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World Class Fertilizer Products from World Class Assets

Potash West

Overview

Potash West NL (ASX:PWN,OTCPINK:PWNNY) is an Australian based mineral exploration company focused on developing phosphate and potash projects including the potassium-rich glauconite deposits of the Perth Basin in Western Australia. The Company dominates mineral tenure in one of the world’s largest glauconite deposits, with exploration licenses and applications covering an area of more than 2,100 km2. Potash West’s goal is to maximize shareholder value by bringing the Dandaragan Trough Project into production. A Definitive Feasibility Study on the phosphate resource on the project is expected to be completed by December 2015.

To gain exposure to European markets, Potash West has also secured the right to earn a 55 percent interest in the South Harz potash exploration project in Germany. The area features a wealth of historical data and is located next to existing producers and well-established infrastructure, meaning the Company is well positioned to rapidly advance this project. A review of geological data is expected to be completed in Q1 2015. Based on the results, venture plans to fast-track exploration in the region, including definition of a JORC resource.

Investment Highlights

  • Exposure to the growing fertilizer business.
  • Skilled and experienced management team.
  • Low risk start up with phosphate project.
  • Large scale K-Max process developed by Potash West and Strategic Metallurgy to produce potassium, magnesium potash, alum and iron oxide from glauconite.
  • Control of one of the world’s largest known glauconite/greensands deposits.
  • Set for future exposure to European markets through German potash exploration project.
    • Significant resource potential
    • Strong expansion opportunities
    • Ready market on doorstep
  • Dinner Hill JORC compliant resource estimate is 244 million tonnes grading 3% K2O including 122 million tonnes at 4.6% K2O.
  • Dinner Hill Phosphate Indicated Mineral Resource increased to 120Mt @ 2.8% P2O5, 3.1% K2O, and 8.2% CaO in March 2014.

Potash extraction technology

Potash West and its partner, Strategic Metallurgy, have developed a proprietary K-Max process to extract Sulphate of Potash (SOP) and other co-products from glauconite. The Company has also applied for a patent for the process, which uses a concentrated hot acid leach that breaks down the glauconite recovering all the potassium within the mineral in 6 to 8 hours. The next step is precipitation leaching and solid liquid separation to procure high magnesium potash, alum and iron oxide. The K-Max process will allow for open pit sand operations which are low cost compared to existing conventional potash operations.

Key Properties

Dandaragan Trough Project

potash-west-map

The Dandaragan Trough Project is a massive mineral tenure covering nearly 3000 square km in Western Australia, and is thought to be one of the world’s largest glauconite deposits. The Dandaragan Trough land package begins only a short distance (60 km) from Perth, Western Australia’s largest city. The Company’s objective is to produce not only potash, but also valuable by-products such as superphosphate which is also used as a commercial fertilizer.
In February 2012 the Company completed a verge drilling program over the length of the Dandaragan Trough Project. The 153 hole, 8,300m program identified ten prospective target zones over a distance of 140km. The drilling has demonstrated that near surface grades above 4% K2O are present.

The Company then embarked on a substantial drill program to further define the potash resource, completing 3272 meters of test drilling in October 2012.

The total JORC compliant resource estimate is 244 million tonnes grading 3% K2O and 1.6% P2O5 respectively, including 122 million tonnes at 4.6% K2O.
A 2,000kg bulk sample from the Poison Hill Greensand test program proved highly encouraging. Tests indicated that glauconite could be separated from gangue (waste) minerals by means of magnetic separation, thus enhancing the overall K2O content. Over 100 leaching tests were carried out with range of reagents and temperatures. After only six hours of leaching over 95% of potassium could be extracted from the glauconite concentrate.

The Company is proceeding on a dual path approach to developing the glauconite resource. Firstly, concentrating on the economic extraction of the primary potash resource using new extraction techniques to achieve high rates of mineral recovery; and secondly, extracting bi-products of potash (iron ore, superphosphate, and aluminum sulphate), and determining the economic viability of those minerals. Marketing studies are underway to confirm prices and markets for these bi-products, which will enhance the economics of the entire project.

