Some of the Biggest Names in Potash Are Now Lining Up To Speak With Encanto, Following the Completion of Prefeasibility Work at Muskowekwan
By Chris Cann
A place on the Encanto Potash dance card is probably pretty hard to come by these days. The Toronto-listed potash developer recently turned its plans for a massive potash operation at the Muskowekwan property from big talk into a very real possibility.
And so, as is usually the case when a junior is faced with a large-scale development with capital expenditure numbers in the billions of dollars, it's time to start courting wealthy suitors.
Encanto released the results of pre-feasibility work at Muskowekwan in August. The study looked at two different kinds of operation - conventional mining and solution mining. For those not familiar with the latter, it involves pumping hot liquid into the ground to melt the potash into a solution which is then pumped back to the surface.
Besides the benefit of safety in the solution technique - there is no need for an underground workforce - the overall numbers also look impressive when set against a conventional operation. The required up-front capital for a 2.5 million tonnes per year solution mine comes in at just over US$2.4 billion, while a conventional mine would cost more than US$2.7 billion for a smaller two million tonnes per year operation.
What's more, the mine life runs out to a possible 56 years under the solution mining scenario, and only 39 years using the conventional method. The only win for conventional mining is that the solution option extracts the potash at a lower grade, which pushes the operating costs up slightly.
But the outcome is clear. The net asset value using the solution method amounted to US$2.86 billion, while the internal rate of return came in at 26.6 per cent. The net asset value using a conventional mining method is somewhat less, at US$2.35 billion, while conventional mining would generate a lower internal rate of return too. So, a solution mine it will be.
Those extraordinary numbers offer some idea of the scale of this project and an insight as to why there is so much interest. But the story doesn't stop there. Encanto has recently completed drilling over an area adjacent to Muskowekwan land roughly equal to it in size. According to business development consultant Gary Deathe, who has been working closely with Encanto, this is likely to double the resource base at the project.
Assays are due back in the not-too-distant-future and Deathe expects an updated resource to be published early in the New Year. The additional acreage is subject to a Treaty Land Entitlement vote that was to take place in late November but this is thought to be a formality.
Precisely how a doubling of resources will change the parameters of the operation will depend largely who Encanto ends up bringing into the project. But there are two clear options. One is to increase the throughput and production significantly. The second is simply to extend the mine life out by another 50 years. The fact that Muskowekwan is so flexible gives Encanto plenty of room for manoeuvre in its negotiations.
Full Article ------------------------------------------------------------------- For further information, please contact:
Vanguard Shareholder Solutions Tel: 604.608.0824 Toll Free: 1.866.918.0824 ir@vanguardsolutions.ca www.encantopotash.com |