Transcription of Finance News Network Interview with Potash West NL (ASX:PWN) Managing Director and CEO, Patrick McManusLelde Smits: Hello I’m Lelde Smits for Australia’s Finance News Network and joining me from Potash West NL
(ASX:PWN) is its Managing Director and CEO, Patrick McManus. Patrick welcome to FNN here in Hong Kong at Mines and Money.
Patrick McManus: Thanks Lelde and thanks for inviting me.
Lelde Smits: Potash West is engaged in extracting potassium for the production of potash. Where are your projects located and which one is your main focus?
Patrick McManus: The main and sole focus of Potash West is the Dandaragan Trough project which is a sedimentary basin; it starts about 50 kilometres north of Perth and runs for about 150 kilometres north-south, and about 30 kilometres east west. It’s an old sedimentary basin where glauconite and quartz deposited several million years ago and made a product, or made a sequence called greensands. And we’re looking at exploiting those greensands for not just potassium, but also phosphates, aluminium and iron oxides.
Lelde Smits: As an exploration company focused on finding a substantial fertilizer project, what do you believe are the most compelling reasons for concentrating on West Australia’s Perth Basin?
Patrick McManus: Well what we’ve been doing since we listed nearly two years ago now, two main bodies of work. One: exploration and two: process development to establish the flow sheet. First of all on the exploration, we’ve got a very large land holding; we’ve got probably about 85 per cent of the sedimentary basin under our tenements. We’ve found by drilling on the roads, areas where we had good thick sequences of greensand. And we found them all through the basin, then went back to one of those and drilled out a resource, which we completed by October.
We announced a JORC resource of about 240 million tonnes at about 3.0 per cent K20. And in parallel to that we did a flow sheet, our partners Strategic Metallurgy are very experienced hydro metallurgists. And they worked out a flow sheet that allows us to produce, not just sulphate of potash which is a premium potash product, but also superphosphate, aluminium sulphate, high magnesium potash and iron oxides.
Lelde Smits: A scoping study has recently affirmed the viability of the Dandaragan Trough project. What are the highlights of the study?
Patrick McManus: I think there’re two main takeaway messages from there. One, the revenue - the sales revenue per year is nearly three times the cash costs, so it’s a robust project in terms of free cash flow. And on the very small scale we did the study on, it generates about $240 million a year of free cash. The other important aspect of the study is that on the scale we worked with, the resource we established at Dinner Hill lasts for over 60 years. So the opportunity to increase the project throughput and life is very high. So we think we’ve got a strong project- in terms of cash flow- that will go on for many, many decades.
Lelde Smits: And what is the next priority for the Dandaragan Trough project, and when do you expect to achieve it?
Patrick McManus: Two main activities, one is within the flow sheet we identified an opportunity to produce a better quality phosphate product, which will have two benefits. It’ll produce a better, more marketable superphosphate and also reduce the size of the chemical plant, which will have both capital and operating cost benefits. That work we’ll be starting in about a month and will take about six months. So round about September time 2013, we should have the results on that. The other thing we are looking forward to doing is running a pilot plant, to prove the process flow sheet that we’ve developed on batch scale in the laboratory, in continuous operation.
Lelde Smits: And at this stage, when would you expect to start construction, commissioning and producing product?
Patrick McManus: If everything goes well; and there’re a few steps to go through, we would be starting construction sometime in 2016. And one of the big advantages of the Dandaragan Trough project, compared to conventional potash operations is that we should be able to start or complete construction, in about two years. Conventional potash deposits are higher grade but usually quite deep underground. So it takes them about six years to go from the investment decision to actually producing, whereas we’ll be able to do it in two. So that should see us commissioning sometime in 2018.
Lelde Smits: And what are your funding plans to take the Company to the completion of a definitive feasibility study?
Patrick McManus: Well the short term objectives are to complete the pilot plant and the prefeasibility work. We’re at the moment doing our rights issue to our existing shareholders, which has been well supported and we will be raising $3 million through that avenue. That money will be - most of that will go to the phosphate study I spoke of. We’re also looking for larger investors, cornerstone or sophisticated investors to come in to supply the probably, $10 to $15 million we’ll need to complete the pilot plant work and then the prefeasibility study.
Lelde Smits: Finally Patrick, what would you like to see Potash West achieve before the end of this year?
Patrick McManus: At the end of the year, what would be a great outcome for us would be to be completing the construction of our pilot plant, because that would see us taking the next steps towards the prefeasibility work. That will give us more certainty about this excellent project.
Lelde Smits: Patrick McManus, thank you for the update to Potash West.
Patrick McManus: Thank you very much Lelde.
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