Potash ridge august 2015
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Transcript of Potash ridge august 2015
Potash Ridge’s intends to capitalize on the
worldwide shortages in sulphate of potash
through developing low capital cost, quick
to produc@on opportuni@es, along with a
longer-‐term, larger scale development
project.
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HIGHLIGHTS
3
SOP is a premium potash with a significant supply
deficit
§ Current worldwide consump1on is ~5 million tonnes per annum; demand poten1al is 10-‐12 million tonnes per annum
§ Exis1ng producers unable to expand to meet supply deficit § In North America, SOP price is almost 3x price for regular potash
Potash Ridge’s Strategy § To become the premier producer of SOP in North America
Valleyfield
§ Low capex, quick to produc1on opportunity in Quebec – immediate focus
§ Widely used proven process § Strategic loca1on near by-‐product hydrochloric acid demand § Close to rail and ports § Cash flow genera1ng poten1al in 18 months § Robust economics with expansion poten1al
Blawn Mountain
§ Larger scale, longer term, lowest quar1le opera1ng cost project in Utah
§ Large surface mineral deposit; over 40-‐year reserve life § Major permits and water rights secured; infrastructure nearby § Known produc1on process § Commercial arrangements well advanced; robust economics
exclude upside from sale of alumina rich by-‐product
POTASSIUM AND SULPHUR ARE ESSENTIAL NUTRIENTS
SULPHATE OF POTASH: A PREMIUM FERTILIZER
Sulphate of Potash (SOP) Muriate of Potash (MOP)
50% K2O Equivalent 60% K2O Equivalent
17% S 0% S
<1.0% Cl 45% Cl
4.8 million tonnes sold in 2013 50 million tonnes sold in 2013
Improves yield, quality, taste and enhances shelf life
Crop quality/yield diminish as chloride builds up
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§ Sulphate of Potash (“SOP”) is a high grade potash fer1lizer containing two nutrients (potassium and sulphur)
§ Yield benefits of applying SOP and significant supply shortages result in high SOP prices
SOP MARKET DYNAMICS
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Europe 24%
N. America
7%
C & S America
6%
China 49%
Africa 5% RoW
9%
SOP Consump@on by Region
Region Process Method
World Capacity Process Inputs Products Avg Cost /
Ton1 Future Outlook
China/ Europe
Mannheim 2.3Mt 43%
• MOP • Sulfuric Acid • Energy
• SOP • Hydrochloric • Acid (“HCL”)
$453
HCL demand limits growth
Europe MOP and Kieserite
1.2Mt 22%
• MOP • Kieserite • Energy
• SOP • Magnesium
Chloride
$440 No
addi1onal deposits
China/ USA/ Chile
Salt Lakes 1.9Mt 35%
• Lake Brines • Energy
• SOP • Magnesium
Chloride • Sodium Chloride
$381
No addi1onal suitable lakes
Exis@ng SOP Produc@on by Process
Limited new produc1on of SOP from these exis1ng processes due to absence of new salt lakes sources and dealing with hydrochloric acid from MOP conversion
CRU predicts a doubling of SOP consump1on to 9,500,000 tonnes per annum by 2019 – uncertain where will this produc1on come from
SOP PREMIUM PRICE TRENDS
7 1 Compass Minerals Q1 2015 Report, 2 Potash Corp Q1 2015 Report
TREND TOWARDS PRICING OF SOP BASED ON INCREMENTAL REVENUE THROUGH YIELD/QUANTITY IMPROVEMENTS VS. PREMIUMS OVER MOP
Compass Q1/15 realized price U.S.$815/tonne1
Potash Corp Q1/15 realized price U.S.$284/tonne2
MANNHEIM PROCESS
§ Converts regular potash (MOP) to SOP § Proven produc1on process, with numerous opera1ng facili1es in Europe and China § Management includes individual with almost a decade of experience with Mannheim
Processes § Scale allows for produc1on within 18 months of iden1fying suitable loca1on
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Mannheim Furnace
Potassium Sulphate (“SOP”)
Hydrochloric Acid (“HCL”)
Potassium Chloride (“MOP”)
Sulphuric Acid
Energy
VALLEYFIELD: LOCATION
• Located near Montreal, Quebec
• Strong local support • Land posi1on in place • Rail access at site • Port within 600 metres,
allowing access into key U.S. markets
• Located near iden1fied hydrochloric acid customers • MOU signed for ojake
of ini1al produc1on
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• Within 1 km of sulphuric acid supply • Ini1al planned produc1on of 40,000 tonnes per annum of SOP • Ability scale up to 130,000 tonne per annum at site
VALLEYFIELD: PRELIMINARY ECONOMICS
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§ Economics based on one unit § 40,000 tonnes per year § Poten1al expansion to three units
at site § SOP price currently Cdn$1,010/tonne (US
$815/tonne) § MOP price currently US$284/tonne (Cdn
$350/tonne)
§ Acid pricing based on trader quotes
§ $8.2 million average annual cash flow for first 5 years
§ Economics based on industry standards and internal management es1mates.
