In Saskatchewan, meanwhile, Western Potash has distinguished itself as “the most advanced junior potash development story,” says Western VP of corporate development John Costigan. The company cleared its last hurdle with April’s environmental assessment approval. “Even those of our peers who have environmental approval have contingent approvals only,” Costigan emphasizes. “Nobody’s quite where we are.”
The approval followed December’s feasibility study, which used a 10% discount rate to calculate a pre-tax net present value of $3.6 billion and a 21% internal rate of return. After taxes the numbers show a $2.44-billion NPV and an 18.6% IRR. With a $2.91-billion initial capital cost, the operation would produce 2.8 million tonnes of potassium chloride a year over its 40-year life, based on proven reserves of 35.84 million tonnes and probable reserves of 101.44 million tonnes KCl. Payback would take 5.6 years.
A number of advantages brought Milestone this far. Among them is solution mining, in which water is pumped into underground caverns and then pumped out as potash-rich brine. With a construction phase that can be completed in three and a half years, the method offers much lower capex, says Costigan.
As for the water supply, it’ll come from the city of Regina, which signed a 45-year agreement to supply the company with treated effluent.
And with Regina only 30 kilometres away, Milestone enjoys an enviable location. Roads, power lines and two railways run right through the property. “We have agreements in place ready to be executed for electricity, rail and the port,” says Costigan.
While the company’s stock has trended favourably over the last month, Western conducts talks with potential joint venture partners.
“Our contribution would be the project,” Costigan explains. “Our partner would match that, depending on what the percentage is. If it’s 60/40, they’d put 60% in, which would be more than the value of our project, and that would be the first equity contribution to the project. Then together we could raise the debt, which we’d repay from operations down the road.”
Western already has mine-building expertise on board. Project director Richard Lock has also served as project director for the Resolution copper mine, now in pre-feasibility, and brought Rio Tinto’s Diavik diamond mine into production. “Those are larger operations under much more difficult conditions,” points out Costigan. “It’s a slam dunk for Richard to build a potash solution mine in Saskatchewan.” Additionally, “We’ve been in the Basin six years and we probably have better geological knowledge than anyone out there.”
With Western Potash discussing a potential JV for a Saskatchewan mine and Pacific Potash preparing for early-stage Brazilian exploration, the two companies might be a study in contrasts. But, if all goes well, they could both play a part in helping feed generations to come.