TIDMSO4
RNS Number : 3346I
Salt Lake Potash Limited
30 August 2016
30 August 2016 AIM/ASX Code: SO4
SALT LAKE POTASH LIMITED
Scoping Study Confirms Lake Wells' Potential as a Major Low Cost SOP Project
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Salt Lake Potash Limited (Salt Lake, SO4 or the Company) is
pleased to announce the results of a Scoping Study on the Company's
Lake Wells Sulphate of Potash (SOP) Project (the Project) in
Western Australia. The Project's economics are highly encouraging,
highlighting its potential to produce low cost SOP by solar
evaporation of lake brines for domestic and international
fertiliser markets.
Highlights:
Ø The Scoping Study (accuracy +/-30%) prepared by global
engineering firm, Amec Foster Wheeler, and other international
experts, demonstrates excellent project fundamentals based on
well-established solar evaporation and salt processing techniques.
Based on the positive results of the Scoping Study, the Company
will now proceed to a Pre-Feasibility Study (PFS).
Ø Lake Wells has the potential to be one of only five large
scale salt lake SOP producers around the world and the Project's
estimated cash production costs of A$185 per tonne (Stage 2) would
be amongst the lowest in the world.
Ø The Scoping Study is based on a two stage development plan for Lake Wells:
- Stage 1 is based on shallow trenching and bore production with
100% of brine feed drawn from the near surface Measured
Resource.
- Stage 2 also includes pumping additional brine from the deeper
Inferred Resource, to increase production to 400,000 tpa of
SOP.
Ø Key Scoping Study results for Stage 1 and Stage 2 (refer to Sensitivity Analysis):
Stage 1 Stage 2
------------------------------------------------------------------- ------------- -------------
Annual Production (tpa) - steady state 200,000 400,000
------------------------------------------------------------------- ------------- -------------
Capital Cost * A$191m A$39m
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Operating Costs ** A$241/t A$185/t
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* Capital Costs based on an accuracy of -10%/+30% before contingencies and growth allowance
but including EPCM.
** Operating Costs based on an accuracy of +/-30% including transportation & handling (FOB
Esperance) but before royalties and depreciation.
Ø The Scoping Study results highlight the benefits of Lake
Wells' location in the Northern Goldfields, with excellent access
to gas and transportation infrastructure.
Ø Opportunities have been identified to further optimise capital
and operating costs through equipment lease financing, further
operational refinements and partnerships. The Company will also
continue to investigate potential additional revenue streams for
the project.
Commenting on the completion of the Scoping Study, CEO Matt
Syme: "We are very pleased with the Scoping Study results, which
confirm Lake Wells as a potential lowest cost quartile SOP
producer. This Study highlights Lake Wells' relative advantages
based on a large consistent resource, potential for brine
extraction by both surface trenching and pumping the deeper
paleochannel aquifer, and of course the locational advantages of
access to the gas pipeline and transportation infrastructure."
Cautionary Statement
As discussed below, the primary purpose of the Scoping Study is
to establish whether or not to proceed to a Pre-Feasibility Study
("PFS") and has been prepared to an accuracy level of +/-30%. The
Scoping Study results should not be considered a profit forecast or
production forecast.
In accordance with the ASX listing rules, the Company advises
the Scoping Study referred to in this announcement is based on
lower-level technical and preliminary economic assessments, and is
insufficient to support estimation of Ore Reserves or to provide
assurance of an economic development case at this stage, or to
provide certainty that the conclusions of the Scoping Study will be
realised.
The Production Target referred to in this announcement is based
on 100% Measured Mineral Resources for Stage 1 and 70% Measured
Mineral Resources and 30% Inferred Mineral Resources for Stage 2.
There is a low level of geological confidence associated with
Inferred Mineral Resources and there is no certainty that further
exploration work will result in the determination of Measured or
Indicated Mineral Resources or that the production target or
preliminary economic assessment will be realised
Important Information for this Announcement
The Scoping Study has been prepared and reported in accordance
with the requirements of the JORC Code (2012) and relevant ASX
Listing Rules.
The primary purpose of the Scoping Study is to establish whether
or not to proceed to a Pre-Feasibility Study ("PFS") and has been
prepared to an accuracy level of +/-30%, the Scoping Study results
should not be considered a profit forecast or production forecast.
As defined by the JORC Code, a "Scoping Study is an order of
magnitude technical and economic study of the potential viability
of Mineral Resources. It includes appropriate assessments of
realistic assumed Modifying Factors together with any other
relevant operational factors that are necessary to demonstrate at
the time of reporting that progress to a Pre-Feasibility Study can
be justified." (Emphasis added)
The Modifying Factors included in the JORC Code have been
assessed as part of the Scoping Study, including mining (brine
extraction), processing, metallurgical, infrastructure, economic,
marketing, legal, environmental, social and government factors. The
Company has received advice from appropriate experts when assessing
each Modifying Factor.
Following an assessment of the results of the Scoping Study, the
Company has formed the view that a PFS is justified for the Lake
Wells project, which it will now commence. The PFS will provide the
Company with a more comprehensive assessment of a range of options
for the technical and economic viability of the Lake Wells
project.
The Company has concluded it has a reasonable basis for
providing any of the forward looking statements included in this
announcement and believes that it has a reasonable basis to expect
that the Company will be able to fund its stated objective of
completing a PFS for the Lake Wells project. All material
assumptions on which the forecast financial information is based
are set out in this announcement.
This release contains 'forward-looking information' that is
based on the Company's expectations, estimates and projections as
of the date on which the statements were made. This forward-looking
information includes, among other things, statements with respect
to pre-feasibility and definitive feasibility studies, the
Company's business strategy, plans, development, objectives,
performance, outlook, growth, cash flow, projections, targets and
expectations, mineral reserves and resources, results of
exploration and related expenses. Generally, this forward-looking
information can be identified by the use of forward-looking
terminology such as 'outlook', 'anticipate', 'project', 'target',
'potential', 'likely', 'believe', 'estimate', 'expect', 'intend',
'may', 'would', 'could', 'should', 'scheduled', 'will', 'plan',
'forecast', 'evolve' and similar expressions. Persons reading this
news release are cautioned that such statements are only
predictions, and that the Company's actual future results or
performance may be materially different. Forward-looking
information is subject to known and unknown risks, uncertainties
and other factors that may cause the Company's actual results,
level of activity, performance or achievements to be materially
different from those expressed or implied by such forward-looking
information. Forward-looking information is developed based on
assumptions about such risks, uncertainties and other factors set
out herein, including but not limited to the risk factors set out
in Schedule 2 of the Company's Notice of General Meeting and
Explanatory Memorandum dated 8 May 2015.
INTRODUCTION
The Lake Wells Project is located in the Northern Goldfields of
Western Australia approximately 200 km north of Laverton. The area
is well served by existing infrastructure, including the Great
Central Road, the Goldfields Highway, the Goldfields Gas Pipeline
and the railway sidings at Malcolm and Leonora.
The Lake Wells Project comprises 1,126 km(2) of Exploration
Licences covering the Lake Wells Playa, and the area immediately
contiguous to Lake Wells.
Salt Lake Potash has undertaken extensive drilling, sampling and
geophysical surveys at Lake Wells since acquisition in mid-2015, to
understand the geological setting and define brine resources within
the Lake Wells Playa. A Scoping Study was initiated in early 2016
to investigate the technical and economic parameters of a SOP
production operation at Lake Wells, exploiting the identified brine
resources.
The Scoping Study is based on the Project's Mineral Resource
Estimate of 80-85 Mt of SOP in 9,691 GL of brine at an average of
8.7 kg/m(3) of K(2) SO(4) . The Mineral Resource Estimate includes
Measured and Indicated Resources of 26 Mt of SOP in the shallowest
20m of the Lake.
The Study has established the indicative costs of a two stage
production operation, initially producing 200,000 tonnes per annum
(tpa) and then 400,000 tpa of dried organic 99.9% pure SOP. Stage 1
produces 200,000 tpa but includes most of the capital works
required for a 400,000 tpa operation. Stage 2 will commence after
initial capex is repaid by cashflow generated from the shallow
Measured and Indicated Resource.
