Potash Sector Report 21 July 2011 OVERVIEW What is Potash?...

Potash Sector Report
21 July 2011




OVERVIEW


What is Potash? Potash is a generic term used to describe a variety of mined minerals and manufactured chemicals that contain potassium. Potash plays a critical role in the regulation of plant physiological functions: It strengthens cell walls, aids in water retention, improves disease resistance and boost nitrogen and phosphate absorption. Enhancing these functions results in improved plant quality and increased yields
Sylvinite and Carnalite are the primary potash bearing ores. Deposits are differentiated based on tonnage and grade (KCI%)
Potash Geology. The dominant potash in the market is the compound potassium chloride (or �KCI�), a naturally occurring pink, salty mineral. Most of the world reserves of potassium were deposited as sea water from ancient inland oceans evaporated, and the potassium salts crystallized into beds of potash ore. KCI ore deposits are located deep underground and are mined using conventional mining techniques or solution mining for the deeper mineralisations.
The primary potash-bearing ore is sylvinite, which is made up of sylvite and halite. It is the most desirable ore due to its high KCl ranging from 15-40% content and the relative ease with which it can be extracted under standard conventional or solution mining depending on the depth of the deposit.
Carnallite is another potash-bearing ore, primarily composed of carnallite and halite. The main difference between sylvinite and carnallite, with respect to potash production, is that carnallite contains magnesium which is an impurity in the product and typically has much lower grading than sylvinite. Carnallite deposits generally range between 10-20% KCI content, the mineralisation occurs between depths of 800-1,500m and is extracted through solution mining.
Potash deposits are differentiated the same way as other ore deposits on the basis of tonnage and grade expressed as (% KCI). As a point of clarification there are two conventions to express the grade of potash deposits. United States Geological Survey (USGS) publishes data for potash on the basis of its potassium oxide content (K20), however most potash is mined as potassium chloride (KCI) and in this document we express all tonnages in terms of KCI content. As a rule of thumb to convert tonnes of K20 to tonnes of KCI multiply by 1.58.
Potash deposits are mined through conventional underground mining techniques or solution mining for deeper deposits
Solution mining involves boreholes drilled into the deposit, leaching solution inserted, solution bearing ore content is then extracted to surface for processing.
PRODUCTION PROCESS
Potash is commercially mined through two methods, conventional underground mining and solution mining techniques. The geology of the deposit dictates what method is best suited for resource extraction. Conventional mining methods have a depth limitation, once potash reserves are deeper than 1,200 meters, solution mining must be employed. Key parameters in deciding whether to use solution mining are thickness of mineralisation, grade of the potash bed, depth of the mineralisation, presence of faults and dip of potash beds. Figure 1 below highlights some of the pros and cons for each mining method.
Figure 1: Conventional Underground Mining vs Solution Mining
Conventional Underground Mining Solution Mining
Benefits
� Low operating costs
� Well-known and well-understood method

� Low capital costs
� Reduced time to production
� Low demand for manpower
� Can mine deep or irregularly shaped deposits
� Flexible operations

Drawbacks
� Greater capital costs
� Underground infrastructure is not easily moved to other locations

� High energy usage results in greater operating costs

"Standard open-cut mining is not currently used in any major potash deposit globally given the typical depths of a deposit. However, the EXCEPTION will be SOUTH BOULDER MINES (STB.ASX), who are defining two shallow potash bearing horizons with mineralisation at depths of <100m, with studies underway for an open-cut mine.