The entrepreneurial zeal of Australia’s potash industry

Auger drilling at Agrimin’s Mackay project.

Potash is on track to become Australia’s next untapped resource with a promising future that could turn the country into a global frontrunner for production and exportation. Nickolas Zakharia writes.

Around 10,000 years ago, the world’s first farmers scattered grains across the Fertile Crescent, an area of land spanning from the tip of the Red Sea to the Persian Gulf.

Some 7000 years later, humanity was learning how to mine resources such as copper.

At first, it might not have seemed like these two trades would ever intersect.

But potash mining – which is primarily used in horticultural products – has shown just how vital the mining industry can be for modern farmers growing crops.

Extracting the foundations

Australia currently has no potash production, but in a decade from now some predict the country will become a major supplier of sulphate of potash (SOP).

Many potash mining projects are in the works across Western Australia’s salt lakes, with the brine providing perfect conditions for SOP to organically form due to their high sodium and chlorine content.

This gives Australia a clear advantage over the unnatural ways potash is produced overseas.

And as the global demand for crops continues to grow, so does the need for a larger supply of potash.

“I often say to people that this could be something huge. What wouldn’t you give to be a part of the iron ore industry in Western Australia 40 to 50 years ago? This is potentially where we are with potash,” Argonaut director – research Michael Eidne tells Australian Mining.

Eidne is an expert in Australia’s emerging potash industry and believes the resource holds plenty of promise.

“There’s not a lot of undiscovered resources in an industry of that scale and if people find something new in it to do, they will go and do it,” Eidne says.

“At the end of the day it’s a confluence of markets, availability, environmental concerns and greenfield opportunity.”

For Eidne, potash’s treasure chest is in its export market, which could put Australia on the map for its product.

“We could easily get to a million tonnes in the next five to 10 years,” he says. “From a domestic perspective, it’s not particularly big. But in terms of an export market it is a very good opportunity.”

With emerging players such as Agrimin, Salt Lake Potash and Kalium Lakes all expecting high production throughput in the next few years, the industry is set to blossom.

“You’re looking at about 200,000 to 250,000 tonnes of potash coming online each year in the next few years if these guys keep up with the schedule or what they’re planning,” Eidne says.

“I think what has to happen for smaller potash companies is these larger companies have to get into production so funders can see this industry is real because no one is producing sulphate of potash in Western Australia yet.”

The global market currently takes around seven million tonnes of potash per year.

In Eidne’s view, Australia’s potash industry has the potential to tap into certain parts of the farming industry, such as fertigation.

“Water stress is happening over large parts of the world and as a result farmers are putting in more drip irrigation solutions and fertigation solutions,” he says.

Fertigation involves using underground pipes to deliver water straight to the root system of a crop. It is widely considered to be a more sustainable method for crop watering and requires potash with high solubility, which is where SOP has an advantage.

“The problem with using sprinklers or broad acre or any sort of irrigation is that you lose an enormous amount of water that just disappears back up into the atmosphere,” Eidne says.

“Water in the agricultural industry is a pretty contentious issue as it is an increasingly scarce resource – especially in those big agricultural markets around the Mediterranean and southern parts of the US.

“If you look at the test work, Salt Lake and Agrimin’s SOP rates very high from a solubility perspective. So one of the big opportunities for the local market is that fertigation niche in my view.

“It’s the entrepreneurial zeal of the Australian mining industry to say ‘Hey, here’s a new resource, let’s go after it, build a project and export it’.”

Road to becoming a major seaborne supplier

Agrimin is thinking big.

The company expects to initially have an annual production rate of 426,000 tonnes of SOP, which would make it the largest potash producer in Australia, according to production targets up to April.

Agrimin is in the process of developing two projects in Western Australia; the Mackay potash project at Lake Mackay, which is the world’s largest undeveloped SOP-bearing salt lake, and the Percival potash project at Percival Lakes.

Agrimin has been progressing its definitive feasibility study in WA.

 

Agrimin chief commercial officer Rhys Bradley says the company is about to finish its two-year-long definitive feasibility study (DFS) as it enters its next phase of the projects.