The Project will produce SOP from hypersaline brine extracted
from Lake Wells via trenches and a combination of shallow and deep
production bores. The extracted brine will be transported to a
series of solar evaporation ponds built on the Lake where selective
evapo-concentration will precipitate potassium double salts in the
final evaporation stage. These potassium-rich salts will be
mechanically harvested and processed into SOP in a crystallisation
plant. The final product will then be transported for sale to the
domestic and international markets.
MAJOR STUDY PARAMETERS
Table 1: Key Assumptions and Inputs
----------------------------------------------------- ------------------
Maximum Study Accuracy Variation +/- 30% +/- 30%
----------------------------------------------------- -------- --------
Stage Stage 1 Stage 2
----------------------------------------------------- -------- --------
Life of Mine (LOM) 20 years
----------------------------------------------------- ------------------
Annual Production (steady state - tonnes) 200,000 400,000
----------------------------------------------------- -------- --------
Portion of Production Target - Measured & Indicated 100% 70%
----------------------------------------------------- -------- --------
Portion of Production Target - Inferred 0% 30%
----------------------------------------------------- -------- --------
Mining Method (Extraction)
----------------------------------------------------- -------- --------
Trenches (km) 107 157
----------------------------------------------------- -------- --------
Shallow Bores (number) 4 4
----------------------------------------------------- -------- --------
Deep Bores (number) - 34
----------------------------------------------------- -------- --------
Mining Method (Extraction (volume))
----------------------------------------------------- -------- --------
Trenches (m(3) /h) 3,074 4,521
----------------------------------------------------- -------- --------
Shallow Bores (m(3) /h) 576 576
----------------------------------------------------- -------- --------
Deep Bores (m(3) /h) - 2,203
----------------------------------------------------- -------- --------
Total Volume (m(3) /h) 3,650 7,300
----------------------------------------------------- -------- --------
Evaporation Ponds
----------------------------------------------------- -------- --------
Area (ha) 2,990 3,170
----------------------------------------------------- -------- --------
Recovery of Potassium from feed brine 70% 70%
----------------------------------------------------- -------- --------
Recovery of Sulphate from feed brine 18% 18%
----------------------------------------------------- -------- --------
Plant
----------------------------------------------------- -------- --------
Operating time (h/a) 7,600 7,600
----------------------------------------------------- -------- --------
Operating Costs * (+/-30%)
----------------------------------------------------- -------- --------
Minegate (A$/t) $165.74 $110.00
----------------------------------------------------- -------- --------
Transport (A$/t) $75.10 $75.10
----------------------------------------------------- -------- --------
Total (A$/t) $240.84 $185.10
----------------------------------------------------- -------- --------
Capital Costs (-10%/+30%)
----------------------------------------------------- -------- --------
Direct A$160.7 A$32.0
----------------------------------------------------- -------- --------
Indirect A$30.5 A$6.8
----------------------------------------------------- -------- --------
Growth Allowance A$32.5 A$5.1
----------------------------------------------------- -------- --------
Total Capital A$223.7 A$43.9
----------------------------------------------------- -------- --------
* Before Royalties and Depreciation
STUDY CONSULTANTS
The Scoping Study was managed by Amec Foster Wheeler. Amec
Foster Wheeler is a recognised leader in potash mining and
processing with capabilities extending to detailed engineering,
procurement and construction management. Amec Foster Wheeler were
able to leverage an international network, including access to its
Centre of Potash Excellence located in Saskatoon, Canada.
In addition to Amec Foster Wheeler, the Company engaged
international brine-processing experts Carlos Perucca Processing
Consulting Ltd (CPPC) and AD Infinitum Ltd (AD Infinitum) and their
principals Mr Perucca and Mr Bravo, who are highly regarded experts
in the potash industry. Mr Bravo previously worked as Process
Manager Engineer at SQM, the third largest salt lake SOP producer
globally. He specialises in the front end of brine processing from
feed brine through to the crystallisation of harvest salts. Mr
Perucca has over 25 years of experience in mineral process
engineering and provided high-level expertise with respect to plant
operations for the processing of harvest salts through to final SOP
product. AD Infinitum and CPPC were responsible for the brine
evaporation and salt processing components in the Scoping
Study.
The Company also engaged Project Advisory Group (PAG) to provide
an independent transport study on the logistic options for the
exportation of SOP from Lake Wells. PAG is an Australian project
and engineering consultancy group with extensive experience in
transport cost engineering.
Independent expert potash market forecasts and assessments were
provided by Integer Research Limited, Greenmarkets and Stratum
Resources Limited.
PRODUCTION TIMELINE
The Scoping Study considers a two-stage development which
utilises the hydrogeological characteristics of the Lake:
-- Stage 1 an initial 200,000 tonne per annum SOP operation
utilising the surface aquifer (<20m below ground level) by
extracting brine from a system of trenches and shallow bores from
the identified Measured and Indicated Resource. Construction of
brine extraction and evaporation infrastructure will begin two
years before SOP production.
-- Stage 2 expands to 400,000 tonne per annum SOP by extracting
additional brine from the deeper inferred resource (>20m below
ground level) from the paleochannel aquifer. Stage 2 will commence,
after payback of initial capital expenditure from Stage 1.
PROJECT GEOLOGY AND RESOURCE
Geological Setting
Lake Wells is in the North Eastern Goldfields Province at the
margin of the Archaean Yilgarn Craton. The province is
characterised by granite-greenstone rocks that exhibit a prominent
northwest tectonic trend and low to medium-grade metamorphism. The
Archaean rocks are intruded by east-west dolerite dykes of
Proterozoic age, and in the eastern area there are small,
flat-lying outliers of Proterozoic and Permian sedimentary rocks.
The basement rocks are generally poorly exposed owing to low
relief, extensive superficial cover, and widespread deep
weathering.
A paleovalley is incised into Proterozoic basement beneath Lake
Wells. The lateral extent of the paleovalley appears well defined
by basement outcrop mapped on the 250K geological mapsheet. The
paleovalley appears to be entirely enclosed by basement outcrop,
with outcropping basement providing separation from Lake Carnegie
to the north, and a ring of outcropping basement providing closure
to the south. The paleovalley is infilled with inferred Tertiary
sediment to a maximum intersected depth of 126m in the northern
arm, and exceeding 84 m in the southern arm. These sediments thin
toward the lateral margins of the channel and also at the northern
extent, southern extent and in the central "neck" area.
The brine resource is hosted within the sediments infilling the
paleovalley, and within the underlying weathered Proterozoic
basement.
The geological structure hosting the brine pool comprises the
units described in the following sections:
Playa Lake Sediment (PLS)
Recent (Cainozoic), unconsolidated silt, sand and clay sediment
containing variable abundance of evaporite minerals, particularly
gypsum. The unit is ubiquitous across the salt lake surface. The
thickness of the unit ranges from approximately 10 to 20m. This
unit hosts the Measured, Indicated and (initial) Inferred Resource,
estimated on the basis of shallow Auger Core drilling (see ASX
Announcement dated 11 November 2015).
The upper part of the unit comprises unconsolidated, gypsiferous
sand and silt with a strong overprint of ferric oxides from 0.5 to
around 3 - 8m depth. The unit is widespread, homogeneous and
continuous with the thickest parts in the centres of the northern
arm and southern arm respectively. This is underlain by well
sorted, lacustrine silt and clay, from 5 to 20m depth. This zone is
relatively homogeneous across the lake. Permeability is variable
and is likely controlled by grainsize and sorting of the soft
sediment.
Paleovalley Sediment
Clay silt and sand: Tertiary, unconsolidated clay with variable
inter-beds of silt and sand. The thickness varies considerably,
from negligible at the southern and northern margins of the lake,
to greater than 60m thick in the central and northern parts of the
lake. Recovery of brine samples from this unit is difficult due to
the fine grained lithology. Intermittent samples have been obtained
from more permeable silt and sand inter-beds. These samples
exhibited high grade brine, consistent with overlying and
underlying strata.
The upper part comprises grey, massive, firm to indurated,
plastic, lacustrine clay, with rare fine quartz grains throughout.
