PROJECT UPDATE: Potash Ridge’s Blawn Mountain Technically and Economically Viable

Utah-focused Potash Ridge (TSX:PRK,OTCQX:POTRF) added itself to the growing list of potash companies taking their properties to the next level when it released a positive prefeasibility study (PFS) earlier today. The study, which was completed by Norwest Corporation, states that Potash Ridge’s main asset, Blawn Mountain, is “technically and economically viable,” justifying further development.

Blawn Mountain is a sulfate of potash (SOP) project with the potential for an average of 770,000 tons per year of production for the first 10 years of operations, once ramping up has occurred. The PFS indicates that over the preliminary estimate of a 40-year life of mine, the project could average 645,000 ton of SOP per year. With further exploration, two known zones of mineralization at Blawn Mountain have the potential for expansion. Currently, the company projects total sales of 26 million tons of SOP product over the life of the mine.

Norwest determined that Blawn Mountain has an after-tax net present value of $1 billion using a 10-percent discount rate. However, this figure does not include a terminal value, assuming no extension to the period of operations. The study also shows an unlevered after-tax internal rate of return of 20.5 percent and a payback period of five years following the start of operations.

Potash Ridge expects to be a low-cost producer of the coveted SOP. The company is looking at an installed SOP capex of $1.1 billion (including a 15-percent contingency) and strong cash flow from operations in the area of $234 million per year, not taking into account the ramp-up period, which it estimates at two years.

In addition to SOP, the company expects to produce 1.4 million tons per year of sulfuric acid at an average price of $135 per ton. SOP’s going price is roughly $649 per ton. With that in mind, the company plans to average a net cash operating cost after by-product credits of $218 per ton of SOP (including royalties) or $173 per ton (excluding royalties). Potash Ridge has not assumed any credits for its alumina materials.

“The completion of the PFS is a major milestone in the development of the Project. We are extremely pleased with the results that demonstrate the technical and economic viability of the Project,” Guy Bentinck, CEO, said in a company statement, “The PFS highlights that we have a 40-year Project, entirely based on mineral reserves, with a technically sound and economically proven flow-sheet. The Project offers a unique opportunity for significant production of SOP in Utah, one of the most favourable mining jurisdictions in the world. In recent months the North American SOP market dynamics have demonstrated strong long-term fundamentals, resulting in increasing pricing premiums over MOP. Our intention is to move forward into the Feasibility Study stage early next year. We will also continue with strategic initiatives to pursue long-term partnerships and financing arrangements for the development and construction of the Project.”

The company plans to complete a feasibility study and permitting in 2015, and construction is slated to start in late 2015. Following construction, Potash Ridge is planning a production ramp up in 2017 through to 2018 before reaching full production in 2019.

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.

Editorial Disclosure: Potash Ridge is a client of the Investing News Network. This article is not paid-for content.