IC Potash's Ochoa Project is located in southeast New Mexico and consists of over 100,000 acres of federal subsurface potassium prospecting permits and State of New Mexico potassium mining leases.
Key features of the Ochoa Project are as follows:
- Highly advanced deposit with more than 400 million tons of proven and probable mineral reserves
- Long life mine with upwards of a hundred years of minable ore
- Ore used as feedstock to produce premium priced potash products including Sulphate of Potash (“SOP”) and Sulphate of Potash Magnesia (“SOPM”) (reference About SOP)
- Base case production level of 568,000 tons per year of SOP and 275,000 tons of SOPM
- Forecasted to produce SOP and SOPM at the bottom quartile of the cost curve, with a forecasted total operating cost of $147 per ton
- Forecasted to have a low total capital cost and low capital cost per ton, with a total capital cost of $706 million
- Excellent mining jurisdiction in Southeast New Mexico with large producers present, established infrastructure, skilled labor, and established permitting processes
These combined project characteristics position the Ochoa Project as a leading potash development project.
Geology and Mineral Reserves
IC Potash has established substantial mineral reserves that will support a long-life and low cost mining operation. The total mineral reserves are over 400 million tons, with a continuous thickness, constant grade, and low dip. These reserves represent upwards of a 100 year mine life, which represents the scalability and economic potential of the Ochoa Project.
The mineral deposit occurs at depths of 975 to 1,600 feet within the project area, and is considered to be minable using conventional room and pillar mining methods with continuous miners and other underground mining equipment. The mining method is common to the New Mexico potash mining district.
The mineral reserves for the Ochoa project have been verified by Gustavson Associates, LLC of Lakewood, Colorado, and have been prepared in compliance with National Instrument 43-101 Standards.
The Ochoa Project Mineral Reserves Tabulation
Reserves Within 40 Year Mine Plan |
||||
|
Total Ore Tons |
Recovery Factor |
Recovered Ore Tons |
Polyhalite Grade |
| Proven | 76,950,000 |
84.29% |
64,861,000 |
80.14% |
Probable |
93,632,000 |
79.69% |
74,613,000 |
78.78% |
| Total Proven & Probable | 170,582,000 |
81.76% |
139,474,000 |
79.39% |
Remaining Reserves Within Proposed Mine Plan |
||||
| Proven | 115,709,000 |
84.62% |
97,911,000 |
76.51% |
| Probable | 128,163,000 |
83.44% |
106,935,000 |
75.33% |
| Total Proven & Probable | 243,872,000 |
84.00% |
204,846,000 |
75.89% |
Total Proven and Probable Reserves Within Entire Proposed Mine Plan |
||||
|
414,454,000 |
83.08% |
344,320,000 |
77.33% |
Exploration Methodology
The exploration work completed at the Ochoa Project includes six widely distributed drill holes (Phase I), seven in-fill drill holes (Phase II), and seven additional in-fill drill holes (Phase IIB). Other exploration work includes the studying of approximately 1,000-mi2 area in order to identify major geologic features and determine the basic distribution of lithologic units, including polyhalite mineralization. This work relied on published reports and was supplemented with petroleum data records and well logs obtained from public and commercial sources. ICP also acquired 812 geophysical borehole logs from various exploration sources. Wireline log readings from these boreholes have been used to interpret subsurface lithology.
The IC Potash core holes were used to anchor correlation efforts to all control points generated by geophysical logs. The thickness of polyhalite from core analysis was tied to the wireline log signatures and correlations were made working outward from IC Potash core holes. Correlation confidence is extremely high between all well controls for all formations and markers, as well as for the top and base of the polyhalite bed. Informal makers also exhibited high correlation confidence and provided additional constraint on the volume within which the polyhalite bed occurs.
Regional Geology
The Area of Interest (“AOI”) lies at the northeastern margin of the Delaware Basin. The Delaware Basin and neighbouring Midland Basin to the east are structural sub-basins of the large Permian Basin that dominated the region of southeast New Mexico, western Texas, and northern Mexico. The AOI has limited bedrock exposures and surface conditions are dominated by windblown sand dunes, caliche, and poorly developed soil horizon. Extensive and thick evaporite deposits occur throughout the Late Permian (Ochoan) age rocks of the Delaware Basin. These evaporites occur between the Capitan Reef limestone of the underlying Guadalupe Series and the fine clastic sediments of the Triassic Dewey Lake red beds.
