In the mining business, when you mix bold innovation with pragmatic business solutions and sustainable practices, you have a winning formula.
With this in mind, a small Canadian company just took a big step towards validating a “world’s first” business model for mining potash in Saskatchewan.
Also, by committing up to a quarter of a billion dollars to this game-changing, eco-friendly strategy, Western Potash (TSX: T.WPX, Stock Forum) expects to overcome its biggest logistical hurdle — getting access to plenty of water. And this promises to unlock the company’s potential to generate up to a billion dollars (or more) in revenues per year for decades to come. But not until the future mine is operational, which is expected to get underway in Q4, 2016.
Western Potash has just finalized an agreement to pay the city of Regina to redirect much of its treated sewage water to the company’s Milestone potash project site. Currently, this effluent is deposited into the nearby Wascana River. In the process, not only does this benefit the environment, but the company is also able to secure a long-term water supply. One that isn’t coveted by southern Saskatchewan farmers or regional municipalities because it’s not potable.
In essence, it’s a deal that’s described as a “win-win for everyone” by Regina’s acting deputy mayor Louis Browne, who adds: “Not only is the City of Regina now being compensated for treating a waste product, but we are also facilitating economic growth in one of Saskatchewan’s key sectors.”
The importance of this budding water-licensing partnership cannot be overstated. In fact, water promises to be the very lifeblood of a future solution-extraction mine at Milestone. That’s because large amounts of water are required to flush deeply-buried potash to the surface, rather than mechanically excavating it. In so doing, Milestone is expected to become the first such mine in the world that uses treated effluent, rather than fresh water, to extract this salt-based mineral.
Western Potash spokesperson John Costigan says the solution-extraction process offers key competitive advantages. For instance, it translates into significantly lower mine construction costs than with conventional potash mining, as well as making a mine faster to commercialize.
“The Potash industry is a capital intensive business and breaking the barriers to entry will require a new approach,” he says. “Solution mining and operations that can keep labour and other costs down will have a better chance of success.”
He adds: “In this industry, anyone who can find a better technology or an innovative approach to reduce costs or risks will have the edge.”
The agreement would see roughly half of the city of Regina’s treated waste water piped approximately 35 kilometres to the Milestone project site, which is southeast of Saskatchewan’s capital. This works out to be as much as 60,000 cubic metres per day — enough to fill two dozen Olympic-sized swimming pools.
Western Potash is also required to build the infrastructure to transport the waste water to the mine, including a pump house, at an estimated cost of $80-100 million.
After it arrives at the Milestone mine site, the water will be further purified before it’s put to work. And when it’s flushed back to surface — along with the potash — in the form of a brine-like solution, the water will be evaporated. All that will be left behind to be shipped to overseas markets is the dissolved potash. This is in high demand these days, particularly in emerging economies like India, Indonesia, and China. And that’s because it’s an indispensible ingredient in fertilizers, and can significantly boost crop yields.
Over the duration of the deal’s 45-year term — which is worth approximately $228 million in “water access” fees to Regina — this will go a long way to improving the quality of the fresh water in the Wascana River.
In turn, this will benefit numerous stakeholders. They include proximal landowners, such as farmers and First Nations communities, whose property values can be negatively impacted by the presence of pollution-related algae in the river. Obviously, wildlife stands to gain, too, especially since summer algae blooms can sometimes be toxic.
A full environmental impact assessment of the pending diversion of the treated effluent is still being conducted, but all parties involved are confident that this sustainable business model will get regulatory approval.
The realization of Canada’s first new solution mine in 40 years is expected to generate up to 2.8 million tonnes in potash production per annum for at least four decades (and perhaps up to a century, or longer).
With anticipated pre-tax mining costs of about $62 per tonne, this would generate approximately $1 billion a year in revenue, based on current potash prices (which are in the range of $400-$450 per tonne). This computes to a projected payback within six years on the mine’s anticipated $3.3 billion in commissioning costs.
According to Costigan, the company’s ground-breaking use of waste water will transcend the mere pursuit of corporate profits. It should also serve as an example of how trendsetting 21st century mining companies are giving the industry an image makeover that benefits everyone.
“It’s more than a win/win for the two parties involved. It’s also a big win for the environment,” he says.
“We hope that this agreement provides proof that economic and environmental sustainability in our industry is not only achievable with a little creative thinking, but it can also pay big dividends for all stakeholders.”
Disclosure: Principals of www.BNWnews.ca do not directly or indirectly own shares in any of the companies mentioned in this article.