Note: Amounts in Canadian Dollars
Ini1al capital cost
$25 million
IRR (aker tax)
31.9%
NPV (10%) $40.8 million
Payback Period 3.0 years
SOP price / tonne $750
HCL price / tonne $70
MOP price / tonne $450
Sulphuric Acid price / tonne $100
ALMOST 100 YEARS OF POTASH PRODUCTION
UTAH: AN ATTRACTIVE MINING JURISDICTION
1Forbes Magazine, November, 2014 2Fraser Ins1tute, April, 2013
Major resource producing state
Exis1ng potash produc1on
Best state for business1
Top quar1le mining jurisdic1on2
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OUR LAND ADVANTAGE
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Very strong state and local support from: § Utah Governor and Lieutenant Governor
§ Both local county commissions
§ Key local stakeholders
State-‐owned land designated for development: § Property is in very remote loca1on
§ No objec1ons when mine permit applica1on was made
§ No environmental, aboriginal or social issues
All necessary support infrastructure nearby: § Close to highway, rail, natural gas and
power transmission
§ Close to construc1on materials, skilled workforce and equipment suppliers
§ Water available in nearby valley – water right already obtained
RESERVES AND MINE LIFE
Drilling work to date has established 40 years of reserves – calculated by independent engineer (Norwest)
Drilling to date has focused only on two of the four areas within the 15,400 acre land posi1on
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Reserve Category
Total Proven
('000 tons) Probable ('000 tons)
Alunite Ore (ROM tons) 136,254 289,540 425,794
Ore (average K2O (%) grade) 3.56 3.49 3.51
Ore (average K2SO4 (%) grade) 6.59 6.46 6.49
SOP (tons) 8,457 17,970 26,427
Sulphuric Acid (tons) @ 98% Purity 18,888 40,136 59,024
Mineral Reserves by Category November 6, 2013
DRILLED
NOT YET DRILLED
THE BLAWN MOUNTAIN PROPERTY
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AREA 1 MINING ZONE
PROCESSING PLANT LOCATION
AREA 2 MINING ZONE
ACCESS ROAD
ORE TEST PIT Note that ore is at surface
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PERMITTING ESSENTIALLY COMPLETED
The following table iden1fies the major permits and approvals that the Corpora1on has or s1ll needs to obtain prior to construc1on:
Permit/Approval Issuing Agency Completed
Explora1on Permit Utah Division of Oil, Gas and Mining October, 2011
US Army Corps of Engineers Jurisdic1onal Waters Concurrence US Army Corps of Engineers March, 2014
Groundwater Permits Utah Division of Water Quality July, 2014
Large Mine Opera1on Approval Utah Division of Oil, Gas and Mining August, 2014
Air Quality Emission Standard (1) Utah Division of Air Quality
Air Quality Emission Standard requires the feasibility study to be par1ally completed before the applica1on is filed. It is not a permit, but more an agreed upon emission target that the Project must be designed to meet.
(1)
SIMPLE PROVEN FLOWSHEET
Alunite
Calcination
Water Leach
Alumina Rich Material
SOP Solution Crystallizing Drying, Compacting & Sizing SOP
SO2 Acid Plant Sulphuric Acid
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WELL UNDERSTOOD FLOWSHEET USING COMMONLY USED EQUIPMENT
§ Extensive test work confirms flowsheet; § Test work during feasibility study will include bulk
samples at equipment vendor facili1es – will result in vendors providing produc1on guarantees
Crushing & Grinding
§ Exis1ng plant in Azerbaijan currently mothballed (Ganja Refinery)
§ Flowsheet similar to commercial-‐scale produc1on processes historically used in US and Australia
PREFEASIBILITY STUDY – SUMMARY
§ Reserves support 40 year mine life, with poten1al to increase life of opera1ons through explora1on of two addi1onal zones of known mineraliza1on
§ Project aker tax Net Present Value (“NPV”) of $1.0 billion using a 10% discount rate:
§ Unlevered aker tax internal rate of return (“IRR”) of 20.5% § Excludes credit for poten1al alumina rich material revenue.
