Transcription of Finance News Network Interview with Potash West NL (ASX:PWN) Managing Director, Patrick McManus.
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me for an update from Potash West NL (ASX:PWN) is Managing Director, Patrick McManus. Pat welcome back. Potash West is developing a potash project in the Dandaragan Trough of WA. When we last spoke you mentioned the goal of completing a scoping study this year. Is this on track and what has the study revealed so far?
Patrick McManus: Thanks Clive. Yes it’s basically on track and there’re a couple of things that are coming out of it. We can produce commercial grade potash products, either the chloride or the sulphate which gives market flexibility. And parallel to that the exploration work we’ve been doing is intersecting good thicknesses of greensands, throughout the area we’re looking for.
Clive Tompkins: Now Pat for those in our audience not in WA. Where is the Dandaragan Trough and in what form does the potash exist?
Patrick McManus: The Dandaragan Trough is a sedimentary basin located - it starts about 50 kilometres north of Perth to the west of the Darling Scarp and continues for about 140 kilometres. And it’s about up to 20 or 30 kilometres wide. In total it’s about 3,000 square kilometres of which we have under our exploration license, about 2,900 square kilometres. So we’ve got nearly all of that ground. And what we’re looking for there is glauconite within the greensands in this sedimentary basin. Glauconite is an unconventional source of potash, most of which is potassium chloride; we’re looking at a potassium silicate.
Clive Tompkins: Good. So how much does it cost to extract the potash from the greensands?
Patrick McManus: It’s a two-step process. The sands are very close to the surface, there’s not much overburden and they’re unconsolidated, so the mining and initial separation will be very low cost. That will separate the glauconite from the quartz, greensand being a mixture of glauconite and quartz. The next step is the chemical extraction of the potassium from the glauconite and that’s, I guess, the proprietary technology we’ve developed with our partner, Strategic Metallurgy. That’ll be a valuable asset for the Company in the years ahead. We’re not revealing all of those process steps, apart from it’ll be an acid leach followed by purification liquor, and then evaporation precipitation of the potash products.
Clive Tompkins: And what sort of cost savings will your new process deliver in terms of extraction?
Patrick McManus: It’s a bit apples and oranges at the moment. The grades are lower but we’re in a sand very close to surface with virtually no overburden. Whereas conventional deposits are higher grade but buried on average, about a kilometre underground. We’ll need to go through the scoping study to work out all of the operating cost and capital cost estimates, to be able to compere accurately between the two processes.
Clive Tompkins: Thanks Pat, now to drilling. What’s taking place?
Patrick McManus: Well since we listed, obviously we’ve got a very big land holding. The first thing we did was widespread stratigraphic drilling, just to get a better understanding of the seams in the basin. And we targeted areas where we had thicknesses greater than 20 metres of plus three per cent of K2O, with less than five metres of overburden. We found about 10 of them and we’re now going back to those areas to start drilling with the objective of getting a JORC resource.
We’ve just completed drilling on the Marchagee project area and we’re in the process of working now on Dinner Hill. We’re expecting to do about 4,000 or 5,000 metres of drilling on the Dinner Hill area and that’s in progress, and we’ll continue on probably for another couple of weeks. Obviously assays will then follow from there, but we expect some results out from that probably in six weeks.
Clive Tompkins: Thanks Pat. So following this drilling campaign, you should have a good picture in terms of the size and extent of mineralisation within the trough. Is that the case?
Patrick McManus: I think in terms of the total resource in the trough, we’ll have only scratched the surface. So we will need ultimately to do a lot more drilling in terms of the area where we’ve got the JORC resource. We won’t need any more drilling before the scoping study, but as we go on to the bankable feasibility study, we may need further drilling to improve the quality from indicated to measured.
Clive Tompkins: Now to corporate matters, you recently raised $1.5 million via a placement. Will you be funded for the rest of the year and where will funds go?
Patrick McManus: One – yes we are fully funded for the rest of 2012. A small amount of the money will go on establishing patent protection and IP (intellectual property) management of this process, I mentioned earlier. Most of the money though, will basically ensure that when we’ve completed the scoping study in December 2012, we will have sufficient money in the bank that we’re not urgently seeking funds to start the feasibility study. So we should end the year with about $1.5 million in the bank.
Clive Tompkins: And Pat, for investors interested in what you’re doing. When do you hope to be in production and what are the economics of the project?
Patrick McManus: If everything goes well, we could be starting construction in 2015 and commissioning and producing products about the middle of 2016. At this stage, it’s too early to talk about the economics of the project. The scoping study which we’ll be commissioning over the next three months, will give us the first indications of that and we expect those results by the end of the year.
Clive Tompkins: Very good, now to your share price. Where has it traded over the last 12 months and where is it currently?
Patrick McManus: Generally it’s in a range between peaks of 15 to 35 cents, but generally in the range of about 22 to 27 (cents). I think currently today, its 26 cents.
Clive Tompkins: And what market cap does that put on the Company?
Patrick McManus: We’ve got about 84 million shares on issue now after that capital raising. So in round figures, it’s about $21 million.
Clive Tompkins: Last question Pat. Where would you like to see Potash West by the end of the year?
Patrick McManus: The strong objective of all of us in the Company is to see us finishing with a positive scoping study by December this year. That coupled with the JORC resource that we’re expecting in September, will give our investors great comfort so we can go forward in next year.
Clive Tompkins: Patrick McManus, thanks for the update.
Patrick McManus: Thanks Clive.