The Lake Wells Potash Project

Overview

The Lake Wells Potash Project (LWPP) is a palaeo-channel brine hosted sulphate of potash project.

A scoping study has been completed covering the Lake Wells Potash Project (LWPP), pointing to a long life and profitable operation. Supported by a JORC 2012 Indicated and Inferred Mineral Resource Estimate of nearly two billion cubic meters of brine capable of producing 14.7 million tonnes of sulphate of potash (SOP), the LWPP is a world class SOP asset.

A definitive feasibility study is underway and scheduled for completion in the first half of 2019, with project development targeted for late 2019. 

The LWPP consists of a substantial tenement package securing a significant area of palaeo-valley and salt lake terrain in the northeast part of the Yilgarn Craton, Western Australia. Multiple exploration programs have resulted in the generation of the large JORC compliant mineral resource and recent exploration indicates that the resources are likely to grow.

Scoping Study

A Scoping Study on the Lake Wells Potash Project was released on 23 March 2017. Exceeding expectations, the scoping study confirmed that the Project’s economic and technical aspects are all exceptionally strong, and highlight APC’s potential to become a significant long-life, low capital and high margin sulphate of potash (SOP) producer.

Key outcomes from the Scoping Study:

  • Stage 1 production rate of 150,000tpa of premium-priced sulphate of potash (years 1 – 5)
  • Stage 2 production rate of 300,000tpa of premium-priced sulphate of potash (years 6 – 20)
  • Upgraded JORC 2012 Mineral Resource Estimate comprising 14.7m tonnes of SOP, including 12.7mt in the Indicated category
  • Operating expenditure of A$368/US$283 tonne SOP in the first 5 years and A$343 tonne SOP over the life of mine
  • At a SOP price of A$795 per tonne SOP, the Project generates LOM annual operating pre-tax cashflow of A$118m/US$81m
  • Pre-production capital expenditure (Stage 1) of A$175m/US$135m and Stage 2 of A$163m/US$125m
  • Life of Mine (LOM) of 20 years (inc. Stage 1 & Stage 2) – upside to LOM through continued exploration

Lake Wells Potash ProjectFigure 1: Location map highlighting the Lake Wells Potash Project, granted mining leases and the planned road upgrades funded by the Federal, State and Local Governments.

Location and Tenure

The Lake Wells Potash Project is located 180 km NNE of Laverton (Figure 1) and consists of granted mining and exploration licenses covering a total of over 1,200 square kilometres.

The project area is serviced by the well maintained Great Central Road and Lake Wells Road. Recent announcements from the Federal and State Governments indicate that $35m has been allocated to seal 100km of the Great Central Road from Laverton commencing in January 2019. The road sealing initiative by the government will improve access to the project and reduce the haulage costs to any future operation.

Mineral Resources

Palaeo-channel bore fields supply large volumes of brine to many existing mining operations throughout Western Australia, and this technique is a well understood and proven method for extracting brine. APC will use this technically low-risk and commonly used brine extraction model to further develop a bore-field into the palaeo-channel hosting the Lake Wells SOP resource.

In early 2017 an updated JORC compliant mineral resource was released for the LWPP as part of the Scoping Study announcement. The overall Indicated Resource for the LWPP is 12.7 MT of SOP, with an addition Inferred Resource of 2.1 MT, giving a total of 14.7 MT SOP as detailed in Table 1 below.

It should be noted that the Resources are reported on a drainable basis; drainable referring to that portion of the brine that could potentially be abstracted over time.  Reporting brine on a drainable basis is similar to reporting recovery figures for a mineral mining operation. 

Table1

The Indicated Mineral Resource is a static estimate; it represents the volume of potentially recoverable brine that is contained within the defined aquifer. It takes no account of modifying factors such as the design of any bore field (or other pumping scheme), which will affect both the proportion of the Indicated Mineral Resource that is ultimately recovered and changes in grade associated with mixing between each aquifer unit, which will occur once pumping starts. The Southern Zone remains a data constrained Inferred Resource, though recent drilling has been completed aiming to bring this area into the Indicated category.

The hydrogeological sequence contains hyper-saline brine which is enriched in potassium and sulphate.  The quality of brine is broadly consistent over depth: potassium concentrations are in the order of 4,000 mg/L and SOP concentrations are in the order of 8,000 mg/L.