In January 2015, Potash West announced the results of a Scoping Study which demonstrates the robust nature of the Dandaragan Trough Project. The study is based upon the updated 2014 JORC compliant Mineral Resource quoted for the Dinner Hill phosphate deposit.

The study assumes the production of single superphosphate (SSP) in a standalone plant for the first 5 years of operation. Subsequently, the glauconite concentrate and phosphate rock will be processed in a joint facility (Integrated K-Max plant) to produce potash products, potassium sulfate, potassium magnesium sulfate and merchant grade phosphoric acid, as well as iron oxide and, aluminium sulfate for the remaining life of the mine.

Key outcomes of the Scoping Study:

  • Processing rate 4.2 Mtpa
  • Mine life +20 years
  • Average LOM revenue per year $380 million
  • Average LOM Operating cash costs per year (inclusive of royalties) $168 million
  • IRR 30%
  • NPV12% $652 million
  • EBITDA, per year $212 million

“When conducting the earlier phosphate only Scoping Study we recognized that synergies existed for the staged production of phosphate, potash and other commodities with the implementation of phosphate and K-Max plants, utilizing the same mining and beneficiation plant,” Managing Director Patrick McManus. “This Scoping Study has demonstrated the major benefits of new economies of scale.”

Dinner Hill Resource

  • Total Resource 244 Mt @ 3.0% K20 (October 2012)
    • Including 122 Mt @ 4.6% K20 within less than 20% of Dinner Hill target area
  • Exploration target of 1 to 1.5 Bt
  • Phosphate Resource (JORC Indicated) of 120 Mt @ 2.8% P2O5, 3.1% K2O, and 8.2% CaO updated on March 2014. The resource was upgraded, following the feasibility of processing calcite-rich chalk.

Dinner Hill K-Max Resource

Total high grade K-Max resource 122 Mt @ 4.6% K20, within less than 20% of Dinner Hill target area. Total area 60 sq km
Exploration target of 1 to 1.5 Bt, @ 4.0 to 4.8% K20

Potash West currently plans to carry out a Definitive Feasibility Study on the project with completion expected by December 2015. Completed construction is targeted for 2017 with initial production by mid-2018.

South Harz Potash Project

In July 2014, Potash West expanded its interests to Europe with its South Harz joint venture project. The Company acquired the right to earn up to a 55 percent interest in the project, located in the South Harz potash district of Germany. This strategic acquisition will allow Potash West to better serve European agricultural markets.

In January 2015, the joint venture received two exploration license areas covering 450 square kilometers over the Kuellstedt and Graefentonna areas. Historical drilling on both areas – carried out before Germany’s reunification in 1990 – has intersected potash mineralization over large areas.

Under the terms of the agreement, Potash West has the right to earn:

  • A 25 percent interest in the JV by paying $100,000 towards license applications and the project’s advancement (completed)
  • A further 25 percent interest for a payment of $200,000
  • A further 5 percent interest for a payment of $50,000

In August 2014 Ercosplan, world renowned potash consultants commenced the review of geological data in the Kuellstedt application license area, which is expected to be completed in Q1 2015. Based on the results, the company plans to fast-track exploration in the region, including definition of JORC resource.

The region South Harz has seen significant potash mining over the past 100 years, with Germany being the fourth largest potash producer in the world. Both exploration properties are located close to existing producers such as K+S Kali GmbH, and next to established infrastructure for servicing both regional and global markets.

A research note from Helmsec Global Securities suggested that Potash West could “quickly and cheaply” move its German assets to JORC status, and anticipated that the company would see “a rapid advancement into the status of a potash producer,” after that.

Why Potash West

Potash West has a dominant land position over one of the largest known glauconite deposits in the world. It has also expanded into the European potash market through a joint venture agreement for an exploration project in Germany.

High recovery rates are possible with a relatively simple potassium extraction method as demonstrated on similar deposits of glauconite in India, USA and recently by Potash West. Potash West is in a prime position to exploit and commercialize the large potassium rich deposits of the Perth Basin and the historic South Harz potash district in Germany in order to take advantage of an increasing world demand for potash fertilizer.

