Potash Minerals

K2O Utah Project

Potash Minerals Limited owns 90 percent of the K2O Utah project which covers 405km² of highly prospective potash permits in the Paradox basin of south eastern Utah. K2O Utah fulfills the five essential criteria for a successful potash project:

  • Massive, high grade, mineable sylvinite resource
  • Access to infrastructure, transportation and markets
  • Ability to secure regulatory approval with strong community support
  • Necessary inputs of gas, water, electric and labour
  • Organizational capabilities to succeed.

Reports on the project from a number of analysts and brokers including Taylor Collison, Patersons and Fosters Stockbrokers were favourable to the Company. In addition San Juan County where the project is located continues to encourage our development efforts and has passed a resolution in favour of this project. An overview of the project area is shown on the following map.

 

INTRODUCTION

Potash Minerals Ltd. (ASX:POK) is pleased to announce that the United States of America (USA) Bureau of Land Management (BLM) has approved the Company’s 90% owned K2O Utah LLC’s Hatch Point Potash Exploration Project. The Company is delighted to report this development to shareholders, and views this as achieving the most significant milestone since acquiring the K2O Utah Potash Project. 

The US BLM Federal Potash Exploration Permit awarded to K2O Utah is the first one to be granted in Utah for more than 25 years according to company research. K2O Utah is also the only applicant to receive a “Non-Known Potash Leasing Area (Non-KPLA) Designation” in Utah during this time.

Approval of the Exploration Project and issuing of 22 potash exploration prospecting permits now allows exploration activity to move on to the Federal land following on from the significant progress made during 2012 on the State areas. Importantly, it also means the Company’s independent geologists, Agapito, was able to issue a maiden JORC resource of 902Mt at 20% KCl grade.

The BLM completed its Environmental Assessment (EA), issued a Finding of No Significant Impact (FONSI) and signed a Decision Record (DR) approving this potash project in San Juan County Utah.  Exploration drilling can now take place on potash prospecting permits approved by the BLM on April 25, 2013. Prior to this approval exploration was restricted to the limited number of blocks on Utah State land.

 

RESOURCE

Independent geologist Agapito Associates, Inc. analyzed the geophysical data from 39 wells in the project area. They estimated the exploration target to be 3.4 to 5.2 billion tonnes of sylvinite at an average grade of 23% to 34% KCl. The principal bed of interest potash 18, by itself was estimated to be 3.0 to 4.6 billion tonnes of sylvinite. No lesser grades nor non-sylvite forms of potash were included in these resource estimates. A map of potash bed 18 upper follows and from this it is evident that there is a ten square mile area with a K2O grade in excess of 24% (38% KCl).

 

APPROVALS

The project has obtained Federal right of way to cross Bureau of Land Management (BLM) lands to access the state leases for drilling. Permission to drill four holes on the Utah State land has been granted. Three exploratory wells have been drilled and remediated. The company is please to report that there have been no lost time accidents in the projects history.

For the Federal (BLM) lands covered by the K2O applications, K2O has priority over any other entities for obtaining a permit. K2O Utah has already purchased the rights to the potash on the state lands and has existing prospecting permits for the state lands. The US BLM has issued letters advising K2O Utah that the project land is not a known potash leasing area and therefore the company’s rights will not be subject to competitive bidding for this property and further states that this will not be affected by subsequent drilling results.

 

PERMITS

K2O moved closer to a prospecting permit in November 2009 when the federal land under application was designated a non KPLA (known potash leasing area). K2O Utah has executed a Memorandum of Understanding (MOU) with the US BLM in October 2011 in order to clarify the process for a Federal exploration permit on the Federal land within the K2O Utah site.

Following the execution of this MOU the company has submitted its prospecting permit application conforming to the MOU in November 2011 in order to drill 4 holes on federal land. This activity was intended to delineate the resource for a JORC compliant estimate on the federal drilling as well as state holdings.

In March 2012 the company amended the Federal drilling permit application in order to select better drill holes. These better sites were identified through the state drilling program and geological data received from Stone Energy. The public comment period for this federal drilling permit announcement concluded on July 30 2012 and only three comments were received. The public notice period for the BLM Environment Assessment concluded on November 30, 2012. The BLM completed its Environmental Assessment (EA), issued a Finding of No Significant Impact (FONSI) and signed a Decision Record (DR) approving this potash project in San Juan County Utah and issued 22 potash exploration permits.

DRILLING

The Company has constructed roads and drill pads for the state drill sites. All three drill holes were remediated by January 2013. San Juan County worked with the company to improve the county access road for the site. Sabine Storage and Operations of Houston, Texas drilled the three exploratory holes. Frontier Drilling provided a 27.5 inch rotary table rig with a 1,000 horsepower drawworks to drill and core these 3 state holes. The company has completed the drilling of the State holes and is now preparing to drill 4 holes on Federal land.

