale potash projects are becoming so cost-prohibitive. If we were to conventionally mine this, it could cost $1,500 a tonne, but solution mining capital costs would be closer to $1,000 a tonne.
Also, the Milestone property is situated on a significant heat anomaly, which our studies have shown would reduce our operating costs by 8.5%. This is because solution mining is easier and more efficient with hotter formation temperatures.
Lastly, solution mining gives us access to premium deposits that have never been accessed before, and reduces the engineering risk. Any major producer would tell you that one of the biggest technical risks to conventional mining of potash is flooding. We eliminate that risk by designing the utilization of water, as opposed to conventional mining where we have to keep everything virtually water-proofed.
Also, solution mining has a smaller environmental footprint. We are even evaluating the re-injection of a solution back into the formation to further reduce our environmental footprint.
RI: In the short term, what can investors expect from Western Potash?
JC: What they can expect is a really solid technical approach to prepare for the construction of a potash mine.
The other thing is the expansion of our resource, which was approximately 750 million tonnes as of June 2010. Since then, we've acquired additional land. Our life of mine is now capped at 40 years, but once we update our resource calculation we anticipate expanding the life of the mine substantially.
Last but not least we will be moving off the Venture Exchange to the TSX, which will improve our global visibility and typically increases liquidity, as well.
RI: How should potential partners in your Milestone potash project evaluate Western Potash and the project?
JC: The Milestone project is the only independent potash project of significant size and scope left in Canada. We also have a strong technical team backing up this world-class, tier-1 asset. This kind of leverage will not exist much longer for the major players engaged in potash. We are able to offer them independence from the forced pricing dictated by the six companies that control 85% of the world's production.
RI: Is there anything else that investors should know?
JC: Investors should understand that, compared with other potash juniors that have been acquired in Saskatchewan, we're priced with a great deal of share price upside remaining. Western Potash is a very low-cost operation in a politically stable and mine friendly jurisdiction. With access to Saskatchewan's excellent infrastructure and talent pool our Milestone project has excellent grades and mineral composition. As such, this has great potential to be not just a profitable, world-class mine, but also one of the most environmentally friendly mines of its kind.
Investor Highlights:
- Significant NI 43-101 resource
- Only new potash deposit in North America
- >40 year mine life at 2.5Mt/yr
- Tier 1 deposit in Saskatchewan, Canada
- High Grades (30%+ KCL)
- High formation temperatures
- Significant untested land
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