Capex and Opex cost of solution mines are not much effected by depth of the deposit. An underground mine will care about the depth.
Again.., it is, however, all about the grades and the size of the deposit at ave. high grades. (Then other factors kick in)
Other important factor is; which type of ore is being mined: Sylvinite, Carnallite ore Kainitite?
Sylvinite (Pure KCl mixed with halite) Marine eveporates - Potassium Chloride (KCl): PURE KCL ORE, - 20-45% KCl contect, - ore contains highly soluable halite (salt-NaCl) - and very low levels of insoluables.
Carnallite : Marine eveporates - Potassium Magnesium Chloride (KMgCl3-6(H2O) - 8-25% KCl content (Ave.15%). - usually consist of relatively thick beds. - Contains high magnesium levels which needs special process for removing from potash product. - higher levels of insoluables
Kainitite : Fresh water eveporates (Salt lakes) - Potassium chloride & magnesium sulfate (MgSO4KCl-H2O) - 10-28% KCl. (Ave.18%), - occurring in irregular granular masses in salt lakes brines, - converted to schoenite and SOP by solar or mechanical crystallization process. - The fertilizer product is being SOP (Potassium sulfate)
All of the projects in Africa (other than ELM's) has very low grades at a commercial point of view; 1) at the current level of potash price and 2) at the current level of environment and 3) the infrastructure where the projects are located in.
So any of those project in Africa can not be considered as economically viable for mining, other than ELM's, IMO.
How good is ELM's grades? Is it a world class deposit?
ELM's resource has very high grades and thick layers of SYLVINITE ore which is definitely suitable for underground mining @280m depth.
These grades and thicknesses are definitely world class. The good thing with all these high grade layers, they are min. 3m thick and above which is a very good for underground mining. The high grade sylvinite layer from EK-05 goes to EK-04 and EK-06 by even getting thicker from 3.00m to 3.58m at then to 4.50m which makes it 2km far from the centre of EK-05. So only this part can be a small potash company maker. And it is open to south after EK-06, we don't know how far it is going. ELM needs to extend the drilling program to this direction. If ELM can get he same good results of EK-01 for EK-09 and EK07 (last hole), then they need to extend the drilling at this direction too.
Let's have a look at the other African potash players. Let's keep our eyes wide open guys..!
First of all average grade which is giving by the company's scoping study or a maiden resource statement does not mean that it is all minable. It needs to be calculated by a bankable feasibility study which is going to exclude many of layers as "not mineable". This is even going to happen some low grade layers of ELM's deposit, (I can imagine which ones they are)
1) MagIndustries ave. grade for solution mining is 17% KCl
2) STB's ave. grade: 18.58% Mainly kainite ore. Mining method unknown, considered to be open pit but using solar evaporation process would be viable. Then high capacity production is not be the case. I don't think the open pit mining would be viable as moving of 50-60 m overburden for 18.58% KCl is needed.
3) Allana's ave. grade: 20.8% Mainly kainite ore. Mining method unknown; considered to be open pit or solution mining but distribution of layers are in very different depths, varies from 110m to 585m with different KCl content. The shallowest available layer for open pit mining is at 110m @ 17.65KCl found in hole DK-10-01. Others are; at 150 m depth with 25.8KCl in hole DK-10-02 and at 151m depth with 19.52KCl in hole DK-1-03.
If the open pit mining is the sace; who is going to move this 100-150m overburden in Danakil basin for those low grade KCl contents at this current situation?
Other layers are at 495m depth 3m @ 30.87%KCl and at 590m depth 4.2m @24.51% KCl in hole in hole DK-10-06. They could only be good for solution mining. Solar evaporation process could be the only option. But, it is not known if those layers are meeting the solution mining requirements or not (the irregularities of those potash layers may even not be suitable for a solution mine planning). There are still too many unknowns for this project.
What about ELM's solution mining for carnallite layers? Are they going to be viable?
ELM will definitely mine the high grade sylvinite ores by underground mining. This is what ELM is planning and what ELM's stock price is factored by. Other than that, as a significant potantial upside, ELM is talking about the solution mining for very thick carnallite layers now. We don't know the grades yet. If ELM can't find a 25% KCl (over 15% K2O) grade for those thick carnallite layers, their solution mine idea too, is going to be a dream for me. This is the reality.
If they can find around 25% KCl grade for very thick carnallite layers, that time by the help of low costs of energy, water, labour, etc in Congo, ELM would be competitive in solution mining (mechanical crystallization process) potash products. That would make a 50% ($1) upside impact on the current sp of ELM, I suppose.
There are so many tenements in Saskatchewan suitable for solution mining atm, but most of them are not mined. So why would you think that big miners would open their solution mines by low grades at the hell of Danakil basin instead of opening them in Saskatchewan.
Operating a solution mine at Danakil basin is economically ridiculous other than solar evaporative process at the current situation IMO! That would be fine if the potash price was around $800-1000 p/t.
The reason is this; Example; You are spending same Capex cost for a solution mine facility with same one in Saskatchewan in Canada. You are sending same 100.000t of hot water down for making a brine in the carnallite layer with 17% KCl grade for extracting 10.00t ore to the surface. By mechanical crystallization method you evaporate the water and make 1700t of KCl potash product. In Saskatchewan, they make the same process and use the same amount of water and energy, they make 3400t of KCL potash as their ore grade is over 33% (and zero or less Mg as they are mining sylvinite and carnallite ores). So they would double the production of same plant in Danakil basin. Why would they invest in countries with high sovereign risk? That is not understandable!
What about the solution mining in Saskatchewan? Costs? Grades?
In Saskatchewan, there are only two solution mines (9 underground mines). They are high Opex cost mines. Solution mining cost is around $220 p/t KCl product. They mine ores which have over 33% KCl grade. (Nearly double of African deposits other than ELM's).
1) PotashCorp's Patience Lake Mine. Low capacity, low cost mining. Mines sylvinite @36% KCL grade at 1000m depth. Mine capacity is very low; 0.2m in 2010, 0.1mt in 2009. as it uses natural crystallization process method and produces potash for lawn and garden, and granular-grade potash (which is high
2) Mosaic's Belle Plane Mine. High capacity, high cost mining. Mines sylvinite and carnallite at 33% KCl grade at 1600m depth. Mine capacity is very high; 2.8mt pa. Uses mechanical crystallization process with very high Opex cost. So majority of sales goes to north American market which potash prices are always 20-30% higher than other part of the World. (it is now $550t in North America while $400t for other part of the World now) Produces: fine, standard, coarse, Ag granular, HQ granular, special granular
The latest solution mine project in Saskatchewan was PotashOne's Legacy project. 1500m depth with 28% KCl content 27mt measured resources . It was sold for $450m to German K+S in November.
The only remaining big potash explorer in Saskatchewan is now Western Potash. Solution mining is targeted, ave. ore grade is 32.40% KCl (19.89 K2O). However the deposit area is stuck at the north east end of deposit so there is not much to mine, but they are still drilling. We'll see what happens to that one in the future.
Good luck with fertilizer stocks. (researching for phosphate now but could not find a good reason to jump in to this sector yet, it looks too early to me as there are so many phosphate deposits around the world, nearly everywhere)
Thanks for reading this very long post. Cheers
K2P Price at posting:
$1.82 Sentiment: Buy Disclosure: Held