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NPV (aker tax, at 10%)(1) $1.0 billion
IRR (aker tax)(1)
20.5%
Average annual SOP produc1on 645,000 tons
Average annual sulphuric acid produc1on 1,440,000 tons
SOP price (average) $649/ton
Sulphuric acid price (average) $135/ton
Project life 40 years
Ini1al capital cost (including 15% con1ngency)
$1,124 million
Opera1ng cost (excluding royal1es) $173/ton SOP 1Inclusive of by-‐product acid revenues and royal1es; no credit assumed for poten1al revenue from the sale of alumina rich material.
CAPEX/OPEX SUMMARY
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7% Other ($14M)
14% Royal1es ($33M)
Potash Ridge Salt Lakes MOP/ Sulphate Salts
Mannheim Process
Produc@on Cost per Ton by Produc@on Method (1)
$381 $440
$453
$173(2)
Potash Ridge
Expected In Production 1 CRU/Company Information 2 Includes acid by-product credit (assumes $135/ton price), excludes potential revenue from alumina rich material
1 1 1
§ Approximately 28% of direct capital costs are supported by fixed-‐price quotes § Op1on exist to phase construc1on to reduce upfront capex requirements
Capital Cost Breakdown
MILESTONES
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Preliminary Economic Assessment issued November, 2012
Metallurgical test program ini1ated January, 2012
Pilot Plant Test work ini1ated & SOP from test work produced May, 2013
Prefeasibility Study suppor1ng 40-‐year mine life issued December, 2013
Large Mining Permit Applica1on submiued December, 2013
Water Rights Granted May, 2014
Ground Water Permit approved July, 2014
Large Mining Permit approved August, 2014
Strategic Partnership with Tetra Tech announced August, 2014
Complete metallurgical test program 6 months
Obtain Air Quality Permit 12 months
Issue Feasibility Study 12 months
Receive final permits 16 months
Mine construc1on start up 18 months
Ramp up of mining 2.5 years
(1) From commencement of feasibility study
Expected (1) Achieved
EXPERIENCED AND PROVEN MANAGEMENT
OVER 60 YEARS COMBINED EXPERIENCE 23
Guy Ben@nck President and Chief Execu@ve Officer
Chartered Professional Accountant 20 years mining/resource experience Sherriu CFO and SVP Capital Projects
Ross Phillips Chief Opera@ng Officer and Chief Financial Officer
MA (Econ)/MBA/CFA/CPA 10 years experience in large resource and energy sector projects Sherriu, Capital Power
Paul Hampton VP Project Management
Geologist and Metallurgical Engineer 30 years in design, construc1on and management of mineral processing facili1es SNC, Washington Group, Outotec
Jay Hussey VP Corporate Finance
20 years capital markets consul1ng 9 years SOP experience with Migao Corpora1on.
DIVERSE BOARD WITH COMPLEMENTARY SKILLS
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Robert Gross Chairman Governance Commijee Chair
Lawyer based in Salt Lake City, Utah Former President, First Interstate Bank of Utah and Blue Healthcare Bank Recognized authority on corporate governance
Steve Harapiak Technical Commijee Chair
Engineer Former President, Potash Corpora1on of Saskatchewan Significant experience in engineering, construc1ng and project management
Rahoul Sharan Audit Commijee Chair
Chartered Accountant. founder of Potash Ridge Has led the successful financing efforts for over 15 companies in several industries totaling several hundred million dollars worth of transac1ons
Guy Ben@nck President and Chief Execu@ve Officer
Chartered Accountant 20 years mining/resource experience Sherriu CFO and SVP Capital Projects
HIGHLIGHTS
25
SOP is a premium potash with a significant supply
deficit
§ Current worldwide consump1on is ~5 million tonnes per annum; demand poten1al is 10-‐12 million tonnes per annum
§ Exis1ng producers unable to expand to meet supply deficit § In North America, SOP price is almost 3x price for regular potash
Potash Ridge’s Strategy § To become the premier producer of SOP in North America
Valleyfield
§ Low capex, quick to produc1on opportunity in Quebec – immediate focus
§ Widely used proven process § Strategic loca1on near by-‐product hydrochloric acid demand § Close to rail and ports § Cash flow genera1ng poten1al in 18 months § Robust economics with expansion poten1al
Blawn Mountain
• Larger scale, longer term, lowest quar1le opera1ng cost project in Utah
• Large surface mineral deposit; over 40-‐year reserve life • Major permits and water rights secured; infrastructure nearby • Known produc1on process • Commercial arrangements well advanced; robust economics
exclude upside from sale of alumina rich by-‐product