Amazon posts initial potash resource in Brazil (March 10, 2010)

Amazon Mining Holding (AMZ-V) has defined an inferred resource for its Cerrado Verde potash project in Brazil of 105 million tonnes grading an average of 10.3% potassium oxide.

The news sent Amazon Mining’s shares in Toronto up 5.9% or 13 cents to close at $2.35 per share. Over the last year the junior has traded in a range of 15.5 cents and $3 per share.

The National Instrument 43-101 inferred resource was based on 19 drill holes at Cerrado Verde, in the heart of Brazil’s agricultural region in western Minas Gerais state.

Amazon believes Cerrado Verde is an open-pittable source of verdete (green) slate, a potash-rich rock from which it can produce a slow-release, non-chloride multi-nutrient fertilizer product, with K20 contents ranging from 5% to 14%.

The initial resource estimate was calculated based only on drill holes in the Funchal Norte target, which is a small portion of the entire Cerrado Verde project, and will form the basis of a preliminary economic assessment.

Amazon Mining is looking into the possibility of using a pyro-metallurgical treatment process to deliver a thermo-potash product. The company, founded by a group of Brazilians in 2005, is collaborating with government institutions and agricultural investment programs to collect data that will help it determine “the economic and metallurgical parameters associated with the manufacture of thermo-potash.”

The manufacture of conventional potash salts from Cerrado Verde is also being investigated. The results of these tests could improve potash product concentrators and help develop specialty products, the company outlines.

The deposit’s green slate hosts potash-bearing minerals glauconite (a hydrated potassium-iron silicate) and sericite (a monoclinic, basic potassium aluminosilicate of the mica group).

The company believes the strategic importance of potash to Brazil will create financing opportunities outside conventional market financing, from sources including government, land funds, growers associations and fertilizer distributors.

In September 2009, for instance, Amazon Mining signed an agreement with ArcelorMittal Bioenergia, a company in the ArcelorMittal Group, to fund agronomic tests using Amazon Mining’s proposed thermo-potash product. Under the arrangement, Amazon will provide thermo-potash to ArcelorMittal for use in planting Eucalyptus forests.

ArcelorMittal Bioenergia produces charcoal for steel production from renewable eucalyptus forests, a substitute for mined metallurgical coal. The company’s plantations stretch across 170,000 hectares in the Brazilian states of Minas Gerais and Bahia.

Eucalyptus was introduced to Brazil in 1910, for timber substitution and the charcoal industry. Today there are about 5 million hectares planted with eucalyptus and the wood is valued by the pulp and paper and the charcoal industries.

Typically wood can be harvested every 5-7 years, helping to preserve the native forests from logging. The slow release and multi-nutrient characteristics of thermo-potash could make it an ideal fertilizer for Eucalyptus.

The memorandum of understanding between Amazon Mining and ArcelorMittal governs testing of thermo-potash products from a pilot plant.

ArcelorMittal will designate a test plot and fund all costs associated with testing. Its investments will include yield comparisons and chemical analysis of nutrient behaviour in the soil and in the eucalyptus. Data from the studies will be jointly owned by the two companies.

ArcelorMittal will have a pre-emptive right to the acquisition of 15% of potential thermo-potash production at the market price for 24 months in the event Amazon Mining successfully commissions a thermo-potash production plant.