The Ochoan Series consists of the Castile, Salado, Rustler, and Dewey Lake Formations in the northeastern Delaware Basin. The oldest evaporite cycle of the Ochoa Series is known as the Castile Formation. The Castile consists of anhydrite and halite within the Delaware Basin. The overlying Salado Formation is structurally and lithologically complex and, in addition to the cyclic anhydrite, halite, and clay sedimentation, it is also host to the McNutt potash zone. Potassium bearing salts accumulated in the northeastern Delaware Basin. With later subsidence, the remainder of the Salado Formation sediments was deposited, followed by anhydrite, interbedded polyhalite, halite, and dolomite of the Rustler Formation and the Dewey Lake Formation continental red beds. Collectively, the Castile, Salado and Rustler evaporite-bearing formations are over 4,000 feet thick.
Rocks of the Ochoa Series underlie an area of about 400,000 square miles. Potash salts are found throughout the southern half of the area of that area. Potash in the Salado Formation occurs as interbeds within both the anhydrite and halite units of the cyclic units. In the former, it occurs in the form of polyhalite and in the latter as sylvite, langbeinite or carnallite. The Salado Formation in the northern Delaware Basin is divided into three units of which the middle zone, known as the McNutt potash zone, varies in thickness between 120 feet in the northwest part of the Delaware Basin to over 590 feet in the eastern part of the basin. Within the McNutt zone, there are 11 distinct potash cycles of which five have been commercially developed in the Carlsbad area. The target horizon of ICP's Ochoa Project is the polyhalite within the Rustler Formation. The Rustler Formation disconformably overlies the Salado Formation.
The occurrence of polyhalite in the AOI was inferred by IC Potash by analyzing geophysical logs of oil and gas wells. Elevated gamma ray readings were observed in the Tamarisk member of the Rustler Formation at a depth between 1,200 and 2,000 feet. Subsequent core drilling by IC Potash confirmed the mineralogy to be polyhalite.
Location of Delaware Sub-Basin 
Southeast New Mexico
The Ochoa Project is located in southeast New Mexico, a highly industrial region in the United States. Southeast New Mexico has a long history of producing potash from mines currently owned by two large producers, The Mosaic Company and Intrepid Potash, and contains the largest known concentration of potash reserves in the United States.
The United States potash industry was initiated during World War I as the result of a German embargo that drove prices above $450 per metric ton. At the time, the United States government mandated the Bureau of Land Management to find a domestic source of potassium based salts (potash) to ensure United States security of supply. As a result of this initiative, the potash deposits in Eddy County, southeast New Mexico, were discovered in 1925 and first commercial production occurred in 1931.
New Mexico accounts for more than 77% of potash produced in the United States and approximately 19% of the potash used in the United States. This translates into significant tax revenues for the state and source of employment for numerous New Mexicans. For this reason, New Mexico is a leading state in terms of expertise related to the construction, operations and processing of potash.
IC Potash’s Ochoa project is located directly southeast of this historic potash region, referred to as the Known Potash Leasing Area. This provides IC Potash with excellent access to infrastructure and skilled labour.
Mineral Processing and Engineering
The US Bureau of Mines developed processes to produce SOP fertilizer produced from polyhalite in the 1930s and 1940s. Their work was based on chemistry done in Germany combined with conventional industry unit operations. IC Potash has rediscovered the previous work and has identified unit operating processes that will utilize polyhalite as the feed stock for potassium sulfate production.
The IC Potash processes to convert polyhalite into SOP use unit operations common to the industrial minerals industry. Processing polyhalite to produce SOP and SOPM involves 7 main steps: primary crushing of the ore, wet grinding and halite salt removal, calcination, leaching, evaporative crystallization of SOP, evaporative crystallization of SOPM, drying, and granulation of the products
Step 1 – Crushing
Raw polyhalite ore from the mine is processed through two parallel, two stage, crushing circuits. One of the goals of the crushing system is to produce uniform product. This aids in the calcining step. These crushing circuits will therefore utilize impact crushers and heavy duty screens operated in closed circuit, to produce a P80 -8 mesh product.
Step 2 – Calcination
The crushed polyhalite ore will be fed to two separate rotary kilns that are equipped with industrial burners, and a ceramic lined fire box. The crushed polyhalite will be heated to 950° F and held at this temperature for 15 minutes by controlling the flue gas temperature. Calcination drives off the water of crystallization allowing the polyhalite to decompose which makes the magnesium and potassium sulphates become soluble in water.
