Potassium sulfate (aka: Sulfate of Potash or SOP) is used in crops that are sensitive to chloride or fertiliser burn like tobacco, pineapple or avocado, or where sulfur is deficient. Its nutrient composition is approximately: Potassium: 41% and Sulfur: 18%. SOP does not contain chlorides and helps to fill in the gap left by soils that react badly to muriate of potash (MOP); SOP adapts well to soils presenting high salinity levels while being suitable for crops such as fruits, tobacco, potatoes and vegetables. In contrast, the more common MOP variety of potash does not tolerate high soil salinity, which reduces its range of applications.
Enter IC Potash (TSX: ICP) and its Ochoa project in New Mexico. The project is indicated as having potential reserves of some 340 million tons of proven and probable reserves of ore within the proposed mine plan. ICP intends to produce high quality SOP at low cost such as to increase profitability. Last spring, ICP received a strategic investment of close to CAD$ 40 million from Yara International, one of the largest fertilizer producers in the world.
Yara has access to many international markets and distributors, making the deal especially ‘strategic’ given that SOP is ideal for the European and South Western Asian markets, which are low in magnesium, where Yara enjoys considerable distribution access. Yara signed an off-take agreement with ICP to buy 30% of all ICP’s products from its Ochoa project in New Mexico for a 15 years long period. This is very significant and will contribute greatly toward propelling the Ochoa project into production – which should start, on schedule, in the fall of 2015.
The sales agreements are complemented by low production costs, among the lowest in the industry with a projected Opex rate per metric ton of production of USD$ 162 or 65% less than the industry average of USD$ 249/ton. IC’s promising pre-feasibility studies have indicated an initial production rate of 510,000 metric tons of SOP and about 247,000 metric tons of potassium manganese sulfate (SOPM) per year. The additional advantage comes from the fact that SOP commands a premium in the market and it is produced in far smaller quantities than MOP – also known as standard potash-adding a much needed ‘desirability’ component, given that most established and emerging potash plays deal with MOP. SOP can sell for up to 30-50% more than SOP.
From a technical standpoint, ICP has secured the water supply for the Ochoa project and completed construction of the two planned deep groundwater production wells from the Capitan Reef in Lea County in southeastern New Mexico. ICP has also started to address the requirements of the New Mexico Office of the State Engineer and the Bureau of Land Management by testing the water’s hydraulic properties to determine its compliance with regulatory requirements. The completion of the wells signals that ICP is on target toward completing a Feasibility Study and an Environmental Impact Study (EIS) as it heads toward production stage – which should be reached in early 2015. The Capitan Reef is located at significant depth and it is used solely for commercial purposes without interfering with the water supplies serving the local population. In addition, ICP will also benefit from support from the United States Secretary of the Interior, Ken Salazar, who has been encouraging the promotion of a favorable setting for the development of the oil and potash industries in New Mexico. ICP has hired SNC-Lavalin to develop important sections of the Feasibility Study, expected to be completed by August 2013. This entry was posted in Potash & Phosphate Intel and tagged New Mexico, SOP, Sulfate of Potash by Alessandro Bruno.
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