The topography of this unit essentially mirrors the morphology of
the lake and these sediments are interpreted to drape the
underlying sediments in the lake.
The grey clay is underlain by dark-coloured, firm to indurated,
lacustrine, massive clays. These sediments are similar to the
overlying plastic grey clays but contain organic material.
Paleochannel Basal Sand
Tertiary, unconsolidated medium to coarse grained sand. This
unit has been intersected in drill holes that have reached the
deepest parts of the paleochannel in the northern part of the lake.
The maximum intersected thickness to date was 15m (LWA006). The
inferred permeability is high on the basis of coarse-grained
lithology and relatively high brine flow rates observed during air
core drilling and test pumping. This unit is expected to represent
a productive aquifer. The extent of the unit is poorly defined
since most drillholes in the deeper sections of the northern part
of the lake failed to reach the basal units.
Basement (Basal) Siltstone
Proterozoic age siltstone, representing the primary basement
rocks, and interpreted as the equivalent of regional Proterozoic
metasediments. These rocks are red to brown to green, well
indurated, fine-grained, meta-siltstone and meta-sandstone. These
rocks are composed of predominately quartz and lithic fragments
with common presence of muscovite and chlorite and an interlocking
texture suggesting metamorphism up to Lower Greenschist facies.
Foliation is prevalent and occurs parallel to the original bedding
suggesting burial, rather than dynamic, metamorphism, without
significant large-scale folding
The upper part of the basement yielded water at variable rates
for most drillholes which demonstrates elevated permeability. The
permeability of this unit is likely to be associated with
weathering and fracturing of the rock matrix. Where fractured, the
rock is expected to act as a productive aquifer. The maximum
thickness of fractured, brine yielding aquifer was 45m
(LWA009).
Most drillholes ended in fractured brine yielding aquifer and
were constrained by the capacity of the aircore drilling method.
The siltstone aquifer and brine pool potentially continues some
depth below the range of the current drilling program.
Basement structure is variable. Basement is shallow (<30m) at
the southern and northern margins of the lake and also in the
central "neck" portion of the lake (Refer North-South transect).
Basement lows are observed in the central southern and northern
parts of the lake. In both areas, a number of holes drilled to
below 100m depth, failed to intersect the Basement siltstone.
Mineral Resource
The Lake Wells Mineral Resource was estimated by Groundwater
Science Pty Ltd, an independent hydrogeological consultant with
substantial salt lake brine expertise, and is reported in
accordance with the JORC Code 2012. The resource estimate is based
on 32 shallow auger holes averaging 16m deep and 27 aircore holes
averaging 63m deep.
Total Mineral Resource Estimate
Classification Geological Unit Bulk Volume Porosity Brine Volume Average SOP(1) K(2) SO(4)
(Million m(3) ) (Million m(3) ) (K(2) SO(4) ) Tonnage
Concentration (Mt)
(kg/m(3) )
---------------- ----------------- ---------------- --------- ---------------- ---------------- ----------------
Playa Lake
Measured Sediments 5,427 0.464 2,518 8.94 23
---------------- ----------------- ---------------- --------- ---------------- ---------------- ----------------
Playa Lake
Indicated Sediments 775 0.464 359 8.49 3
---------------- ----------------- ---------------- --------- ---------------- ---------------- ----------------
Playa Lake
Sediments
Inferred (Islands) 1,204 0.464 558 5.34 3
---------------- ----------------- ---------------- --------- ---------------- ---------------- ----------------
Paleovalley
Inferred Sediment 10,600 0.40 4,240 9.07 38
---------------- ----------------- ---------------- --------- ---------------- ---------------- ----------------
Fractured
Siltstone
Inferred Aquifer 6,717 0.22-.30 1,478 - 2,015 8.79 13-18
---------------- ----------------- ---------------- --------- ---------------- ---------------- ----------------
Total 24,723 9,691 8.74 80-85
----------------------------------- ---------------- --------- ---------------- ---------------- ----------------
Note: 1) Conversion factor to K to SOP (K(2) SO(4) equivalent) is 2.23
Table 2: Lake Wells Project - Mineral Resource Estimate (JORC
2012)
The Scoping Study production model is based on 100% Measured and
Indicated Resources in Stage 1 and 70% in Stage 2.
Hydrology Summary
Lake Wells is the end point of a 19,000 km(2) closed surface
water catchment. The total lake area is approximately 440 km(2)
yielding a catchment to lake area ratio of over 40.
The morphology of the salt lake shape and surface is consistent
with the classification system described by Bowler (1986). The
Northern part of the Lake exhibits morphology typical of some
degree of surface water influence and periodic inundation (smooth
lake edges, no islands). The southern part of the lake exhibits
morphology consistent with a groundwater dominated lake with rare
inundation (irregular shoreline, numerous islands).
It is inferred that the northern part of the lake receives
episodic surface water inflow from the drainage line to the north,
and that this water rarely, if ever, reaches the southern parts of
the lake.
Surface conditions on the lake observed during drilling were
wetter at the northern part of the lake compared to the southern
part, which is consistent with this concept.
The Lake is a terminal feature in the surface water system, i.e.
there are no drainage lines that exit the lake.
Groundwater Summary
The lake is inferred to be a terminal groundwater sink on the
basis of the large area of the lake and the shallow water table
observed beneath the playa lake surface, which facilitates
evaporative loss. Groundwater beneath the lake is hypersaline and
comprises the brine potash resource.
Groundwater hosted in Tertiary paleochannels in the goldfields
region was studied by Johnson et al (1999), though the study extent
terminated immediately west of the Lake Wells paleochannel system.
The study identified typical Tertiary Paleochannel morphology that
has been identified in the Lake Wells system.
The drilling undertaken at Lake Wells has identified three
aquifer units:
The shallow Playa Lake Sediments exhibit variable lithology
comprising sand silt and clay. An upper zone of evaporate (gypsum
and halite) rich sediment approximately 5m thick is likely to
provide the most permeable zone. Some coarser grained sand horizons
are logged in the deeper sediment which yield water in the
transition to the Tertiary clays.
At the base of the Paleovalley Sediments, a basal sand and
gravel unit has been identified by geophysics throughout the Lake
and verified by drilling in the northern arm. This unit comprises
fine to coarse grained, well to poorly sorted sand and gravels. It
is considered to be a productive aquifer. Basal sands typically
infill the "Thalweg" or deepest part, of a paleochannel which
typically ranges from 60 m to 1500 m width (deBroekert and
Sandiford (2005)). The unit is important as a production zone for
pumping brine to the surface via deep bores.
Underlying the Tertiary Paleovalley fill the Proterozoic
siltstone exhibits some permeability due to fracturing and
weathering. The permeability is likely controlled by structure
(faulting) where faulted areas facilitate weathering and fracturing
as secondary porosity.
Geophysical Survey
An extensive ground based geophysical survey has been completed
at Lake Wells, assessing the bedrock topography and generating
paleochannel aquifer drill targets. The Company completed the
gravity survey using industry leading high accuracy gravimeters and
position systems to measure subsurface density. A total of 46
gravity lines comprising 2,147 stations spaced 50 - 200m apart were
completed. In addition, a passive seismic (Tromino) system was used
to correlate a secondary geophysical interpretation tool with the
gravity and provide a more robust model. A total of 11 passive
seismic lines spanning 30km was completed on priority lines
identified by the gravity survey.
Gravity measurements were processed and merged with available
regional data. The final merged residual gravity data have been
used as the basis for interpretation.
Image processing of the gravity data shows there is a
semi-continuous distinct residual gravity low present along the
eastern to central areas of the entire tenement area. The anomaly
which is approximately 2km wide, traces a typically sinuous path,
including several cut out meandering branches from the northern to
southern tenement boundaries. The location and depth of the
paleochannel has been interpreted by modelling gravity profiles
across the structure. Modelling has been assisted and where
applicable constrained by a number of aircore holes that have
penetrated the Tertiary sequence to bedrock.
