Gensource: Think Small for Potash

In a recent interview in The Financial Post Gensource Potash (TSXV:GSP) CEO Mike Ferguson discussed the potash market and the company’s projects in Saskatchewan.
As quoted in the interview:

“We come at it a different way. We see “demand” as what the soil needs in terms of potash. The farmers know what the soil needs but they also know what they can afford. Only in North America and Europe is the soil getting the K it needs. In the rest of the world there is a disconnect between what the soil needs and what the farmer chooses to buy. In places like China and Brazil, which don’t have good farm financing structures, potash is an upfront cost to the farmer. Which means he might have to choose between buying potash and feeding his family.” said Ferguson.
Beginning with that premise, Gensource developed a very different business plan. “Every successful potash mine has a market. You need to know where you are going to sell the potash before you build the mine. Even large companies like BHP, Vale or Rio Tinto, for whom the CAPEX of a conventional mine is not a large issue, are in the position of having to look for a “partner” before they can begin a mine. Because “partner” really means “market”.
“Conventional mining methods, both rock mining and solution mining, are not economical at a small scale.” said Ferguson. Large scale potash mining is very expensive and only works with really large tonnages. And that, in turn, means that the only realistic market for the big mine potash are the cartels who are able to deal in millions of tons at a time.
The key to thinking small is the use of selective mining methods which only bring the potash to the surface and leave the salt in place. “These are methods which are already being used in the US.” said Ferguson. It is a huge saving. Conventional mining methods bring two tons of salt to the surface for every ton of potash. Using selective mining methods leaves the salt in place which, in turn reduces the mine’s surface footprint and environmental impact.
By going small, mining 250,000 metric tonnes per year rather than millions, Gensource believes it will be able to bypass the cartels, keep its CAPEX low and deliver potash directly to end users. “The demand is in the soil.” said Ferguson.
Thinking small also means that as suitable end user markets are identified, new, small, mines can be brought online. Gensource sees the possibility of multiple small mines, each with its own end user market, being built close enough to each other that they would be able to share infrastructure investment and transportation.

Connect with Gensource Potash (TSXV:GSP) to receive an Investor Presentation.