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Potash salts for all of Europe: Australians want to develop Thuringian deposits

Davenport Resources wants to revive potash mining in the southern Harz - in front of the doors of the rival K + S AG. The region should benefit noticeably from this.

Frankfurt Potash mining in Thuringia could experience a renaissance: at least that is the vision of the Australian company Davenport Resources. The Melbourne-based project development company has secured various mining and exploration licenses for potash deposits in the southern Harz in recent years, which, according to the company, comprise an estimated five billion tons of crude salt and cover an area of more than 500 square kilometers.

This summer the company wants to carry out a test drilling in the Ohm Mountains and then a feasibility study. The applications for approval will be sent out shortly, the company explains.

"We want to help potash mining in Thuringia to achieve a new heyday," said Jason Wilkinson, Managing Director of Südharz Kali GmbH, a subsidiary of Davenport Resources, in an interview with Handelsblatt. "Our long-term goal is to build a potash mine that strengthens the region economically and at the same time enables the environmentally friendly and safe use of the existing potash deposits," adds Chris Gilchrist, CEO of Davenport Resources.

The Australian project is at the gates of the German mining company K + S AG, whose large plant in Werra is only around 100 kilometers from the Ohm Mountains. K + S did not want to comment on Davenport's plans at the request of the Handelsblatt. Potash mining has a long tradition in Thuringia, the first shafts were built at the end of the 19th century. During the GDR era, potash exports were an important source of foreign currency. After the political change in the early 1990s, almost all mines were shut down. Even during the GDR era, the potash deposits in Thuringia were comparatively well researched. Much of this information was obtained by Davenport with the acquisition of the licenses over the years. Gilchrist assumes that the company could extract 325 million tons of potash salts from the deposits in the Ohm Mountains alone. "The European market currently needs around five million tons per year," he says: "So we could supply Europe for a very long time."

According to figures from the International Fertilizer Association (IFA), around 71 million tons of potash were produced in 2019 and 68.5 million were sold. The market has repeatedly overcapacities, the potash prices fell in the past year to in some cases 220 dollars per ton, but have now risen again. For Davenport managers, the issue of overcapacity is “more of a theoretical problem,” he says. "The providers in the market have always understood how to adapt their production to the required quantities." The global potash market is an oligopoly; in fact, it can be observed again and again that suppliers take quantities out of the market when the price is too low. "The potash price is currently rising again," says Gilchrist, "the global demand for fertilizers will increase with the increasing demand of a growing global population." He believes that a price level of 300 dollars per ton at the end of this decade is realistic. According to the investor presentation, Davenport wants to produce at similarly low costs as its Eastern European competitors Urakali and Belaruskali (around 100 US dollars per ton) and thus more than half cheaper than K + S. Heiner Marx, managing director of K-Utec AG from Sondershausen in Thuringia, points out imponderables in the plans. The company emerged from the GDR's potash research, today it offers worldwide services for consulting and the development of raw material deposits and also works for Davenport. "Whether the use of the deposits in Thuringia can be carried out economically depends on many questions," says Marx. On the one hand, on the quality of the salts, on the other hand, on the production costs underground and above ground for further processing and, last but not least, on the secondary costs for environmentally friendly disposal of the salt waste. “The disposal costs ultimately determine the price per ton,” says Marx. The mining group K + S, for example, disposes of a large part of its salt waste via the Werra River and stores it in large heaps. In recent years the company has invested a lot of money in reducing waste and disposing of it in a more environmentally friendly way. According to Gilchrist, Davenport wants to use new technologies to produce less waste and return the resulting salt waste underground to the mine. “We will not have salt piles meters high and salty sewage that has to be channeled into rivers,” promises South Potash boss Wilkinson. "We want to produce in an environmentally friendly and CO2-neutral manner."

Whether and how Davenport can keep these promises remains to be seen in a few years. “In the optimistic scenario, we will be able to extract the first tons of potash salts from the earth in 2025/26,” says Gilchrist. But everything has to go as planned, all permits, including those for building a mine, have to be granted, and no complaints from environmentalists, for example, may delay the project. The financing must also be right. As a listed company, Davenport itself is a penny stock with a current market capitalization of just under 17 million euros. The largest single shareholder, alongside the family around the financial entrepreneur Rory Luff, is currently Delphi management consultancy. Davenport raised ten million Australian dollars (around 6.4 million euros) for the test well at the end of last year. If the analysis of the salt samples is positive, the feasibility study should be drawn up. The managers don't want to say exactly how much money Davenport would have to collect before a mine is built. But it should be a large sum: K + S, for example, paid more than three billion euros for the development of its potash mine in Canada. Davenport manager Gilchrist is confident that the company will be able to raise the necessary capital in the next few years: "The ten million financing round for the drilling after samples and the start of the feasibility study has been significantly oversubscribed," he says . Since Davenport is a project development company and not a mining company, the question remains whether the company really wants to drill itself or, after the feasibility study, sells the entire project to a mining company with the highest bid: "A sale is not what we are currently planning," says Südharz-Kali Manager Wilkinson and adds: "If it comes to building the mine, we could consider a partner."

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