TORONTO (miningweekly.com) – It would seem as if an old kid is back on the potash block in the form of polyhalite, from which sulphate of potash (SOP), among other products, is produced, as three contemporary companies vie to enter a newly expanding market.
SOP was initially derived from polyhalite (which is a Latin word meaning ‘many salts’) in the US during the first half of the twentieth century, but the focus moved completely to the mining of a potassium variant called muriate of potash (MOP), after its discovery in vast quantities by prospectors in search of oil, in Canada’s province of Saskatchewan, during the 1930s and 1940s.
To this day Saskatchewan remains one of the main MOP producers globally.
Potash is classified in two main categories, namely MOP, which is the commonly found potash source, and SOP, which is a premium niche potash product.
The current global market for MOP comprises about 55-million tons a year, compared with six-million tons a year for SOP, which is sold at a premium of between 20% and 60% to the price of MOP, AltaCorp Capital analyst John Chu told Mining Weekly Online.
He added that where MOP is commonly found occurring naturally within ground resources, and needs only minimal processing to make saleable products, SOP could be manufactured cheaply from the mineral called polyhalite, which is not commonly found.
In modern times, as the globe has witnessed its population swell to over seven-billion people, the demand for potash and its derivatives is again looking up.
At the same time, as the demand for food rises, the closely trending price of potash is also steadily rising, opening the market to a higher-quality source of potash in the agricultural industry’s search for higher-yielding crops.
One company that is racing to add to the diminishing supply of SOP is IC Potash, which is currently engrossed in completing a feasibility study and finalising permitting for its Ochoa polyhalite property, in south-east New Mexico.
CEO Sidney Himmel told Mining Weekly Online that potash operations are generally highly cash intensive in getting off the ground.
“We are talking anything from about $2-billion upwards past $5-billion to construct a potash mine,” he said during an interview.
However, the miner’s prefeasibility study pointed to the likelihood that the mineral deposit containing proven and probable reserves of more than 400-million tons of polyhalite ore within the proposed mining area, which could be constructed at a low capital cost of $706-million, could produce SOP and SOP magnesium at a cost of about $147/t over a mine life of about 40 years.
The after-tax net-present value, including a 10% discount, is stated at $1.3-billion.
Following closely on IC Potash's heels are two other miners who saw the emerging gap in the SOP market, including London-listed Sirius Minerals, which is developing the York potash project, within the county of North Yorkshire, in the UK, and Israel Chemicals, an Israeli fertilizer and speciality chemicals company, which owns the Boulby mine, in north-east England.
A recent geological study undertaken by Israel Chemicals subsidiary Cleveland Potash revealed that more than a billion tons of polyhalite ore is located beneath the potash that it currently mines there. The company plans to build a polyhalite treatment facility near the Tees Valley, the location of the Boulby mine.
Sirrius, in June, published a National Instrument 43-101-compliant resource estimate of 1.35-billion tons of ore containing 88.7% polyhalite, of which 27.2% is SOP grade. This translated to an estimated resource of about 344.91-million tons of SOP.
However, in the context of the difficult capital markets, another industry analyst Mining Weekly Online spoke to said it was unlikely that any of the junior companies would in the medium term succeed in establishing mines if the projects did not have substantial reserves and if capital costs and operating costs came in below average.
“It is all about capital risk,” he said, noting that although prices are expected to gradually rise over the medium term, investors would think hard before digging into their pockets to invest in a new potash play.
However, Chu affirmed that with three companies now vying to enter the polyhalite market, it gives the mineral new credibility in a world where food demand is guaranteed to soar.
SOP, which consists of potassium in combination with a sulphate (K2SO4), enhances the quantity and yield of fruits, vegetables, nuts and green leafy plants such as tobacco, whereas MOP consists of potassium in combination with chloride (KCl), which is more amenable for use in carbohydrate-based crops such as corn, wheat and sorghum.
However, with the continuous use of MOP, the quality of crops may diminish as a result of the build-up of chloride, compared with SOP that is said to enhance crop mass, water content and colour, as well as extend shelf life and improve the taste of crops.
SOP is produced from primary and secondary sources. The primary sources of SOP come from minerals and naturally occurring brines mainly located in China, Germany, Chile and the US. The UK has also in recent times begun to extract polyhalite. Pimary production accounts for more than half of the world's SOP production.
The remaining portion of the world's supply comes from the processing of MOP with sulphuric acid or with a sulphate salt. This secondary source of supply could be produced anywhere raw materials can be shipped and processed and is known as the Mannheim process, which produces SOP at up to, an expensive, $560/t.