The Lake Wells SOP Project

Australian Potash Limited (ASX: APC) holds a 100% interest in the LSOP located approximately 500kms northeast of Kalgoorlie, in Western Australia's north-Eastern Goldfields.

The Project is located in one of the world’s premium locations for solar evaporation operations. The Company released the findings of the Definitive Feasibility Study (DFS) into the development of the Project in August 2019.

The DFS identified a long-life operation (30 years with extensional opportunities not modelled in the DFS indicating a mine life in excess of 50 years), strong project economics with NPV8 A$665 million and local and regional employment opportunities for 65-80 people in steady state operations.

The demand for SOP, the premium form of potassic fertiliser, continues to rise in Asia and the rest of the world. Potassium is one of the three non-substitutable, essential elements for plant growth (along with nitrogen and phosphorous, together NPK). The LSOP has a JORC2012 compliant, Measured Mineral Resource of 18.1Mt of SOP, which is the largest measured Resource released across the Australian peer space to date.

On developing its solar salt operation at Lake Wells, APC will look to supply both overseas and domestic markets with 150ktpa of SOP for at least the next 30 years. Offtake discussions are very well advanced for the sale of the entirety of the LSOP’s output with several significant international industry participants.

The Lake Wells playa system, including the on-playa trial pond.

Lake Wells aerial

Multiple exploration programs have resulted in the generation of the large JORC compliant Probable Ore Reserve and Measured Resource Estimate (MRE). The recently completed DFS demonstrated the potential for long life and profitable operation.

Definitive Feasibility Study

The Definitive Feasibility Study (DFS) on the Sulphate of LSOP was released on 28 August 2019. Exceeding expectations, the DFS confirmed that the LSOP’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 SOP producer.
Key outcomes from the DFS:

Compelling economics:

  • Pre-tax NPV8 of A$665M
  • Annual pre-tax free cash flows of A$100M and Life of Mine (LOM) pre-tax free cash flows of A$3.1Billion
  • Pre-tax Internal Rate of Return (IRR) of 25% on robust operational and capital efficiencies
  • 150,000 tonnes per annum (tpa) Sulphate of Potash (SOP) production rate

Long life Project with lowest quartile production costs:

  • 30 year mine life with LOM production of 4.5Mt of premium high-grade SOP
  • LOM cash cost of US$262/t places the Lake Wells Sulphate of Potash Project (LSOP) in the first quartile of the SOP cost curve

Sector leading CAPEX:

  • Development CAPEX of A$208M including A$57M of indirect costs and contingency
  • Capital intensity of A$1,387/t SOP compared to peer average A$2,400/t

Resources and Reserves:

  • LOM production is met using maiden 3.6Mt Probable Reserve and draws on the Measured Resource Estimate of 18.1Mt drainable SOP

Clear pathway to production:

  • Defined Project delivery schedule of 24 months post Final Investment Decision (FID)
  • Financing and off-take discussions rapidly advancing
  • FEED program commencing immediately

Lake Wells Potash Project

Figure 1: Location map highlighting the LSOP, granted mining leases and the planned road upgrades funded by the Federal, State and Local Governments.

Location and Tenure

The LSOP is located 160 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.

Ore Reserves and Mineral Resources

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

Additional work post the 2017 MRE culminated in an MRE upgrade, released in August 2019, of 18.1Mt SOP in the Measured category. This significant resource upgrade is the result of extensions to the previously interpreted palaeovalley through drilling and passive seismic data collection, along with a better determination of the specific yield of the host sediments.

Specific yield (Sy) is a critical determinant in any brine hosted resource as this is the amount of brine that can be extracted, where most sediments host significant volumes of water that are effectively fixed and cannot be recovered via gravity and water bores. Reporting brine on a specific yield, or drainable basis is similar to saying recovery figures for a mineral mining operation. A collection of two data types enabled calculation of the Sy for the LSOP; physical sediment samples submitted for particle size distribution analysis (PSD), and geophysical borehole magnetic resonance (BMR).

The LSOP brine MRE is a static estimate; it represents the volume of recoverable brine that is contained within the defined aquifer/s. It does not account of modifying factors such as the design of a bore field (or another pumping scheme), which will affect both the proportion of the MRE that is recovered and changes in grade associated with mixing between each aquifer unit that is likely to occur once abstraction starts.

The hydrogeological/lithological sequence contains hypersaline brine, which is enriched in potassium and sulphate. The quality of brine is broadly consistent over depth, where potassium concentrations range between 3,000 – 5,000mg/L leading to average SOP concentrations exceeding 8,000 mg/L

For modelling purposes, the LSOP's sediments have been divided into hydro-stratigraphic units as determined by hydrogeologic characteristics. Eight units in total were used to model the deposit, these are;

  • Recent surficial deposits (Loam)
  • Cemented deposits (Crete)
  • Upper Aquitard (UA)
  • Upper Sand (US)
  • Lower Aquitard (LA)
  • Mixed Aquifer (MA)
  • Basal Sand
  • Basement Rock (BR)

Palaeovalley bore fields currently supply large volumes of process water to many existing mining operations throughout Western Australia, and this technique is a well understood and proven method for extracting brine. APC is proposing to use this technically low-risk and commonly used brine extraction method in their proposed development of the Lake Wells SOP resource.

Figure 3: LSOP Palaeovalley 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 palaeoriver system within the LSOP 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 LSOP 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 be the lowest risk and lowest cost operationally, further enhancing the attractiveness of the LSOP.

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