Potash One looks at solution mining in Saskatchewan

Vancouver — On the heels of an oversubscribed $10.4-million financing, Potash One (KCL-T, KCLOF-o) is starting prefeasibility work on the Legacy potash project in Saskatchewan, where it hopes to soon develop a low-capex solution mine for the fertilizer mineral.

Potash is the general name for potassium-bearing minerals, the most common of which are potassium chloride (KCl) and potassium carbonate (K₂CO₃). The vast majority of potash — 95% — is used in fertilizers. The rest is used for feed supplements and in industrial production.

Since it is used in fertilizers, demand for potash has been climbing steadily over the last decade, fuelled by growing demand for food, fibre and feed. The move towards biofuels has also added to potash demand, as has decreasing availability of arable land. Potash demand is currently estimated at 50 million tonnes annually.

Increasing demand has translated into increasing price. In early November Canpotex, the export-marketing consortium of Canadian potash miners, signed a new contract to supply potash to Japanese customers at just over US$900 per tonne. Some projections show the price climbing to over US$1,300 per tonne in the next few years before cooling off.

Saskatchewan is home to the biggest potash deposits in the world. Drillers seeking petroleum in Saskatchewan in the 1940s in- stead found the Prairie Formation, a massive bed of potash that underlies much of southern Saskatchewan. Conservative estimates postulate that, were it all mined, Saskatchewan could supply world demand for potash at its current level for several hundred years.

There are 10 potash mines in operation in the province, accounting for more than $2.5 billion in capital investment (though to build the same mines now would cost many times more). The province produces 15.7 million tonnes of potash annually, making it the largest producer in the world. Annual sales have recently totalled some $1 billion.

As the price of potash started to climb, junior exploration companies jumped to stake potash claims in southern Saskatchewan. Potash One was one of those juniors but it staked and acquired land based on one characteristic: the potential to develop a solution potash mine.

Most Saskatchewan potash mining is done via conventional underground block caving. Since the Prairie Formation lies, on average, at 1 km depth, developing a conventional potash mine would be an expensive venture.

Solution mining takes advantage of the fact that mineral solubility in water improves with increasing temperature. Since temperature increases with depth, deeper potash deposits become candidates for solution mining. In line or primary solution mining, water is sent down a pipe to the deposit and circulated todissolve halite (sodium chloride) and sylvite (potassium chloride); the solution is then pumped to the surface. In secondary mining, a halite-rich brine is injected into the deposit, selectively dissolving the sylvite and leaving the mineralized halite behind.

Solution mining certainly has its benefits. Foremost, development costs are significantly lower: Potash One estimates capital expenditures for a conventional mine at $2 billion compared with $1.4 billion for a solution mine. Development timelines are also considerably shorter, perhaps saving as much as two years. Production is easily scalable and mining risk is significantly decreased.

In Saskatchewan, the Prairie Formation dips to the south. Where the formation lies at or above 1 km depth, conventional underground mining is employed. But the maximum depth for safe underground mining is usually around 1.1 km. In order to mine potash farther south, where the potash layer dips to greater depths, a different technique is required.

Luckily, it is at those greater depths where solution mining becomes a possibility.

Depth is not the only requirement for potash solution mining. Grade is a consideration, as are bed thickness, the presence of faults, the dip of the deposit, the presence of clay layers above the deposit that can lead to roof fallout, and carnallite content. Carnallite is a hydrated potassium magnesium chloride mineral, the presence of which decreases dissolution efficiency and potash recovery.

Only one of Saskatchewan’s 10 potash mines is a solution mine. The Belle Plaine potash mine, owned and run by Mosaic Co. (MOS-n), pioneered the solution mining technique that is now also used in Michigan. Belle Plaine has been in operation since the early 1960s and has produced more than 60 million tonnes of KCl.

Potash One’s large land package — now in excess of 1,214 sq. km– abuts Mosaic’s property to the north. The Legacy lands were explored in the 1960s by Imperial Oil and Lumsden Potash Development. Both companies drilled and then completed solution mining tests, which determined that two members (beds) of the Prairie Formation present in the area, called the Patience Lake and Belle Plaine members, are amenable to solution mining.

A technical report from 2006, based on historic drill and solution mine test data, pegged Legacy’s indicated resources at 36.8 million tonnes K₂O and its inferred resources at 360.4 million tonnes K₂O. The resource estimates are actually based on potential solution mining of those two members.

Potash One has spent the two years it’s held the project preparing to begin this prefeasibility study. Two-dimensional seismic studies have been completed, baseline environmental data is being collected, and resource confirmation drilling is in progress.

As for the prefeasibility, the company has assembled one team of experts to assess the mining scenario; they will be looking into well, cavern, and mine designs in terms of technology choices and risk and cost optimization options. Another team is developing the basic processing facility.

And the company is well funded to carry its activities through prefeasibility studies. In early November, Potash One closed an oversubscribed, non-brokered private placement comprising 8.3 million flow-through shares at $1.25 per share, for net proceeds of $10.37 million. The company now has $27 million in its treasury.

Shares of Potash One recently traded at just under $1. It has a 52-week trading range of 71-$6.25 and has 51.7 million shares issued.