The chief executive of one of seven major potash companies in WA has expressed the need for a cautious approach when it comes to developing a new resource industry.
Methodical. Cautious. Conservative. Rigorous. These might not be the most exciting adjectives, but when it comes to developing a new resource in a nascent industry, excitement isn’t often a pathway to success.
Instead, the pathway is laid brick by brick over time.
And after years of planning, testing, discovery and development, Western Australia’s emerging sulphate of potash (SOP) industry is on the cusp of becoming a reality.
WA is again leading the world down a new mineral commercialisation pathway: this time with potash. New SOP projects worldwide are incredibly rare but in the last seven years, with seven of these having emerged in WA.
The basic ingredients for the state to establish a successful SOP industry are there – great resources, plenty of sunshine, a positive regulatory environment and access to the best mining people and technologies in the world.
WA is well placed to become a major supplier of premium organically certifiable, non-substitutable high-grade potassium fertiliser which will help to feed the world, and not destroy the environment while doing it.
For those not familiar with the intricacies of potash production, SOP is the best premium potassium fertiliser in the world, and provides not only potassium, which is vital for healthy crop growth, but also sulphur, widely regarded as the fourth macronutrient. SOP is also better for most soils because it contains very little chlorine compared to muriate of potash (MOP), which can burn germinating seeds and leaves if spread too close to those seeds.
Unlike in WA, at least 50 per cent of the world’s SOP fertiliser is made using the Mannheim production method, which requires sulphuric acid to be added to MOP, and then reacted to +550 degrees. It’s an energy intensive process which produces hydrochloric acid waste.
But in WA, producers will use solar-salt production – crystallising salt in huge brine pools using the sun to evaporate the water, eventually leaving behind potassium salts that are processed into SOP. Compared to the Manheim production method, the SOP process produces more than 65 per cent fewer carbon emissions.
By establishing an industry in WA, Australian farmers will have access to a premium, organic, sustainable product which will enable them to grow better, healthier crops on their land. Early field trials Australian Potash has been involved in show that yields on broadacre crops like canola can increase 30 per cent with the application of SOP when compared to using MOP.
This means yields will increase as the availability of arable land decreases, which will become more essential as the world’s population continues to grow.
Local supply will also enable Australian farmers to access fertiliser without paying the shipping costs to import it from overseas, which we’ve seen increase exponentially due to COVID-19.
And COVID hasn’t been the only risk to supply. Recently, the unstable political situation in Belarus, which is a major supplier of the world’s muriate potassium fertiliser, highlighted the risk of relying on overseas markets. With western sanctions being slapped on Belarus, it’s demonstrated that supply routes can be interrupted for reasons far removed from the farming enterprises of Australia.
By establishing a potash industry in the world’s number one ranked mining jurisdiction, with low sovereign risk and access to export channels, the WA potash industry will be able to secure supply to not only Australian farmers, but around the world. In order to secure this stable local supply, time (and yes, money) need to be invested to enable the WA potash industry to move into the production phase and be sustainable into the future. In the case of Australian Potash Limited (APC) and our Lake Wells project northeast of Laverton, it’s been six years in the discovery and development phases, and it will be two years until production commences.
Like many companies developing a new resource, APC is playing the long game.
But in my view, it’s time well spent applying a methodical approach to de-risking that most essential element of every successful minerals project development – the resource. For example, the mineral resource estimate at Lake Wells comprises more than 60,000 metres of drill data and over 700 kilometres of seismic surveys, thousands of hours of hydro modelling, test-pumping and sample analysis and a thorough understanding of the geotechnical setting.
And that’s just the mineral resource.
Years also need to be spent studying evaporation pond modelling and design, perfecting processing flow sheets (the map for building a processing plant), carrying out test work, capital raising, securing loans, gaining regulatory approvals, determining customer needs and negotiating off-take agreements.
Like any new mining industry, de-risking has to involve getting the debt portfolio right. As they say, “you don’t buy the house on the credit card”, and make sure you match your long-term assets with long term debt.
And while it might not be as exciting as rushing to production, taking the time to get things right will lay the groundwork for a viable, sustainable and profitable industry.
- Matthew Shackleton is the managing director and chief executive of Australian Potash.