MINING AND SCHEDULING
Brine Extraction
On-lake drilling and test pumping completed in 2015 and 2016 has
identified three productive zones for brine extraction from Lake
Wells aquifers:
1. The near surface playa lake sediments with elevated permeability.
2. A shallow 'silcrete zone' where chemically deposited silcrete and calcrete have very enhanced permeability.
3. A deep paleochannel sand and gravel aquifer.
All aquifer zones are considered permeable enough to allow
productive yields to be generated as initially demonstrated by test
pumping and particle size distribution analysis.
The brine extraction system collects hypersaline Lake brine
solution to be evaporated in the evaporation ponds. Brine will be
extracted using two methods:
-- Surface trenching provides access to the brine contained
within the surficial playa lake sediments; and
-- Vertical bores provide access to brine from a shallow
silcrete zone (20m depth) and from coarse sand zones at the base of
the Lake Wells paleochannel (120m depth).
Trench System
To access brine contained within the surficial playa sediments
two types of trenches are employed:
-- Extraction trenches, which provide a low pressure zone for
brine contained in the surrounding playa lake sediments to drain
into; and
-- Transport trenches, which act as channels into which brine
from various sources are combined and transferred by gravity
towards the evaporation ponds. A number of transfer pump stations
are required to transfer the solution to subsequent trenches. It is
assumed that surficial playa lake sediment brine extraction also
occurs into the transport trenches.
The trenches are typically linked with dimensions nominally 7.5m
wide at the surface, 1.5m wide at the invert with an average depth
of 6m.
The transport trenches incorporate a slope of 1 in 10,000 with a
maximum length of 15km per section.
Bore System
For Lake Wells, both shallow and deep bores are used for brine
extraction:
-- The shallow silcrete zone bores are on average 20m deep and
are situated in a zone of silcrete and calcrete in the northern arm
of the Lake which has been demonstrated in previous drilling and
test pumping to have very high transmissivity due to secondary
porosity.
-- The deep bores are on average 120m deep, are situated along
the paleo-channel and generate relatively lower extraction flows.
Hole LWA033 was test pumped and the conclusion from the test was
that a production bore pumped from 90m BGL would produce up to 25
L/s in this part of the aquifer.
Bores are cased with pressure rated pipe and screened with 904
grade steel. Diesel powered, surface mounted, shaft driven pumps
are proposed for the shallow bores for their high flow capacity and
relatively low capital investment. Brine from deep bores will be
extracted using stainless steel electrical submersible pumps.
200,000t/a 400,000t/a
--------------------- ----------- -----------
Trenches Trench Length (km)
--------------------- ------------------------
Extraction trenches 64 87
--------------------- ----------- -----------
Transportation
trenches 43 70
--------------------- ----------- -----------
Total 107 157
--------------------- ----------- -----------
Bores Number of Bores
--------------------- ------------------------
Shallow bores 4 4
--------------------- ----------- -----------
Deep bores - 34
--------------------- ----------- -----------
Total 4 38
--------------------- ----------- -----------
Table 3: Brine Extraction by Source
Brine Production (m(3) /h)
--------------- --------------------------------
200,000t/a SOP 400,000t/a SOP
Case Case
--------------- --------------- ---------------
Shallow bores 576 576
Deep bores - 2,203
Trenches 3,074 4,521
--------------- --------------- ---------------
Total 3,650 7,300
--------------- --------------- ---------------
Table 4: Brine Extraction: Production Summary
Brine Evaporation
The extracted brine is concentrated in a series of solar ponds
to induce the sequential precipitation of salts and eventually
producing potassium double salts in the harvest ponds. Evaporation
modelling, pond sizing and design was completed by international
experts, Ad Infinitum and CPPC.
As an initial concept, the halite ponds were envisaged to
comprise two trains, each with ten ponds in series with a total
pond area of 1,800ha. Considering the Lake Wells topography and the
islands at the southern end of the lake, it was decided to rather
make use of the natural "walls" provided by these islands to
develop the halite ponds. The base of the halite ponds will make
use of the natural clay lining in the existing lake sediment to
seal the ponds. It is envisaged that some walls will be required to
bridge the islands to ensure plug flow. The formed salt will be
scraped to form internal barriers, ensuring plug flow with
associated progressive concentration.
There will be four production ponds, for the production of
potassium double salts, in total, each with an area of 90 ha.
Harvesting is envisaged to be conducted in two parallel operations
or trains. Each train will have one production pond online under
evaporation, while the other pond is off-line. Harvesting will take
an estimated 70 days until the pond can be returned to production.
Of these 70 days, 20 days are allowed for preparation (draining the
pond and drying the associated salts). For the Scoping Study, it is
assumed that these ponds will be located on the Lake between the
halite pond area and the process plant. Potassium double salts are
harvested using modified tractor-scrapers and trucks.
PROCESSING PLANT
The potassium double salts harvested from the solar evaporation
ponds are treated in a process plant to convert these salts into
sulphate of potash (SOP), while minimising the chloride content of
the final product.
After mechanical harvesting the salts are first crushed to break
down larger lumps before proceeding to an attritioning and milling
circuit to further reduce the particle size prior to thickening. A
circulating load of intermediate brine is used to transport the
slurry through the plant to minimise product salt dissolution.
The thickened salt slurry is then transferred to a two stage
counter-current conversion reactor where control of temperature,
dilution and residence time converts the mixture of potassium
containing double salts, predominantly kainite, to schoenite (K(2)
SO(4) .MgSO(4) .6H(2) O) prior to SOP production.
The converted schoenite slurry, which still contains a
significant proportion of halite, is then thickened before
proceeding to reverse rougher flotation where waste halite reports
to the rougher concentrate. Rougher tails are then subjected to
scavenging flotation to remove residual halite.
The concentrated schoenite is transferred to an SOP metastasis
reactor where control of temperature and dilution dissolves the
magnesium sulphate from the schoenite to leave SOP as a solid which
is separated by centrifuge before being washed and dried to produce
a final product.
To maximise recovery of potassium from the SOP concentrate, the
liquor is cooled in a vacuum crystalliser to re-precipitate
schoenite. The resulting slurry is filtered and the schoenite cake
recycled to the SOP reactor feed tank. The filtrate is recycled to
the front end of the plant as conversion liquor.
Key design parameters for the process plant are presented in
Table 7, below.
200,000t/a and 400,000t/a
SOP
-------------------------------- --------------------------
Operating Time
Brine extraction; evaporation 8,760 h/a
ponds and harvesting
Process plant 7,600 h/a
-------------------------------- --------------------------
Feed Brine Composition
Potassium content 4 g/L
Sulphate content 19 g/L
-------------------------------- --------------------------
Pond feed brine flow rate (for 7,300m(3) /h @ 8,760
400,000t/a case) h/a
-------------------------------- --------------------------
Overall potassium recovery 70%
-------------------------------- --------------------------
Overall sulphate recovery 18%
-------------------------------- --------------------------
Table 5: Process Plant Parameters
Typical Lake Wells brine contains a significant excess of
sulphate, which may be utilised in future scenarios by back loading
of a low value high potassium content input (for example
non-product grade KCl or Muriate of Potash) for reprocessing to
SOP.
TRANSPORT
The basis for bulk SOP product transport in the Scoping Study is
a combination of road and rail transport to a storage depot at
Esperance port, with periodic consignment transfer to bulk
carriers. The cost build-up comprises the following components:
-- Road transport from site to Malcolm siding near Leonora
-- Storage of SOP at Malcolm and periodic loading into bulk train carriages
-- Rail transport to Esperance port
-- Storage and periodic reclaim onto bulk carriers.
Transport cost estimates were undertaken by Project Advisory
Group (PAG) based on market data, industry databases, industry
contacts and PAG's existing knowledge of the Western Australian
infrastructure market.
PAG is a specialist engineering, commercial, cost engineering
and project management business with substantial experience in the
management of transport studies from mining operations through to
port. PAG undertook direct interaction with informed industry
participants including meetings with truck haulage service
providers, rail leasing companies and bulk shipping
consultants.
Road and Rail
The most efficient route of transportation from site to the
export markets is via Esperance port. The following table outlines
the distance per method required to transport SOP to the
market.
