Toronto-based IC Potash (TSX:T.ICP
, Stock Forum
) has finally released its long-awaited feasibility study for its 100%-owned sulphate of potash (SOP) Ochoa Project, and it’s exactly what management has been hoping for.
The study projects the New Mexico-based facility as an economically-viable mine and processing facility
that should have the capacity and reserves to pound out 714,000 tons of SOP per year for half a century.
ICP shares have drifted over the last six months as the feasibility study process wore on, sitting close to a five-year low, but management points to the study pegging their project as a potential ‘bottom quartile’ cost producer as being the catalyst for major things going forward as a rare ‘low cost/premium price’ operation.
IC Potash President and CEO Sidney Himmel released a statement saying, "This feasibility study evaluated all aspects of our plan to produce SOP from our polyhalite Mineral Reserves. We are pleased with the technical validation of the mining and processing design, and the resulting economic characteristics. The Ochoa Project positions ICP to become a world leader in SOP production and a bottom quartile cost SOP producer. We intend to begin immediately with the next phases of engineering and financing."
SOP traditionally brings a premium rate of return of around 30% above the base potash price ($332 per ton at the time of writing), and has shown stability even in a weak potash market.
The study suggests a $1 billion start-up capital cost with a $195 operating cost per ton, and an internal rate of return (IRR) of 17.8% (16% after tax), with a payback period of five and a half years.
IC Potash has an existing 30% off-take deal with Yara International (OTO:YARIY
, Stock Forum
), the 3rd
largest distributor in the world of fertilizer minerals.
On a call Thursday, Himmel said his project will be “the lowest cost producer of SOP outside of China” in a “well established are with strong community support and excellent infrastructure.”
The study shows excellent returns at current SOP pricing:
“The relevant SOP grades are standard, granular, and soluble. Upon full production of the estimated 714,400 tons per year, the product mix is projected to be 229,400 tons of standard SOP, 385,000 tons of granular SOP, and 100,000 tons of soluble SOP. The weighted average FOB Jal SOP price used in the financial model was $636 per ton. As reported in Green Markets
, the average Q4 2013 granular SOP price was $680 per ton for California Delivery. Granular SOP prices historically receive an average premium of approximately $50 per ton above standard SOP. During Q4 2013, ICP estimates the soluble SOP price was $740 per ton for Florida Delivery.”
IC Potash announced the closing of a $5 million private placement in December, which will finance the next steps for the company. That will entail hitting the fundraising trail to get the mine and processing plant built, something CEO Himmel is no stranger to with an extensive background in banking and finance.
An environmental permit is expected in Q2 of 2014. ICP has a market cap of $47.3 million.
The updated corporate presentation can be found here
FULL DISCLOSURE: IC Potash is a Stockhouse Publishing client.