Potash One grows Legacy resource

Vancouver – Saskatchewan produces one-third of the world’s supply of potash, the key ingredient in fertilizer, but the province has not seen a new potash mine in 40 years. With a new, increased resource estimate in hand, a prefeasibilty study due out in a month, and a renowned mine promoter now in the chairman’s seat, Potash One (KCL-T) is primed to change that.

Potash One hopes to have its Legacy project in Saskatchewan in production by 2013. The company commissioned a prefeasibilty study in December and now has a new set of resource numbers to feed into that study. At the property, which covers almost 100,000 acres, Potash One has delineated 251 million measured and indicated tonnes of potash as well as 853 million inferred tonnes of the potassium mineral.

Potash resources are calculated as the estimated tonnes of refined potash product available from a drilled deposit, taking into account recovery and processing losses. Specifically, Legacy’s measured resources cover an area of 5.6 million sq. metres and carry through 38 metres thickness, with an average grade of 25.8% potassium chloride (KCl). Indicated resources cover 47.5 sq. metres area and 34 metres thickness, with an average KCl grade of 26.3%. And the inferred resource covers 225 sq. metres and reach 33.5 metres thickness, with an average grade of 23.8% KCl.

The new resource adds 186 million measured and indicated tonnes of potash and 230 million inferred tonnes of potash to the old resource, which came out in early 2008.

Since potash beds are highly consistent, the resource confirmation drill program at Legacy comprised only six holes but since the beds lie at more than 1 km depth those six holes totaled more than 9,000 metres of drilling. The company also conducted 270 line km of 2-dimensional seismic surveys as well as 73 sq. km of 3-dimensional seismic surveys. The entire program focused exclusively on the southern end of the project area and the deposit remains open to the west, east, and north.

The prefeasibility study is investigating a solution mine producing 2.5 million tonnes of potash annually. For the sake of comparison the study will also calculate the economics of an operation producing 800,000 tonnes of potash each year. The study is due out in early June.

Once the study is complete, Potash One’s challenge will be finding the funds to build a solution mine. Despite being considerably less expensive than conventional mining, building a potash solution mine still costs more than $1 billion. But the company recently picked up an ace in that arena: in mid-May the company announced that international financier Robert Friedland has joined the company as chairman.

Friedland, who heads up Ivanhoe Mines (IVN-T, IVN-Q) and Ivanhoe Energy (IE-T, IVAN-Q), will guide the company in choosing strategic partners to bankroll its projects. In addition, Friedland’s Singapore-based venture capital company, Ivanhoe Capital, will work under a non-exclusive contract to introduce Asia-based investors to Potash One. Those investors could be sovereign wealth funds or state-owned enterprises.

Potash One also has several conventional exploration projects through a takeover of Potash North Resources earlier this year (Friedland and Lukas Lundin were major shareholders). The deal topped up Potash One’s treasury to $50 million. The company expects to spend about $15 million on Legacy this year, as it will start a feasibility study once the prefeasibility is complete. Little work is planned for the company’s other properties.

Potash One announced Friedland’s appointment and the updated Legacy resource estimate within three days and over that period the company’s share price gained 62¢ to close at $2.74. The company has a 52-week trading range of 70¢ to $6.25 and has 74 million shares outstanding.