The map below sets forth the Potash Minerals Ltd. (K2O Utah) drilling program across State and Federal lands showing interpreted (from geophysical logs) and assayed results reported as %K2O converted to%KCl equivalent. KCl equivalent (KCl) = 1.6 x K2O) may represent a mixed potash mineralogy.

 

JORC

Potash Minerals is pleased to announce that it has completed its first JORC compliant Mineral Resource estimate at its 90% owned Hatch Point Potash Project ("the Project") in the United States.

The JORC Mineral Resource estimate has been defined on less than 20% of the 405 km2 project area encompassing an area of the Project located on State land and the recently granted 22 Federal Prospecting Permits.  Additionally, only potash beds at least 2 meters thick and of greater than a 15.9% KCl-equivalent (10% K2O) composite grade were included for this maiden resource estimate.

Independent consultant Agapito Associates, Inc. has issued a JORC compliant Mineral Resource of 902.4 Mt at 20.3% KCl equivalent (12.8% K2O) average grade at a 15.9% KCl equivalent (10% K2O) composite cut-off grade. Further details of the resource breakdown are included in the following table.

 

 

Bed

Mineralogy

Average Thickness (m)

Resource Area (km2)

In-Place Tonnes (M)1,2

K2O

(wt %)

KCl

(wt %)

Measured3

 

P13 Upper

Sylvinite

-

-

-

-

-

 

P13 Lower

Sylvinite

3.2

0.87

5.0

12.9

20.4

 

P18 Upper

Sylvinite

-

-

-

-

-

 

 

Carnallite

8.8

0.51

6.9

10.5

16.6

 

P18 Lower

Sylvinite

-

-

-

-

-

 

 

Carnallite

2.7

0.51

1.9

15.2

24.1

Total Measured

 

 

13.8

12.0

19.0

 

 

 

 

 

 

 

 

Indicated4

 

P13 Upper

Sylvinite

-

-

-

-

-

 

P13 Lower

Sylvinite

3.4

4.91

29.5

12.6

20.0

 

P18 Upper

Sylvinite

-

-

-

-

-

 

 

Carnallite

8.4

4.85

63.0

10.5

16.6

 

P18 Lower

Sylvinite

-

-

-

-

-

 

 

Carnallite

2.7

4.05

15.5

15.1

24.0

Total Indicated

 

 

107.9

11.7

18.6

 

 

 

 

 

 

 

 

Inferred5

 

P13 Upper

Sylvinite

3.3

7.31

42.4

12.9

20.5

 

P13 Lower

Sylvinite

3.4

10.59

64.4

12.1

19.2

 

P18 Upper

Sylvinite

4.4

45.24

353.9

14.0

22.2

 

 

Carnallite

7.9

14.09

170.9

10.7

17.0

 

P18 Lower

Sylvinite

4.9

12.53

108.1

13.0

20.7

 

 

Carnallite

2.6

11.04

41.0

14.3

22.7

Total Inferred

 

 

780.7

12.9

20.5

 

 

 

 

 

 

 

 

Total Measured, Indicated & Inferred

 

902.4

12.8

20.3

 
The Mineral Resource includes a proportion of higher grade sylvinite comprising 303 Mt at 24.4% KCl (15.4% K2O) average grade, and within this 104 Mt at 30% KCl (18.9% K2O) average grade.

 

WATER

Work was completed on the water supply for the project. Approvals were received for water permits for onsite wells to support the drilling campaign. Work has been undertaken to delineate the water resource from the onsite aquifers which are expected to provide all the water necessary to operate a 2 million tonne potash production facility. Significant water has been found in the State drill holes.

 

ORGANIZATION

Since the project activities began in 1998, approximately $20 million has been invested in data acquisition, drilling, environmental analysis and government approvals. In 2011 the board added individuals and capabilities to further focus the company on potash at the board, management and project level. The project level was strengthened with the addition of capabilities in geology, transportation, finance, engineering, permitting and law. The K2O organization has two individuals with decades of experience in the solution mining of salt. Key information is accessible to the project personnel in two web based systems including project materials and contractual & regulatory documents.

 

MILESTONES

Targeted milestones were achieved, including securing the federal prospecting approval to drill four exploration holes on federal land and obtaining a maiden JORC resource for the project. With the successful completion of these activities K2O Utah has removed major uncertainties and can demonstrate a significant and attractive potash project and a significant JORC resource. With a production level of 2 Million tonnes as proposed in the scoping target, this project will materially enhance its community, through tax payments, employment opportunities and community involvement. Furthermore this US domestic potash production has the ability to reduce the US balance of payments by almost $1 billion at current market prices.