Method Km
----------------- ------------------------------------ ----
Road (unsealed) Lake Wells - Laverton 220
----------------- ------------------------------------ ----
Road (sealed) Laverton - Malcolm Rail Head 100
----------------- ------------------------------------ ----
Rail Malcolm Rail Head - Esperance Port 648
----------------- ------------------------------------ ----
Total Lake Wells - Esperance 968
----------------- ------------------------------------ ----
The basis for estimating road costs is a distance of 320km on
sealed and unsealed roads utilising triple road trains, each with a
payload capacity of 100 t. Rail costs are based on a distance of
648km from Malcolm siding to Esperance via Kalgoorlie. The Leonora
to Kalgoorlie and West Kalgoorlie to Esperance lines are standard
gauge (24 tonne capacity) lines operated as an open-access,
multi-user network under a lease with the State Government of
Western Australia. Rail cars will be loaded at Malcolm utilising a
wet hire front end loader.
The total road and rail costs have been estimated at $75/t SOP
product.
Port
For the purposes of this study, costs associated with storage
and re-handling of product within a covered storage facility are
included in the total transport cost.
Esperance Port is capable of handling Cape size vessels up to
200,000 tonnes and fully loaded Panamax size vessels up to 75,000
tonnes, with the latter assumed to be utilised in this Scoping
Study. The Port handles approximately 19mt per annum of trade per
year with significant excess capacity available for handling and
storage.
MINING INFRASTRUCTURE
The Lake Wells Project is located in the Northern Goldfields of
Western Australia approximately 200 km north of Laverton. The area
is well served by existing infrastructure, including the Great
Central Road, the Goldfields Highway, the Goldfields Gas Pipeline
and the railway sidings at Malcolm and Leonora.
With the Project's proximity to local West Australian goldfields
infrastructure, relatively minor area infrastructure upgrades and
modifications are required. The key infrastructure considerations
are:
-- Main access roads - The Lake Wells site will be accessed from
Laverton via the Cosmo Newbury and Lake Wells Station roads. Beyond
Lake Wells Station, the gazetted Shire road that reaches the
eastern side of Lake Wells will be upgraded for a distance of 60 km
to a standard suitable for heavy haulage.
-- Internal access roads - Internal roads include those required
to connect all of the facilities for operational, maintenance and
personnel movements. The station road along the eastern boundary of
the lake will be extended by 35 km to provide brine extraction
borefield access
-- Fuel supply - Diesel will only be used as fuel for mobile
equipment and remote borefields, therefore only minor fuel storage
will be required.
-- Power supply - Power will be supplied by a contractor on a
build-own-operate (BOO) basis. The proximity of the Goldfields Gas
Pipeline is likely to provide a considerable cost advantage to the
Project in the next stage of the feasibility study process.
-- FIFO arrangement - A fly in/fly out (FIFO) workforce of up to
89 personnel has been assumed for the Project due to the remote
location of the site. It is anticipated that small charter planes
from Perth will land at the existing Lake Wells Station
airstrip.
-- Accommodation village - An accommodation village for 100
personnel has been included to provide housing for the Project.
-- Communications - Internet protocol (IP) communications will
be provided via microwave datalink relayed from the nearest tower.
UHF radio network is proposed for operations communications.
-- Water - Raw process water is sourced from existing aquifers
within a 50km radius from the process plant and, due to the
hardness of the waters in the area, may need to be softened prior
to use in the plant. Fresh water requirement is estimated at
276m(3) /h (2GL/a @ 7,600h).
PRODUCT QUALITY AND MARKETING
Fertilisers consist of essential plant nutrients that are
applied to farmed crops in order to achieve favourable quality and
yield. They replace the nutrients that crops remove from the soil,
thereby sustaining the quality of crops, and are considered the
most effective means for growers to increase yields.
The key components of agricultural fertilisers are nitrogen
(ammonia and urea), phosphates (ammonium phosphates), and potassium
(muriate of potash and sulphate of potash). In addition, sulphate
has gained increased attention over the past several years due to
soils becoming deficient in sulphur (the 'fourth
macronutrient').
Global fertiliser demand is expected to increase significantly
in the coming years due to the world population growth accompanied
by decreasing arable land per capita, changes in diet and growth in
income. These increases will provide an incentive for farmers to
increase fertiliser use for improved yields and quality.
The most widely available source of potassium used by growers is
Muriate of Potash (MOP or KCl), with around 60 million tonnes
consumed annually. SOP and Sulphate of Potash Magnesia (SOPM) are
both speciality types of potassium fertilisers that are produced
and consumed on a smaller scale.
MOP is widely used in all types of farming, however it can be
detrimental to some plants, especially fruits and vegetables, due
to its chloride content. SOP is primarily used as a source of
potassium for crops intolerant of chloride. SOP is priced at a
premium to MOP, due to supply constraints, high production costs
and because of its ability to be used on chloride intolerant crops
(such as fruits, vegetables, beans, nuts, potatoes, tea, tobacco
and turf grass), which typically sell at sufficiently higher prices
to absorb the premium cost.
SOP can be used in most applications where MOP is used and is
preferred in many circumstances as it enhances yield and quality,
shelf life and improves taste. SOP generally outperforms MOP in
terms of crop quality and yield. SOP performs particularly well
with crops that have a low tolerance to the chloride in MOP and in
arid, saline and heavily cultivated soils. The low volume of SOP
consumption relative to market demand is partly a result of the
scarcity of reliable SOP supply.
SOP is traditionally priced at a premium to the MOP price,
correlated to the conversion costs from MOP to SOP (Mannheim
Process) where MOP is used as an input in the process. The premium
has been around 60% for the past decade. In recent years, this
premium has expanded significantly, as decreases in the MOP price
have not translated to similar declines in the price of SOP,
indicating that the SOP market is supply constrained.
SOP can be sold as a standard powder or as a premium granular or
soluble grade product. Granular and coarse SOP is generally priced
at a premium. Salt Lake Potash plans to sell at a premium to the
market price as a certified organic producer, similar to Compass
Minerals. The primary production of SOP from salt lakes allows for
organic certification.
The current spot price for SOP is around US$625 (FOB Northwest
America) with Compass Minerals' June 2016 Quarterly Report
reporting an average price of US$651 for the premium, organic salt
lake product.
The Company's main target market is the Asia-Pacific and
East-Asia, a region forecasting significant increases in the demand
for SOP. SOP production is not easily substitutable and is in
supply deficit, therefore the Company is confident in the current
and forecasted levels of demand.
Salt Lake will continue to focus on developing marketing
relationships and discussions with potential off-take and trade
partners.
ENVIRONMENTAL & SOCIAL IMPACT ASSESSMENT
An opportunities and constraints assessment was completed for
the Project by 360 Environmental. The key findings of the
assessment were:
-- Flora and Vegetation - Vegetation associations occurring at
the site are most likely widespread. The site may contain rare and
priority flora and threatened or priority ecological communities
but further work is required to determine the scale and extent of
impacts to flora and vegetation;
-- Landforms - It is unlikely that landforms within the site,
particularly the flat-topped hills to the north, which may be
considered significant by the EPA, will be affected by the proposed
project development.
-- Subterranean Fauna - No stygofauna or troglofauna have
previously been recorded within the immediate Lake Wells area due
to lack of survey work. Lake Wells does contain habitat that could
host both stygofauna and troglofauna and will require further
study.
-- Terrestrial Environmental Quality - Sediments and the saline
groundwater has the potential to impact on terrestrial
environmental quality if disturbed. A geochemical characterisation
of sediments on the site is recommended to better understand
potential impacts.
-- Terrestrial Fauna - Fauna records for the Site are sparse and
a Fauna Survey will be required. The level of survey required will
be determined based on the proposed development footprint.
-- Hydrological Processes - Broad-scale review of the Lake Wells
catchment and surrounding areas show that drainage is generally
poorly defined. Hydrological investigations of the Lake Wells area
will assist in determining potential impacts from the Project
(detailed definition on processing methods will further inform
this).
-- Inland Waters Environmental Quality - The use of process
water on site as well as the processing of extracted brine has the
potential to affect surface and groundwater quality. Baseline
characterisation of surface and groundwater is already being
undertaken. A review aimed at assessing characteristics of process
water and the required management is likely.