Step 3 – Leaching
Calcined solids enter one of two parallel leaching circuits where they are mixed with brine from the washing and centrifuge processes step, in a mixing box. The mixture exits the mixing box and enters a series of temperature-controlled leach tanks in order to completely dissolve the potassium and magnesium sulphates. The solution is sent to hydrocyclones after leaching, where it is thickened. The thickened solution is then fed to centrifuges in order to separate the solids from solution. The solids are pumped to a final stage leach tank sequence in order to dissolve any remaining potassium and magnesium sulfate. The inert calcium sulfate residual solids are then filtered out and disposed of in the waste management (tailings) facility.
Step 4- Evaporative Crystallization of SOP
The Potassium, Magnesium, and Sulfate ion concentration of the brine is increased to saturation in Mechanical Vapor Recompression Crystallizers. The MVR technology has been used by industry since the late 1960’s to efficiently evaporate water from concentrated brines. Once the brine reaches potassium sulphate saturation small crystals of SOP begin to form. Operating conditions of the MVR unit are controlled to grow and produce the desired SOP crystal size after which the SOP crystals are removed from the unit, debrined, and sent to the SOP dryer.
Step 5 - Evaporative Crystallization of SOPM
The somewhat potassium depleted brine exiting the SOP crystallizer is pumped to the SOPM crystallizer which is operated at slightly different temperature and pressure. As water is evaporated from this MVR unit, SOPM crystals begin to form and grow. When the SOPM crystals reach a desirable size they are extracted from the MVR unit. Some of the SOPM is debrined and sent to the SOPM dryer, the remaining SOPM is returned to the front end of crystallization circuit, returning sulphate needed for recovery of a high percentage of the potassium.
Step 6 – Drying
The SOP and SOPM crystal products are dried in rotary dryers prior to the final granulation step.
Step 6 – Product Granulation
The dried product is screened and the coarse fraction pulverized in order to be granulated. This mixture is combined in a drum granulator with a water starch mix to get the fine portion to stick to the larger prill matrix. The finished granular product is then screened and stored in a warehouse where it is sold as final product.
Project Economics
The Pre-feasibility Study completed for the Ochoa Project shows significant positive economics, with a projected full capital cost of $706 million, a projected operating cost of $147 per ton, and an after-tax net present value of $1.286 billion using a discount rate of 10%. The internal rate of return for the project on a before-tax basis is 32% and 26% on an after-tax basis (both calculations performed on a 100% equity case).
Note: All tons are short tons, unless otherwise specified, and all dollars are in United States currency.
The National Instrument 43-101 Compliant Prefeasibility Study (“NI 43-101”) projects a base case production level of 568,000 tons per year of SOP and 275,000 tons of SOPM. The plant will have operational flexibility to produce a range of product mixes. The Study assumes a 40-year mine life, although the reserves provide for a significantly longer life at anticipated production levels. The base case production information is summarized as follows:
- Annual production at full capacity of 843,000 tons composed of 568,000 tons of Sulphate of Potash (“SOP”) and 275,000 tons of Sulphate of Potash Magnesia (“SOPM”).
- The operating production cost is $147 per ton of SOP and SOPM.
- The projected full capacity capital cost of the project is $706 million.
- A mine life term of 40 years. However the Proven and Probable Ore Reserves in the overall mine plan are sufficient for over 90 years of production. Additional Measured and Indicated mineral resources outside the mine plan are available to potentially extend the mine life to more than 150 years.
- Construction is planned to begin upon the completion of the Environmental Impact Study expected in late 2013.
- The pre-production construction period is expected to be 24 months (completion during Q4 of 2015), with completion of a second train of crystallizers 9 months following initial production.
- Full production is to be achieved approximately 18 months after plant start-up. With production commencing Q4, 2015, production of 80% capacity will be reached Q4, 2016 and full capacity will be reached by Q2, 2017.
- The payback period from the commencement of production is 3.9 years after tax.
- Of energy costs, approximately 1/3 is for natural gas and 2/3 is for electricity. Local electricity and gas companies provided independent estimates of energy costs, which are used in the Study. Gas prices used in the forecasts averaged $3.75 per thousand cubic feet.
