I am optimistic about finding potash beyond the east anhydrite boundry at deeper depths. As previously discussed the Musley deposit as drilled by AAA, FED and Sainik shows multiple potash horizons down to a depth of 700 m. Also, I'm not aware of another potash deposit that does not have multiple horizons. The geological fracture to the west has not been described, so this is difficult to interpret. Clearly, STB has the 2D seismic working well, so this is giving them guidance.
Being very conservative STB has 1 billion tons of potash at a composite grade of 18%. The significant advantage that STB has over others is the ability to use open pit mining. As Olso's previous post shows, the potash recovery rate can be as high as 90%. Solution mining in comparison has a 20% recovery rate.
Therefore, STB could have 180 mt of potash with a recovery rate of 90%. Therefore, 162 mt of recoverable potash. Mining at 4 mt per year would yield a mine life of 40 years.
I believe that the above resource estimates are very conservative for STB's resource.
For valuation purposes, have a look at NYSE:IPI which produces 1 mt of potash per year and has market cap of close to $3 billion.
The greatest risk imo, for STB are still regional/infrastructure but as the Danakil Basin players are establishing themselves with good relations with their respective countries and by obtaining world class financing, these risks are decreasing.
STB Price at posting:
$4.97 Sentiment: None Disclosure: Held
