TORONTO (miningweekly.com) – Toronto-listed Western Potash Corp on Monday unveiled the results of a prefeasibility study at its Milestone project in Saskatchewan, outlining a 2.8-million-ton-a-year operation that would cost $2.7-billion to build, including port facilities.
The news sent the Vancouver-based firm’s shares 4.6% higher on the TSX to end the trading session at C$1.37 apiece.
Western Potash CEO Patricio Varas said the study confirmed Milestone offered a “compelling opportunity”.
According to the study, construction on the project would start in 2013, with first output three years later. The payback period was five years.
Milestone received a $4.14-billion net present value at a 10% discount rate and a 22.7% internal rate of return, Western Potash said.
The study pegged the project's capital costs at a level lower than the $3-billion predicted last week by BMO Capital Markets analyst Joel Jackson.
Shares in Western Potash rallied last week in anticipation of the prefeasibility study announcement, and also because of speculation a bigger company might buy it out.
Corporate development VP John Costigan subsequently played down the likelihood that the company would get acquired, saying it aimed to find a strategic investor to help it fund and build the Milestone solution potash mine by the end of the year.
A 2010 scoping study had predicted a $2.5-billion capital cost for a 2.5-million-ton-a-year operation at Milestone.
Other companies hoping to build new potash mines in Saskatchewan, which accounts for around one-quarter of world supplies, include Germany’s K + S, and Canadian juniors Karnalyte Resources and Encanto Potash Corp.
BHP Billiton is also expected to reach a construction decision on its giant Jansen project in the province sometime next year.