- The underground mining rate varies with mine grade. The average planned production rate is 3.5 million tons of ore per year with an average concentration ratio of 4.15:1.
- The average mining extraction rate is estimated at 83%. The extraction rate is 90% in areas remote from oil and gas wells, and 60 % in areas proximal to such wells. No subsidence whatsoever is forecast where mining is at 60% extraction.
- The average metallurgical recovery is estimated at 90%.
- SOP prices were forecast by CRU for the period 2015 to 2025. The forecast price was for standard SOP delivered in northwest Europe. It is currently planned however that the SOP will be distributed initially in North America, where SOP prices have been significantly higher than Northwest Europe prices. Also, the majority of the product will be granular SOP, which sells at a premium to standard SOP prices. The average CRU price per ton of SOP price adjusted for granular grade, for 2015 to 2025 was $725. For 2026 to 2055 the average per ton price for the 5 years prior to 2026 was used.
- The CRU forecasted SOPM prices per ton for 2015 to 2025 was at $238 per ton. For 2026 to 2055 the average price per ton used was $261.
- Average realized price per ton of product for the 40 year mine life is $623.
The Study considers all facilities required to mine the potash reserve and to process it into SOP and SOPM, including comminution, calcination, leaching, crystallization, drying, and granulation. Also included in the Study are the storage and load-out facilities required for product shipment.
Summary of Operating Cost
Area of Operations |
Cost Per Ton Of Ore |
Cost Per ton of Product |
Mining |
$6.91 |
$ 28.95 |
Processing |
$24.72 |
$ 103.54 |
G&A |
$ 3.53 |
$ 14.78 |
Total |
$35.17 |
$ 147.28 |
Net Present Value and Internal Rate of Return Analysis
Operating Cost |
Capital Cost |
Sales Price |
NPV @ 8% |
NPV @ 10% |
IRR |
-10% |
0 |
0% |
$1,887 |
$1,343 |
26.54% |
0 |
0 |
0% |
$1,816 |
$1,286 |
25.86% |
10% |
0 |
0% |
$1,744 |
$1,230 |
25.17% |
0 |
-10% |
0% |
$1,891 |
$1,358 |
28.16% |
0 |
0 |
0% |
$1,816 |
$1,286 |
25.86% |
0 |
10% |
0% |
$1,740 |
$1,215 |
23.92% |
0 |
0 |
-10% |
$1,502 |
$1,043 |
23.24% |
0 |
0 |
0% |
$1,816 |
$1,286 |
25.86% |
0 |
0 |
10% |
$2,126 |
$1,528 |
28.33% |
Environmental
Mining projects in New Mexico are evaluated on the basis of social, economic, cultural, environmental impacts, as outlined by US regulations such as the National Environmental Policy Act (NEPA), as well as state permitting regulations.
The NEPA process generally includes the following components: 1) development of a proposed action; 2) baseline data collection; 3) scoping; 4) development of alternatives; 5) description of the existing environment; 6) mitigation measures; 7) impact evaluation; 8) preparation of both a Draft and Final Environmental Impact Statements (“EIS”); and 9) a public participation and review process.
IC Potash announced the launch of environmental permitting work on April 11th, 2011 and, subsequently announced on September 11th, 2011, a Memorandum of Understanding (MOU) with the US Bureau of Land Management (BLM) for the purpose of commencing the formal portion of environmental approvals for the company's New Mexico sulphate of potash (SOP) operations. The MOU defines the respective responsibilities, conditions and procedures to be followed by the company and the BLM during the preparation of an Environmental Impact Statement. The company submitted the Mine Plan of Operations (proposed action), which describes the operation and forms the basis for the EIS analysis. The BLM has selected AECOM as the contractor to conduct the EIS.
IC Potash has contracted with INTERA Geosciences and Engineering of Albuquerque, New Mexico, to manage the environmental permitting process and lead the team of specialized scientists and engineers that will complete the work. INTERA is an international geoscience and engineering consulting firm with over 110 employees and offices in the United States, France and Switzerland. Established in 1974, INTERA has a 37-year history of providing environmental and water resources services.
The company is also working with Walsh Environmental Scientists and Engineers LLC to collect some of the environmental baseline data. Walsh's services include mine permitting, NEPA compliance, renewable energy, and oil and gas, as well as a variety of services to government and industry, including engineering, remediation, ecological investigations, permitting and compliance, and site assessment.
