Talking potash at Show Low conference

The 5th Annual Lower Colorado River Resource Conservation & Development Winter Watershed Conference (wow, that's mouthful) wrapped up this afternoon in Show Low after significant discussions about development of potash resources in the Holbrook basin. [Right, potash thickness in Holbrook basin. AZGS report]

Pat Avery, President of American West Potash told the audience on Thursday that they are moving forward with plans for an underground mine generating 2 million tons of finished product per year, with a capital cost of about $1.4 billion. They hope to complete permitting in 1 - 1.5 years, followed by 1 year of construction. The two biggest challenges are permitting and raising the capital for construction.

The Denver-based company has 93,000 acres under lease or ownership. He said permits will be filed in Spring 2012, a mine plan completed in the first half of the year, and equipment ordered late in the year. That scale operation could generate $1 billion per year revenue based on $500 per ton sale price for the potash. The USGS reported last week that U.S. produced potash was sold for $700 per ton on average in 2011.

Construction will employ 500 - 800 people but in staggered phases through that period. Once in operation, there will be 300-400 permanent jobs, for an operation that will run around the clock. Of those, about 80 will work each shift and another 40 will be in regular daily M-F schedules

Given the shallow depth of the potash (averaging 1200 feet), AWP proposes to build an inclined ramp from the surface rather than a vertical shaft.

AWP would build a processing plant using a simple flotation process, near the mine mouth to concentrate the mined salts from 8-20% potash to a 60-62% concentrate for sale. The flotation plant would use about 600 ac-ft of water per year of fresh water and 1365 ac-ft of brackish water, and recycle the latter resource.

The plants products will be red standard and granular potash. They predict 85% recovery using an underground room and pillar mining process. Significant amounts of salt will produced as a byproduct and will essentially be given away to any takers. Salt stored at the site will be in large piles on double liners to protect against it percolating in the ground.

The mine operation should cover no more than about 100 acres, but the area for storage domes for potash and the surface salt piles will eventually cover 300 acres.

Pat had to leave after his luncheon presentation to catch a plane for a trip to China to meet with investors there. He called the AWP project the lowest cost capital potash project in the world.

My calculation is that $1.4 billion cost with 2 MMt production, results in an average capital cost of $700 per tonne.

In contrast, an article on Mineweb.com a couple days ago described the capital cost of development projects in Saskatchewan - "the centre of the potash universe" as $1,081 per tonne.

If these numbers hold up, development of Arizona potash would be at a tremendous economic advantage - 30% lower than in Canada - in the competitive global marketplace.