Gensource Potash Announces PEA Results for Vanguard Project

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Gensource Potash (TSXV:GSP) announced the completion of a Preliminary Economic Assessment for its Vanguard Potash Project in Saskatchewan.

Gensource Potash (TSXV:GSP) announced the completion of a Preliminary Economic Assessment for its Vanguard Potash Project in Saskatchewan.
As quoted in the press release:

General: Design parameters for, and general results of the PEA are:

  • Project capacity: 250,000 t/a final product, standard grade.
  • Mine life: 100 years +, based on 64 Mt of inferred resource identified in the Resource Estimate released 28Apr2016
  • Mining method: Selective dissolution using horizontal caverns Processing: Cooling crystallization incorporating innovative energy efficiency measures
  • Product storage: Nominally 30 days Product destination:CFR China, per the Asset Purchase Agreement between Yancoal Canada Resources and Gensource, announced 06Apr2016. $95/t transportation allowance included in the economic analysis.

CAPEX: $C 247M including contingency – (~$US 190M at today’s nominal exchange rate of 1.30) – Capital Intensity of ~ $C 1,000 / (t/a)
OPEX: $C 52.39 /t final product (~$US 40.30 at today’s nominal exchange rate of 1.30). The major components of OPEX are natural gas 3 delivered to site at $4.15/GJ and operating personnel count of 47 full time staff. Development: 8- 10 months for completion of the development phase of the project, including engineering studies and environmental and regulatory licensing. Construction: 18-20 month construction period
Mining: Vanguard will implement a selective mining approach, using horizontal caverns. A total of 6 caverns, covering nominally 2 sections (1 section = 1 square mile) of mineral resource will be required to attain the planned 250,000 t/a production rate. Calculated cavern life, using only the PLM1 sub-member of the Patience Lake member of the Prairie Evaporite formation (as defined in the Technical Report) is 11 years. Cavern replacement costs and pipeline extension costs are allowed for in the sustaining capital estimate.
Processing: The production of potash product (nominally 96% purity KCl) is accomplished by the removal of KCl from the recirculating brine stream by temperature reduction. Temperature reduction is accomplished by a flash cooling crystallizer, followed by a cooling surface crystallizer operation. The brine stream is continuously recirculated 5 between the solution mining caverns and the process plant, picking up KCl in the caverns and crystallizing it into solid KCl in the process plant. Plant utilities, including steam, natural gas, water, power, control are distributed from central locations to each process/mining unit operation. Off-site utilities include power, natural gas and potentially potable water. Investigations confirm location and availability of the utilities. A rail spur is planned to the plant site to allow all product to be transported by rail, resulting in no heavy-haul truck traffic on the exiting road network.
Transportation and Logistics: All product will be transported by rail to the west coast of Canada or the United States. No specific terminal or port has been selected, but investigations revealed several options at various locations on the west coast of North America for shipment. The Cost of ocean freight, including the cost to move the product from a West Coast port to a Chinese East Coast port has been factored into the operating cost estimate, although a specific port of destination in China has not yet been identified by Gensource’s market partner.
Conclusions and Recommendations: The conclusions and recommendations made in the report are that: – The resource should be upgraded to Measured and Indicated through a drilling and 3D seismic programs. Cost estimate to complete this work is nominally $C 2.6M. Completion of this work is subject to Gensource obtaining additional financing. – Gensource complete a preliminary feasibility study for Vanguard. Cost to complete a preliminary feasibility study is estimated at $1.0M. Completion of this work is subject to Gensource obtaining additional financing.

Gensource Potash President and CEO, Mike Ferguson, stated:

We are very pleased to have completed the PEA for Vanguard – and we are specifically pleased with the results. The analysis in the Report indicates that there is good potential for an economic potash operation using the small scale techniques we’ve defined. The fact that a strong ROI is indicated – even when using very conservative inputs like today’s low potash price, and a real and rational sustaining CAPEX program – supports Gensource’s business plan as a marketable approach to becoming a new and independent potash producer. We believe the PEA provides a very solid foundation for Gensource to move forward with the next step work on Vanguard. The recommendations of the PEA include, 1) upgrade the resource from Inferred to Measured and Indicated through a geological confirmation program and, 2) to begin a preliminary feasibility study. Those are exciting next steps and we are laying the groundwork now.

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