-- Heritage - No registered Aboriginal sites were found within
the Project area. Continuing engagement with the Aboriginal
community is required.
PERMITTING AND FISCAL REGIME
The Lake Wells Project exploration rights are secured by six
granted exploration licenses comprising a total of 368 blocks with
an area of approximately 1,140km2. In order to progress to the mine
development stage, the Lake Wells project will require one or more
mining leases and an approved Mining Proposal and Mine Closure
Plan.
As the project will involve alteration to a watercourse and the
abstraction of groundwater, permits will be required from the
Department of Water for 'Construction of a Bore' (26D) and 'Licence
to Take Water' (5C).
The Lake Wells Project area does not have any registered
Aboriginal heritage sites. The Company has conducted two annual
heritage clearance surveys with Aboriginal Heritage Consultants
reviewing and confirming exploration programs at the Lake Wells
Project. There is no evidence to suggest the Project area includes
any areas of such high Aboriginal heritage significance that may
preclude granting of a Mining Lease.
The Project is currently not covered by any Native Title claims,
however the Company understands a potential claim covering part of
the Northern arm of the Lake is being considered. The Company is
not presently aware of the basis of any potential claims.
Royalties
Potash has not been produced in Western Australia since 1950.
The current royalty legislation does not include any specific rate
for potash produced in WA. The ad valorem or value-based rate of
royalty, which applies under the Mining Regulations 1981, is
applied to a commodity based on the extent to which the commodity
has been processed. As the SOP is sold in its final form (not
subject to any further refinement or processing before sale to
consumers) a royalty rate of 2.5% is expected.
CAPITAL EXPITURE ESTIMATES
The initial capital cost to develop and commence production at
Lake Wells has been estimated at A$191 million (before growth
allowance). Capital expenditure was estimated at an accuracy of
-10% to +30%.
The incremental capital costs for increasing production to
400,000 tpa of A$39 million are mostly invested "on-lake" for
additional brine extraction and solar evaporation ponds.
200,000t/a 400,000t/a
(A$'000) (A$'000)
------------------------------------------------- ----------- -----------
Brine Extraction and Evaporation 26,769 18,266
Process Plant 68,472 5,496
Plant Infrastructure 20,593 1,399
Area Infrastructure 26,412 2,626
Regional Infrastructure 11,188 790
Miscellaneous 7,240 3,433
-------------------------------------------------- ----------- -----------
Total Direct Cost 160,674 32,010
-------------------------------------------------- ----------- -----------
Temporary Facilities 8,034 2,718
EPCM 22,494 4,047
--------------------------------------------------
Total Indirect Cost 30,528 6,765
-------------------------------------------------- ----------- -----------
Total Initial Capital (before growth allowance) 191,202 38,775
-------------------------------------------------- ----------- -----------
Growth Allowance 32,504 5,112
-------------------------------------------------- ----------- -----------
Total Initial Capital 223,706 43,887
-------------------------------------------------- ----------- -----------
Table 6: CAPEX Breakdown
OPERATING EXPITURE ESTIMATES
Primary brine based SOP operations are historically among the
world's lowest cost SOP producers. Salt Lake's forecast minegate
cost of A$110 per tonne would place it in the lowest cost quartile
of global production. The operating cost estimates are based on an
accuracy of +/-30%.
200,000t/a 400,000t/a
(A$/t) (A$/t)
----------- -----------
Labour 69.34 41.25
Power 16.24 14.46
Maintenance 27.89 16.42
Reagents 5.05 5.07
Consumables 16.15 15.72
Miscellaneous, G&A 31.07 17.08
--------------------------------- ----------- -----------
Total Mine Gate Operating Costs 165.74 110.00
--------------------------------- ----------- -----------
Product haulage and port 75.10 75.10
--------------------------------- ----------- -----------
Total 240.84 185.10
--------------------------------- ----------- -----------
Table 7: Operating Costs Estimate (before royalties) (A$/t
SOP)
INTEGRATION WITH LAKE IRWIN
Another of Salt Lake's SOP assets, Lake Irwin, is currently in
the early stages of exploration. Lake Irwin is located
approximately 180km southwest of Lake Wells. It is also located
approximately 60 km from the Goldfields Gas Pipeline near Murrin
Murrin nickel mine and is 80 km from the Malcolm siding on the
Leonora-Kalgoorlie rail line. The site can be accessed by existing
gravel roads to the paved Leonora-Laverton road for product
transport to the Malcolm rail siding.
Salt Lake has recently been granted three exploration licences
over Lake Irwin and exploration with the aim of generating a
resource is currently underway. Brine quality in terms of potassium
content is slightly lower and the sulphate/potassium ratio is
slightly higher than Lake Wells but the two Lakes appear to be
comparable and may offer synergies with processing and
infrastructure.
OPPORTUNITIES
Discussions with market experts Stratum Resources and other
market participants highlighted the potential advantages that could
be derived from product differentiation or offering a broader
organic fertiliser product range. The Lake Wells Project brine
contains dissolved salts other than potassium and sulphate that
could potentially be economically extracted as co-products or
by-products. For the production of SOP, Lake Wells brine has an
excess of sulphate and magnesium which are both important
micronutrients in compound fertilisers. The current processing
pathway results in the removal of excess sulphate during brine
evaporation. Magnesium is currently treated as an impurity and
removed in the plant process. Potential opportunities identified
include production of:
- Sulphate of Potash Magnesia (SOPM): SOPM is a premium potash
product with a total market demand of around 2 million tonnes per
annum. The largest producer globally is Intrepid potash which
produces approximately 200,000 tonnes per annum which recorded an
average selling price in the June 2016 quarter of US$317 per tonne.
Lake Wells brine contains sufficient magnesium to produce 2.3
tonnes of SOPM per tonne of substituted SOP.
- Magnesium Sulphate (MgSO4): MgSO4 is increasingly used as a
standalone fertiliser or compound fertiliser input. MgSO4 sells for
up to US$150 per tonne. An alternative flowsheet considered may
recover MgSO4 in the plant process for sale as a by-product, with
no impact on SOP recovery.
- Increased SOP output via secondary potassium sourcing: The
significant excess of sulphate to potassium in Lake Wells brine may
be utilised in future scenarios by back loading of a low value high
potassium content input (for example non-product grade KCl or
Muriate of Potash) for reprocessing to SOP.
- Salt (NaCl): NaCl has an extremely large global market in
which Australia is the largest exporter from both sea salt and salt
lake operations. Food grade NaCl sells for approximately US$70 per
tonne. Lake Wells brine could potentially produce 15 tonnes of NaCl
per tonne of SOP. Due to the low value of NaCl it is currently
considered unlikely to be economic, due to transportation
costs.
- Further assessment of these opportunities will be undertaken
via engagement with distributors and end-users in line with the
Company's ongoing evaporation trial, test work and broader research
and development work.
NEXT STEPS
Based on the positive results of the Scoping Study, the Company
will commence a Pre-Feasibility Study (PFS) immediately. During the
PFS phase, the Company will undertake more detailed hydrological
modelling, brine extraction optimisation and further infrastructure
assessment aimed at identifying opportunities to enhance the
Project economics through capital and operating cost
reductions.
Exploration activities including drilling, test pumping and
other testwork are already underway, to upgrade the resource
classification and increase the overall resource base. The targeted
outcomes include an improved hydrogeological understanding of the
performance of basal sand (deep bores) bores including draw down
rates, productivity rates and bore positions as well as improved
understanding of the potential productivity of the fractured
siltstone aquifer.
Greater understanding of the behaviour of the PLS through
further exploration activity will allow optimisation of the design
and definition of extraction system trenching from a flow, pumping
and hydraulic perspective.
A comprehensive field evaporation trial is scheduled to commence
with the objective to optimise the definition of evaporation ponds
design from a flow, halite storage, and hydraulic perspective. The
field trial will also produce large samples of product salts which
can be used for marketing and testing purposes.
Continued testwork programs will define design criteria for the
process plant and confirm the selected process route. Studies will
also compare various methods of providing heat to the SOP
crystalliser circuit and methods of cooling the SOP brine in the
schoenite recovery circuit.