A January 2015 Scoping Study and the large JORC-compliant resource estimate both indicate the strong technical and financial viability of the Dandaragan Trough Project.

The completed Scoping Study showed a pre-tax IRR of 29.5% and NPV8 of AU$331 million, based on 340 ktpa SSP production at 18.1% P2O5. The project is expected to have a low CAPEX of AU$144 million. The Dinner Hill prospect has K-Max resource of 122MMT at 4.6% K2O. The scoping study for K-Max resource suggested pre-tax NPV10 of AU$808 million and IRR of 21.0%.

A Definitive Feasibility Study on the phosphate portion of project is expected to be complete by December 2015.

A review of geological data at South Harz project in Germany is expected to be completed in Q1 2015. Based on the results, the company plans to fast-track exploration in the region, including definition of JORC resource.

Management

Adrian Griffin, BSc (Hons) MAusIMM, MGSA, TMS – Chairman
Mr. Griffin, an Australian-trained mining professional, has had exposure to metal mining and processing worldwide during a career spanning more than three decades. A pioneer of the lateritic nickel processing industry, he has helped develop extraction technologies for a range of minerals over the years. Today, Mr. Griffin specializes in mine management and production. He is a former chief executive officer of Dwyka Diamonds Limited, an AIM-and ASX-listed diamond producer, was a founding director and executive of Washington Resources Limited and also a founding director of Empire Resources Limited, Ferrum Crescent Limited and Reedy Lagoon Corporation Limited. Additionally, Mr. Griffin was a founding director of ASX-listed Northern Uranium Limited, of which he is currently a non-executive director. He is also managing director of ASX-listed Midwinter Resources NL, an African-focused iron ore project developer.

Patrick McManus, BSc (Hons), MBA, FAusIMM, FAICD – Managing Director
Mr. McManus has a degree in mineral processing and an MBA. A mining professional in industrial minerals for more than thirty years, his work has taken him to many sites within Australia, such as Eneabba and the Murray Basin, and overseas destinations, such as Madagascar, Indonesia and the United States. During that time, Mr. McManus has worked in operational, technical and corporate roles for Rio Tinto, RGC Limited and Bemax Resources Limited.

Gary Johnson, MAusIMM, TMS, AICD – Director
Mr. Johnson is a metallurgist with more than thirty years of broad experience in all aspects of the mining industry. In his early career, he gained operational and project expertise with a range of metals in operations in Africa and Australia. Later, he was a member of the team operating the metallurgical pilot plant at the giant Olympic Dam copper, gold and uranium project in South Australia.
In 1998, after ten years as chief metallurgist with a large gold producer, Mr. Johnson formed his own specialised hydrometallurgical consulting company. During this period he worked closely with LionOre Mining International to develop the Activox® process for treating sulphide concentrates. Then, in 2006, LionOre acquired Mr. Johnson’s consulting company, and he joined LionOre as a senior executive. In 2007, LionOre was taken over by MMC Norilsk Nickel and in 2009 he became managing director of the latter’s Australian operations.
Currently, Mr. Johnson runs his own consulting company, which specialises in high-level metallurgical and strategic advice. He also holds several patents in the field of hydrometallurgy and is a director of the TSX-listed Hard Creek Nickel Corporation.

Chew Wai Chue — Director
Mr. Chew was a financial advisor with more than 15 years of industry experience, specialising in the provision of corporate and wealth management for ultra-high net worth individuals. With experience in South East Asia capital market and extensive networks of clients based in Singapore and Malaysia, Mr. Chew will provide important contributions to the Board. He has successfully worked with a number of financial institutions in Singapore such as, Standard Chartered Bank, OCBC Bank and Credit Suisse Singapore.
Mr. Chew is now a Managing Partner with a financial advisory firm, providing personal investing planning and wealth management for high net worth individuals and has a good track record of investment into junior mining companies in Australia and South East Asia.