WPX, KCL, AAA, MAA, AMZ, BOEGreat post that breaks it down:
https://www.stockhouse.com/Bullboards/MessageDetail.aspx?p=0&m=28614941&l=0&r=0&s=BOE&t=LIST
Just as we’re awaiting the Scoping Study on BOE’s Potash project, WPX releases its own Potash project scoping study.
- WPX’s project is in Saskatchewan
- A proposed SOLUTION MINING potash project
- SOLUTION MINING projects offer lower Capital Costs and lower Operating Costs than traditional Potash mines
WPX and KCL and MAA and AAA all tout their proposed SOLUTION MINES as the most lucrative of all potential new Potash projects in the world today.
- so the WPX Scoping Study should provide us with some insight as to the economics of ALL the proposed SOLUTION MINES
WPX claims they’re able to get their Operating Costs 10% lower than most of their competition, and as such they claim that their project is “one of the largest and best Tier 1 potash, greenfield, solution deposits, still available in the world today, that are ready for development.”
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So…
How strong is the economics of the Potash SOLUTION MINES that WPX/KCL/MAA/AAA are all touting?
We’ll start with the Good “Looking” parts of WPX’s Scoping Study:
- 2.5 million tonnes of Potash output per year
- Project Unit Operating Costs = $62.90/tonne
- Net Present Value (at 10% yearly discount) = $5.22 billion
The project’s NPV “looks” great. And its Operating Cost “looks” really good.
BUT…..
- Capital cost = $2.51 billion
- After-Tax Payback Period = 7.3 years
These CAPEX and Payback figures assume 100% equity.
- if any cash is borrowed, interest payments must be added
https://tmx.quotemedia.com/article.php?newsid=34111390&qm_symbol=WPX
AND…
- the Scoping Study’s “accuracy assessment” of WPX’s Capital Cost is reported as being +/- 35%
If Capital Cost was 35% higher (which the Scoping Study says is possible), Payback period would jump to 10 years.
AND…
- the WPX project’s nice “looking” NPV of $5.22 billion was based on an average Potash price of U.S. $511/tonne!!!!!
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WOW.
Now I understand why many analysts say that HIGH CAPITAL COSTS (along with long development lead times) serve as a BIG BARRIER TO ENTRY for any new firms that wish to set up their own Potash production.
How are the prospective Potash SOLUTION MINING companies gonna come up with the HUGE DOLLARS needed to develop their projects?
Today’s Potash price is only U.S. $350/tonne, and many producers need to cover $40/tonne shipping out of that to get their product to ocean port.
- the prospective Potash SOLUTION MINING companies need to wait for Potash price to jump to $500+/tonne, before their projects can become even remotely viable
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Its GREAT that WPX released its own Potash project Scoping Study today.
Now when BOE releases its own Potash project Scoping Study (in just a few days), we’ll be able to COMPARE against WPX and ALL THE OTHER touted Potash SOLUTION MINING proposals out there!!!!!
The COMPARISON will most likely be VERY REVEALING.