TORONTO (miningweekly.com) – TSX-listed project developer Potash Ridge this week published the results of a study updating its 2013 technical report on the Blawn Mountain project, in Utah.

The update provides a capital cost that is more attractive given today's market conditions, and sets out an initial production rate that can be absorbed into the North American market, without impacting on economic returns.

Prepared by Millcreek Mining Group, the new technical report is based on an initial yearly output rate of potassium sulphate of about 40% of the production rate previously contemplated, while maintaining robust economic returns.

Based on average output of 255 000 t/y of potassium sulphate during the first ten years of operation after ramp-up and a life-of-mine (LoM) average of 232 000 t/y of potassium sulphate, the $458-million project has an after-tax net present value, at a 10% discount rate, of $482-million, and an unlevered internal rate of return of 20.1%, based on an assumed price of $675/t for potassium sulphate and $115/t for sulphuric acid in 2020 and a 2% inflation rate.

Making use of conventional crushing, roasting, leaching and crystallisation processes, the surface mine will produce and process alunite ore to produce potassium sulphate.

Blawn Mountain currently holds proven and probable reserves of 153-million tons, supporting a 46-year project life.

Potash Ridge said the flow sheet represented a flexible process capable of producing crystalline soluble and granular potassium sulphate to meet market conditions.

According to the report, the company believes it can become the lowest-cost producer of potassium sulphate in North America with average net cash operating costs after by-product sulphuric acid credits of $172/t of potassium sulphate, excluding royalties, which includes about $40/t in transportation costs.

The company sees strong earnings potential with the average calculated operating margin of $135-million a year during the first ten years of operation following ramp-up and an average of $172-million over the LoM. Blawn Mountain is also expected to generate strong after-tax cash flow of $107-million a year during the first ten years of operation and average $128-million a year over the operation’s mine plan.

Potash Ridge intends to undertake further metallurgical testing to determine the most economic means to extract alumina from the residual waste material.

Blawn Mountain has already secured its large mine and other required permits and water rights. The next steps will be to secure a fixed-price engineering, procurement and construction contract, raise construction capital and finalise commercial offtake arrangements, with a target of commencing project execution this year, the company stated.

"Potassium sulphate continues to demonstrate strong long-term fundamentals in North America and worldwide. Demand for soluble potassium sulphate is anticipated to increase significantly as growers convert to drip, micro-sprinkler and precision irrigation systems as a result of continued and growing emphasis on efficient and effective use of water resources in California and other North American agricultural markets. We anticipate that our ability to produce crystalline, high purity soluble potassium sulphate will target this underserved and growing market,” president and CEO Guy Bentinck stated.