The Company will also continue to investigate potential
additional revenue streams for the Project and other opportunities
for enhancement, including the benefits of an integrated Lake
Wells-Lake Irwin operation. The economic viability and benefits of
importing potassium chloride to make use of the significant excess
sulphate in the resource will also be evaluated.
Ongoing marketing studies will further define target customer
markets, preferred product specifications, mode of transport to
market and supply and demand forecasts.
Continued logistics studies will determine the optimum product
transport format for the product.
SENSITIVITY ANALYSIS
The Scoping Study was prepared at a +/-30% accuracy to
investigate the technical and economic parameters of a SOP
production operation at Lake Wells, exploiting the identified brine
resources.
Key inputs into the economic assessment of the Project were
based on the following sensitivities:
Operating Cost Analysis
Operating Cost (A$/t)
-----------------------------------------------
-30% 20% -10% Base +10% +20% +30%
--------- ----- ----- ----- ----- ----- ----- -----
Stage 1 $169 $193 $217 $241 $265 $289 $313
--------- ----- ----- ----- ----- ----- ----- -----
Stage 2 $130 $148 $167 $185 $204 $222 $241
--------- ----- ----- ----- ----- ----- ----- -----
Capital Cost (A$m) *
--------------------------------------
-10% Base +10% +20% +30%
--------- ------ ------ ------ ------ ------
Stage 1 $201m $224m $246m $268m $291m
--------- ------ ------ ------ ------ ------
Stage 2 $39m $44m $48m $53m $57m
--------- ------ ------ ------ ------ ------
* Total initial capital costs include growth allowance.
Table 8: Sensitivity Analysis
SUMMARY OF MODIFYING FACTORS
The Modifying Factors included in the JORC Code have been
assessed as part of the Scoping Study, including mining (brine
extraction), processing, metallurgical, infrastructure, economic,
marketing, legal, environmental, social and government factors. The
Company has received advice from appropriate experts when assessing
each Modifying Factor.
A summary assessment of each relevant Modifying Factor is
provided below.
Mining (Brine Extraction) - refer to section entitled 'Mining
and Scheduling' in this announcement.
The Company engaged an independent hydrogeological consultant
with substantial salt lake brine expertise, Groundwater Science Pty
Ltd, to complete the Mineral Resource Estimate for the Lake Wells
project. The Principal Hydrogeologist of Groundwater Science, Mr
Jeuken, has over 10 years of experience in groundwater resources
assessment and management for mining. He has experience in salt
lake brine potash evaluation, aquifer testing, wellfield planning
and installation for mining, and the development of conceptual
hydrogeological models
On-lake drilling and test pumping completed in 2015 and 2016 has
identified productive sandy aquifers at the Lake surface, a shallow
chemically deposited aquifer where silcrete and calcrete have
formed which enhances permeability and a deep paleochannel sand and
gravel aquifer. All aquifers are considered permeable enough to
allow sustainable productive yields to be generated as initially
demonstrated by test pumping and particle size distribution
analysis.
The hydrological model was produced by the Company with
consultation of independent experts. The two methods of extraction
outlined in the Announcement are common practice for brine
extraction. These extraction methods are used by the three main
current operations which include Great Salt Lake in the US, Lop Nur
Salt Lake (Luobupo) and SQM in Chile.
Processing (including Metallurgical) - refer to sections
entitled 'Mining and Scheduling' and 'Processing Plant' in this
announcement.
The Company engaged brine-processing experts Carlos Perucca
Processing Consulting Ltd (CPPC) and AD Infinitum Ltd (AD
Infinitum) and their principals Mr Perucca and Mr Bravo, who are
highly regarded international experts in the potash industry. Mr
Bravo previously worked as Process Manager Engineer at SQM, the
third largest salt lake SOP producer globally. He specialises in
the front end of brine processing from feed brine through to the
crystallisation of harvest salts. Mr Perucca has over 25 years of
experience in mineral process engineering and will provide
high-level expertise with respect to plant operations for the
processing of harvest salts through to final SOP product. AD
Infinitum and CPPC were responsible for the brine evaporation and
salt processing components in the Scoping Study.
Lake Wells' process development relied heavily on experience
applied by Amec Foster Wheeler and specialist consultants (CPPC and
Ad Infinitum) who are well experienced from working on similar
operations. Production of SOP from lake brines is well understood
and a well-established process.
Infrastructure - refer to section entitled 'Mining
Infrastructure' in this announcement.
Lake Wells' proximity to the West Australian goldfields means
relatively minor area infrastructure upgrades and modifications are
required.
The Scoping Study was managed by Amec Foster Wheeler. Amec
Foster Wheeler is a recognised global leader in potash mining and
processing with capabilities extending to detailed engineering,
procurement and construction management. Amec Foster Wheeler are
able to leverage an international network, including access to its
Centre of Potash Excellence located in Saskatoon, Canada. All
capital and operating costs were estimated by Amec Foster
Wheeler.
Transport cost estimates were undertaken by Project Advisory
Group (PAG) based on market data, industry databases, industry
contacts and PAG's existing knowledge of the Western Australian
infrastructure market.
PAG is a specialist engineering, commercial, cost engineering
and project management business with substantial experience in the
management of transport studies from mining operations through to
port in the region of Western Australia. PAG undertook direct
interaction with informed industry participants including meetings
with truck haulage service providers, rail leasing companies and
bulk shipping consultants.
Marketing - refer to section entitled 'Product Quality and
Marketing' in this announcement.
Independent potash market forecasts and assessments were
provided by experts Integer Research Limited, Greenmarkets and
Stratum Resources Limited.
Stratum's scoping level assessment of local and regional markets
indicates that various markets around the world and particularly in
the Asia-Pacific region would absorb the planned production output
of the Lake Wells Project either to fill new demand or to
substitute lower quality or higher cost supply.
Salt Lake has undertaken initial market discussions with local
and international fertiliser industry participants, which have
indicated substantive interest in a new and stable supplier of high
quality organic SOP from an Australian salt lake project. Stratum
confirmed there is a reasonable expectation the Company will be
able to execute off-take agreements with customers.
The current spot price for SOP is around US$625 (FOB Northwest
America) with Compass Minerals' June 2016 Quarterly Report
reporting an average price of US$651 for the premium, organic salt
lake product.
The Company's target market is the Asia-Pacific, a region
forecasting significant increases in the demand for SOP. SOP
production is not easily substitutable and is in supply deficit,
therefore the Company is confident in the current and forecasted
levels of demand.
Salt Lake will continue to focus on developing marketing
relationships and discussions with potential off-take and trade
partners.
Economic - refer to sections entitled 'Product Quality and
Marketing' in this announcement.
A detailed financial model and discounted cash flow (DCF)
analysis has been prepared in order to demonstrate the economic
viability of the Project. The financial model and DCF were modelled
with conservative inputs to provide management with a baseline
valuation of the Project. Sensitivity analysis was performed on all
key assumptions used. Key inputs and assumptions are outlined in
Table 1 to allow analysts and investors to calculate Project
valuations based on their own revenue assumptions.
The Company engaged the services of a funding and debt advisory
firm, Argonaut. Argonaut is a financial advisory and investment
banking firm which specialises in the metals, oil & gas and
agri-business sectors. Argonaut is well regarded as a specialist
capital markets service provider and have raised project
development funding (including debt, equity, hybrid instruments and
strategic capital/partners) for companies across a range of
commodities including substantial experience in the industrial and
speciality minerals sector. Following the assessment of a number of
key criteria, Argonaut has confirmed in writing that, provided a
definitive feasibility study arrives at a result not materially
worse than the Scoping Study, the Company should be able to raise
sufficient funding to develop the Project.
An assessment of various funding alternatives available to Salt
Lake has been made based on precedent transactions that have
occurred in the mining industry, including an assessment of
alternatives available to companies that operate in industrial and
specialty minerals sector. The assessment and advice from Argonaut
(referred to above) indicates that financing for industrial mineral
companies often involves a broader mix of funding sources than just
traditional debt and equity, and the potential funding alternatives
available to the Company including, but not limited to: royalty
financing; mezzanine finance; prepaid off-take agreements; equity;
joint venture participates; strategic partners/investors at project
or company; senior secured debt/project finance; secondary secured
debt; and equipment leasing. It is important to note that no
funding arrangements have yet been put in place, as these
discussions will usually commence upon completion of a PFS with
results not worse than this Scoping Study. The composition of the
funding arrangements ultimately put in place may also vary, so it
is not possible at this stage to provide any further information
about the composition of potential funding arrangement.