The hydrogeological model for the LWPP comprises four key units: a surficial aquifer with moderate abstraction potential; a sandy aquifer at the base of the surficial unit with moderate abstraction potential; a clay aquitard with little potential for direct abstraction, but with potential for the long-term drainage of brine from this unit into an underlying basal sand aquifer. This basal aquifer is the primary aquifer from which brine will be abstracted.  All four units have been drilled and brine samples have been collected. Aquifer parameters have been derived from PSD analyses as well as test pumping of the upper and basal sand units. All of these analyses support the viability of brine abstraction directly, or indirectly, from all four hydrogeological units. The hydrogeological sequence is indicated by drilling to be up to 174 metres thick.

APC intends to produce 100,000 tpa – 200,000 of SOP over a 20 year mine life from the brine (i.e. 16% of the Indicated Resource). To achieve this, a brine bore field capable of abstracting 46,400 kL/d of groundwater on a continuous basis is required (Stage 1). The remaining 50,000 tpa of SOP discussed in the Scoping Study Stage 1 development will be producing through salt reaction: converting MOP to SOP using the excess sulphate contained in the LWPP brine.

Mineral resource Figure 2: Mineral resource outlines as detailed in Table 1, with recently completed drill locations aiming to upgrade and extend the resource.

Geological Setting

A well-developed system of rivers drained the interior of Australia during the Tertiary period, up to 65 Ma (e.g. Beard 2002, Magee 2009). In central and western Australia, the Tertiary is marked by three broad cycles of weathering followed by erosion and deposition; these three cycles are preserved in the geology of the central and western interior of the continent:

  • Early Tertiary (Palaeocene – Eocene) – weathering and erosion of a deeply incised river-system within which alluvial sand was deposited;
  • Mid Tertiary (Oligocene – Miocene) – weathering and subsequent deposition of the weathered regolith as clay in low-energy fluvial and lacustrine environments; and
  • Late Tertiary (Pliocene-Holocene) – recent deposition of thin alluvial, colluvial and eluvial deposits. The Pleistocene marked the on-set of arid conditions which also started the formation of playa-lakes and brine-formation, most of which date from 1 Ma to 0.5 Ma (Fujioka and Chappell 2014); evaporate and precipitate formations (gypsum, halite, calcrete and silcrete) also occur within the late-Tertiary sediments.

The Early-Tertiary sediments were deposited in palaeo-river valleys. Tectonic movements during the Mid-Tertiary, combined with the onset of aridity in the Pliocene-Pleistocene, resulted in significant changes to Tertiary river-courses, such that the current drainage system and direction do not always align with the palaeo-drainage system.

Lake Wells now forms part of an internally draining terminal drainage with most of its catchment to the west. During the Tertiary, the Carnegie and Keene palaeo-rivers drained from the north into the Wells palaeo-river (Beard 2002). Consistent with this, investigations during studies at LWPP show a deep palaeo-channel extending towards the north-eastern tenement boundary. The Wells-Carnegie system was extensive, with eroded valleys up to 170m deep and ultimate drainage to the Eucla-coast (Beard, 2002).  Thus, sediments underlying the current Lakes Wells Salt Lake infill a large Tertiary palaeo-valley and are likely to be extensive over a wide area both upstream and downstream.

Figure 3: Lake Wells Palaeo-valley 3D model the result of over 300km of passive seismic data and more than 53,000 metres of drilling.

Drilling has revealed a consistent and predictable profile of layered aquifers and brine drenched clay-rich horizons that host the potash bearing brine. The uppermost layer consists of surficial or near surface evaporite and sand/silt, minor silcrete and calcrete. A layer of clay rich sediments and silty sands sit between the surface layer, and a sand layer that presents as an excellent aquifer to draw brine from. A basal unit consisting of stiff grey sandy-clay with highly porous and permeable sands at the base sits on top of the Archean basement.  See Figure 4 below from the MRE for a long section view through the deposit.

Figure 4: 12km long section through the interpreted 130km length of the palaeo-river system within the LWPP tenements.

On-going Exploration

Several brine potash explorers are targeting shallow brine resources on playa lake systems resulting in projects that extend over a very large surface area and that rely on trenches for brine abstraction. Australian Potash considers the LWPP to be unique in that it is the only Australian brine potash project with extensive deep aquifers suitable for exclusive bore field development. Industry experts agree that the development of a bore field relative to trenches for brine abstraction to be the lowest risk and lowest cost operationally, further enhancing the attractiveness of the LWPP.

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