“The key for any bulk project is a logistics chain and having control over that, which is something that we’ve spent 2019 working on,” Bradley tells Australian Mining.

“We’ve got a logistics joint venture agreement with Craig Mitchell, who used to run Mitchell Corp before selling it to Toll – and we’re going to purchase our own piece of land up at Wyndham Port.

“So we’ll have control over our potash from the time it comes out of the plant to being loaded on a ship, which I think is a point of difference between us and other companies.”

According to Bradley, Australia’s salt lakes provide an advantage as the SOP can be extracted in its natural state.

“There’s two main methods of SOP production,” he says. “There’s the primary production method – such as Agrimin’s – where we extract potassium and sulphate rich brine from a salt lake, pump it into evaporation ponds to evaporate off the excess water.

“A lot of the work is done by the sun and there’s no carbon in that part of the process.

“The secondary method of production, which is called the Mannheim process, involves converting MOP (muriate of potash) to SOP by mixing the MOP with sulphuric acid and heating it to 600 degrees to create SOP.

“But as by-products, you also get 1.2 tonnes of hydrochloric acid for each tonne of SOP. And also heating it to 600 degrees uses a fair bit of fuel. So in terms of the carbon footprint, salt lake production will be much lower I’d say – at least quarter of that of Mannheim production so there’s definitely environmental and cost benefits.”

The benefits of SOP are bountiful compared to MOP, which is monopolised by Canada and Russia’s potash industry.

Potash primarily comes in the form of lower quality MOP or higher quality SOP. The main difference between the two is MOP is high in chloride and used for low value crops such as beets, corn and celery, while SOP is used for high value crops, including almonds and avocados due to its high potassium and sulphur content.

“I think in five to 10 years, Australia is going to be a real player in the SOP industry – and Agrimin plans to be at the forefront of that as the largest global seaborne supplier of SOP,” Bradley says.

A potash goldmine

Salt Lake Potash’s Goldfields Salt Lakes project is south east of Lake Mackay in Western Australia’s Goldfields region.

The project comprises of 11 lakes that make 5000km² of area ready for extraction, with the company preparing to start production early next year.

“We are going to be producing in Q1 next year and it’s probably somewhere around a 12-month ramp up and at the end of that period we will be producing at a run rate of circa 245,000 tonnes so somewhere in early 2022 we’ll be hitting capacity,” Salt Lake Potash manager for investor relations Richard Knights tells Australian Mining.

Knights says the company’s Lake Way project has specific logistical advantages that he believes are important to any successful potash project.

“I think the advantage for us at Lake Way was just embedded logistical advantages it seems. There’s an airport nearby, there’s a gas pipeline, you had preconcentrated brine sitting in the Williamson pit so all of these things made the project less capital intensive,” he says.

“I think the industry economics and long-term dynamics are very attractive as long as there’s enough capital thrown at the sector to suggest there’ll be more than one successful business to come out of WA, so I think there’s huge potential.”

Australian Potash is also developing one of its potash projects at Lake Wells in the Goldfields region. The lake is shared with Salt Lake Potash.

The company signed an offtake agreement in March for 20,000 tonnes of SOP per annum to be distributed across Australia and New Zealand.

Australian Potash managing director and chief executive officer Matt Shackleton explains why SOP mining in Australia has only recently gained attention.

“The thing that we never realised was the potash deposits in Australia are mostly brine deposits,” Shackleton says.

“But what we’ve found with the brine deposits here in Western Australia is not only did they have potassium, they also had sulphate levels that allowed you to create a potassium sulphate.

“It was only in about 2013 when Geoscience Australia released a report for the paleochannel systems and drainage systems across and identified several of those paleochannels or ancient rivers were rich in potassium and sulphate.

“We simply didn’t know we had these deposits, we started finding them in literally the last six or seven years.”

It is this combination of advantages that has Australia well placed to make its mark on the global potash trade over the next decade.

This article also appears in the May edition of Australian Mining.

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