Since the acquisition of the Project in June 2015, the Company
has completed extensive drilling, sampling and geophysical surveys
at Lake Wells to understand the geological setting and define brine
resources within the Lake Wells Playa. Over this period, with these
key milestones being reach and the project de-risked, the Company's
market capitalisation has increased from A$15m to over A$65m. As
advised by Argonaut, as the Project continues to achieve key
develop milestones, which can also be significant de-risking
events, the Company's share price is likely to increase.
In April 2016, Salt Lake undertook a capital raising of A$8.9m
via a placement to domestic and overseas strategic and
institutional investors. The Company is debt free and is in a
strong financial position, with approximately A$7.5m cash on hand
(30 June 2016). The current strong financial position means the
Company is soundly funded to continue the drilling, test pumping,
evaporation and other testwork including the completion of the PFS
to further develop the Project to a stage at which funding
arrangements may be executed.
Salt Lake has a high quality Board and management team
comprising highly respected resource executives with extensive
finance, commercial and capital markets experience. The Company's
Chairman has previously raised more than A$600m from capital
markets for a number of exploration and development companies.
Environmental - refer to section entitled 'Environmental &
Social Impact Assessment' in this announcement.
An opportunities and constraints assessment was completed for
the Project by 360 Environmental, a leading Western Australian
environmental management consultancy. Based on the Project's stage
of development, 360 Environmental confirmed there are no current
impediments on the Project.
To date, SO4 has only undertaken preliminary desktop studies for
the purposes of identifying potential environmental opportunities
and constraints. This is typical at this stage of a project. The
further development of the Project will require undertaking a
number of detailed flora, fauna and other studies, including for
the purposes of identifying any stygofauna or troglofauna habitat
with the area of the Project.
Social, Legal and Governmental - refer to section entitled
'Permitting and Fiscal Regime' in this announcement.
The Company has taken legal advice in relation to relevant
Modifying Factors.
Based on the legal advice received the Company considers there
is presently no reason to believe that one or more mining leases
will not ultimately be capable of grant.
As mentioned above, the Lake Wells Project area does not have
any registered Aboriginal heritage sites. The Company has conducted
two annual heritage clearance surveys with Aboriginal Heritage
Consultants reviewing and confirming exploration programs at the
Lake Wells Project
The Company has not conducted a comprehensive stakeholder
identification exercise, however the relative remoteness of the
Project is such it is unlikely that there are relevant stakeholders
other than the pastoral lessees, Aboriginal parties (including, but
not limited to, any native title claimants) and relevant government
agencies.
Salt Lake confirms at this stage they see no obstruction to
gaining a social licence to operate.
FORWARD LOOKING STATEMENTS
This announcement may include forward-looking statements. These
forward-looking statements are based on Salt Lake's expectations
and beliefs concerning future events. Forward looking statements
are necessarily subject to risks, uncertainties and other factors,
many of which are outside the control of Salt Lake, which could
cause actual results to differ materially from such statements.
Salt Lake makes no undertaking to subsequently update or revise the
forward-looking statements made in this announcement, to reflect
the circumstances or events after the date of that
announcement.
COMPETENT PERSONS' STATEMENTS
The information in this Report that relates to Mineral Resources
is extracted from the reports entitled 'Lake Wells Resource
Increased by 193% to 85Mt of SOP' dated 22 February 2016 and
'Significant Maiden SOP Resource of 29Mt at Lake Wells' dated 11
November 2015. The announcement is available to view on
www.saltlakepotash.com.au. The information in the original ASX
Announcement that related to Mineral Resources was based on, and
fairly represents, information compiled by Mr Ben Jeuken, who is a
member Australian Institute of Mining and Metallurgy and a member
of the International Association of Hydrogeologists. Mr Jeuken is
employed by Groundwater Science Pty Ltd, an independent consulting
company. Mr Jeuken has sufficient experience, which is relevant to
the style of mineralisation and type of deposit under consideration
and to the activity, which he is undertaking to qualify as a
Competent Person as defined in the 2012 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves'. The Company confirms that it is not
aware of any new information or data that materially affects the
information included in the original market announcement and, in
the case of estimates of Mineral Resources, that all material
assumptions and technical parameters underpinning the estimates in
the relevant market announcement continue to apply and have not
materially changed. The Company confirms that the form and context
in which the Competent Person's findings are presented have not
been materially modified from the original market announcement.
The information in this presentation that relates to Exploration
Results, not including geophysical and test pumping results for
Lake Wells, is extracted from the reports entitled 'Aircore
Drilling Confirms Deeper Potential At Lake Wells' dated 23 November
2015, 'Successful Shallow Core Drilling Completed at Lake Wells'
dated 22 September 2015 and 'Wildhorse Acquires Two Large Scale
High Grade Sulphate Of Potash Brine Projects' dated 9 April 2015
and is available to view on the Company's website
www.saltlakepotash.com.au. The information in the original ASX
Announcement that related to Exploration Results, not including
geophysical and test pumping results for Lake Wells based on
information compiled by Mr Ben Jeuken, who is a member Australian
Institute of Mining and Metallurgy. Mr Jeuken is employed by
Groundwater Science Pty Ltd, an independent consulting company. Mr
Jeuken has sufficient experience, which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity, which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Mr Jeuken consents to the inclusion in the report of the
matters based on his information in the form and context in which
it appears. The Company confirms that it is not aware of any new
information or data that materially affects the information
included in the original market announcement. The Company confirms
that the form and context in which the Competent Person's findings
are presented have not been materially modified from the original
market announcement.
The information in this presentation that relates to Exploration
Results on geophysical and test pumping results for Lake Wells, is
extracted from the reports entitled 'Geophysics and Test Pumping
Reinforce Lake Wells Potential' dated 10 August 2016 and 'Excellent
Initial Pump Test Results at Lake Wells' dated 12 May 2016 and is
available to view on the Company's website
www.saltlakepotash.com.au. The information in the original ASX
Announcement that related to Exploration Results on geophysical and
test pumping results for Lake Wells based on information compiled
by Mr Adam Lloyd, who is a member of the Australian Institute of
Geoscientists and International Association of Hydrogeology. Mr
Lloyd was an employee of Salt Lake Potash Limited. Mr Lloyd has
sufficient experience, which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity, which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Mr Lloyd consents to the inclusion in the report of the
matters based on his information in the form and context in which
it appears. The Company confirms that it is not aware of any new
information or data that materially affects the information
included in the original market announcement. The Company confirms
that the form and context in which the Competent Person's findings
are presented have not been materially modified from the original
market announcement.
The information in this report/announcement that relates to
processing, infrastructure and cost estimation are based on and
fairly represents information compiled or reviewed by Mr Zeyad
El-Ansary, who is a Competent Person as a member of the
Australasian Institute of Mining and Metallurgy. Mr Zeyad El-Ansary
has 9 years' experience relevant to the activities undertaken for
preparation of these report sections and is employed by Amec Foster
Wheeler. Mr Zeyad El-Ansary consents to the inclusion in the
report/press release of the matters based on their information in
the form and context in which it appears.
Prior to its release, this announcement contained inside
information for the purposes of Article 7 of EU Regulation
596/2014.
For further information and the full announcement, please visit
www.saltlakepotash.com.au or contact:
Matthew Syme/Sam Cordin Salt Lake Potash Limited Tel: +61 8 9322 6322
Colin Aaronson/Richard Tonthat/Daniel Bush Grant Thornton UK LLP (Nominated Adviser) Tel: +44 (0)207 383 5100
Nick Tulloch/Beth McKiernan Cenkos Securities plc (Broker) Tel: +44 (0) 131 220 6939
This information is provided by RNS
The company news service from the London Stock Exchange
END
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August 30, 2016 02:00 ET (06:00 GMT)
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