state drilling

I’ve purchased shares in this company recently – and just thought I would share my thoughts on the geology of the project – and a possible explanation for why the results of POK State Hole 1 were so poor...

The target mineral in this case is sylvinite, which is an evaporite mineral. Evaporite deposits form in lakes (for example, at present, evaporite deposits are being formed in Lake Eyre, and numerous other inland lakes in Australia), or, where marine incursions occur (ie. where inland regions are flooded by seawater, and, subsequently, cut off from the ocean). Subsequent evaporation removes the water and leaves behind whatever was dissolved in the water. Minerals precipitate from the water in a defined sequence, and it would be expected that minerals would be deposited in fairly flat layers and would extend laterally across the lake.

Now, to try and give a possible explanation for the poor results of State Hole 1 - but first, here is what a Horst and Graben system looks like, with a few other details that I have added (which I will explain shortly) –

Essentially the Horst is the higher block and the Graben is the lower block. The faults between them are referred to as “normal dip slip” – which is where the Hanging Wall (in this picture, that is the Graben) moves down relative to the Foot Wall (in this picture, that is the Horst). (Movement is not restricted to up/down, oblique movement can also occur). This scenario occurs in either – (a) an extensional setting – imagine the blocks to the left and right moving outward (red arrows) – the graben would sink down further; or (b), in a depositional basin – if the crust is not in isostatic equilibrium with the underlying mantle (due to deposition of sediments increasing the thickness of the crust), the crust will sink further into the mantle, resulting in a series of normal dip slip faults, or a horst and graben system.

POK State Hole 1 was drilled just on the inside of the graben. As explained above, evaporite deposits form fairly continuous flat beds, so imagine for a moment that the blue layer represents Potash 18 – the yellow that I have added shows that if you drill at the right location (red line – ie. just on the inside of a Graben) – that you could miss the blue layer (ie. potash 18) entirely. The further that the graben moves down relative to the surrounding rock, the bigger the gap between the blue layer on either side of the fault, and thus, the bigger the chance that drilling just inside the graben would miss the blue layer entirely.

But POK did hit Potash 18 – why? And why was it thinner and at lower grades? Faults are often not so clear cut as in the diagram shown above. Evaporites are ductile. What this means is that potash 18 could have been stretched and thus the drill core would have revealed a much thinner layer that was stretched along the fault line.
Faults also often facilitate the movement of water – thus possibly dissolving the sylvinite and redepositing it elsewhere, which could possibly explain the very low grades. If you drill just on the inside of a graben anywhere along the length of the fault line, there could be a high probability that you would encounter thinner beds and lower grades – and possibly miss some beds entirely. Contrast this to HUSKY FED 6-15, which was drilled just on the outside of the graben (green line on above diagram) and which encountered thick beds at high grades. As can be seen, at this location it would be expected that you would hit all layers at full thickness, and as it is not drilling through the fault line, higher grades would be expected as well (as there is no/reduced fluid flow). I don’t know whether the above diagram could be seen as being analogous to what is occurring on site, as I have no idea of the angle of dip of the faults that separate the horst and the graben. I know nothing about the geology of the region, except that there are evaporite deposits, and that there is a graben right through the middle. However, with the very limited information that I have, i’m just trying to show what is possible, and that there is possibly a very good explanation for the results of POK State Hole 1.

I’m sure that management had good reasons to drill in that location – perhaps they wanted to know more about the graben, and how that would affect the fluid movement, and thus the proposed solution mining.

As for POK State Hole 2 – it was away from the higher grade zones – which are further to the south west. Given its location, the results were pretty good, and IMHO, it would have been unrealistic to expect much better than what was found. Again, just because it’s lower grade does not necessarily mean that it was a bad location to drill – you can’t just drill in the high grade zones – you still need to drill at the edges of the deposit to know how far it extends.

As for POK State Hole 3 – it is located in what is thought to be the higher grade area, and (as far as I am aware) it is not located in another graben. Therefore, IMHO, we should expect good results. But if it is a dud, something doesn’t quite add up, and the model is broken.

IMHO, given that the results that were obtained from POK State Holes 1 & 2 were to be expected (or should have been), this project is as good as it has ever been.

As for POK State Hole 4, it is to be located to the South East, which lacks the results from previous gas drilling. But going by what is shown on the maps showing potash bed thicknesses and grades, State Hole 4 is away from the thicker, higher grade region. It could return something good, but my feeling is that the results will not be good, and could well be worse than the results from POK State Hole 2. Perhaps they are drilling there because there is the possibility that there could be something good there; or to define the limits of the sylvinite deposit. Either way, don’t be disappointed if POK State Hole 4 returns poor results. I’m assuming that when they were determining the resource estimates that they had already taken into account that drilling in a number of locations would reveal poorer results, because not all drill holes are in the high grade zones. Keep in mind that even when the best mineral deposits are being discovered – not every exploration drill hole returns good results – because they are still going to drill at the margins of the deposit to define the limits of that deposit. State Hole 3 is in the high grade zone – and a couple of the Federal Holes are in the high grade areas as well – so relax people – State holes 2 and 4 are not in the high grade zone and State Hole 1 was drilled into the inner edge of a Graben. State Hole 3 and fed drilling should still uncover something good.

However, if management are reading this, can I humbly offer my opinion that perhaps it would be worth considering moving POK State Hole 4 to the state block located to the west of POK State Hole 3. Previous gas drilling has determined this region to have the thickest beds at the highest grades, therefore, drilling in this state block is far more likely to return thick beds at high grades – which I’m sure will be of benefit to the company when determining the JORC resource, and in the meantime, will do a lot to increase investor confidence until fed drilling is permitted.

Good luck to all, and I hope that this information is of interest to others. Please note that what I have written above is ONLY MY OPINION, and is based on the VERY LIMITED INFORMATION THAT I HAVE ABOUT THE GEOLOGY OF THE REGION. It is therefore entirely possible that what I have said could be incorrect. As always, do your own research, and only invest what you can afford to lose.