The Company is progressing the Project in the short-term through a Feasibility Study currently being compiled by Cementation USA that has an expected completion date of the end of February 2017. The Feasibility Study is intended to improve the confidence in capital and operating estimates, product pricing and marketing plans, product agronomic characteristics and ensure that all necessary permitting requirements are met. The full PEA report will be filed on SEDAR within 45 days of this release.PEA Highlights
- IC Potash has revised the Project to consider direct application of polyhalite as a crop nutrient product rather than producing Sulphate of Potash through a chemical processing plant. The resulting Project has a reduced capital cost, a shorter ramp-up time and improved financial metrics.
- Updated Mineral Resource estimate (Measured and Indicated) of 330 million tons of high grade polyhalite (89.3% by weight).
- A proposed production schedule extracting up to 2 million tons per annum (Mtpa) of polyhalite for approximately 38 years of steady state production at an average grade of 90% polyhalite. Initial production is estimated to begin in 2019.
- Initial capital expenditure of $368 million that includes a 15% contingency on direct capital items.
- Estimated initial Polyhalite product netback revenue of $162/short ton sold and a Life of Mine average of $203/short ton.
- Total estimated operating costs of $44/short ton mined, processed, and shipped to a local distribution point.
- An after tax, all equity project NPV of $1,197 million at an 8% real discount rate and an IRR of 28%, with payback in 2.6 years.
- IC Potash is contemplating a design, build, operate and maintenance (DBOM) agreement with a contracting firm to expedite the overall project delivery. Negotiations regarding this DBOM agreement are in progress.
The Mineral Resources are contained within a single continuous, flat-lying polyhalite bed with an average thickness of 4.6 feet.The Mineral Resource is considered technically mineable based on the use of heavy duty continuous mining equipment capable of cutting the polyhalite seam with a minimum mining thickness of 4 feet.
|Table 1: Mineral Resource Statement (effective September 30th 2016)|
|Resource Class||Thickness (ft)||Area (ft2 x10 6 )||Volume (ft3 x10 6 )||Mass (tons x10 6 )||Polyhalite (wt.%)||Anhydrite (wt.%)||Halite (wt.%)||Magnesite (wt.%)|
|Mea + Ind||4.63||1,180||4,280||330||89.33||2.12||3.00||6.69|
- Conventional mining using a room-and-pillar mining method like that currently in use in other mines in the region.
- Heavy duty underground room-and-pillar continuous mining equipment similar to that used in potash and coal mining is planned.
- A simplified process recovery which is entirely mechanical, requiring no chemical treatments or nonstandard material handling processes. The processing facility will consist of standard crushing and pelletizing facilities and would produce raw granular and pelletized polyhalite products.
Initial capital is defined as costs required to meet the desired throughput rate of 2 million tons per annum and includes all mobile support equipment, fixed equipment, materials, supplies and labor. Sustaining capital includes rebuilds and replacements as a function of initial capital for all fixed and mobile equipment.
|Table 2: Major Capital Elements (US$000)|
|Area (WBS / Description)||Initial Capital||Sustaining Capital||Total Capital|
|1.0 - Mine|
|11000 General Site Mine||13,073||-||13,073|
|17000 Ancillary Buildings Mine||1,479||-||1,479|
|18000 Off Site Facilities||1,183||-||1,183|
|12100 Underground Mine Development||940||-||940|
|12200 Shaft Construction||77,514||58,135||135,649|
|12300 Mine Production Equipment||13,730||53,754||67,485|
|12400 Underground Support Equipment||9,320||70,365||79,685|
|2.0 - Process Facility|
|21000 General Site - Process Plant||38,430||28,822||67,252|
|24000 Process Plant||71,337||96,304||167,641|
|25000 Product Loadout||11,501||15,526||27,027|
|27000 Ancillary Facilities - Process Plant||7,209||5,407||12,617|
|3.0 - Jal Storage / Loading|
|31000 General Site - Jal||12,164||9,123||21,286|
|36000 Jal Storage / Loading Facilities||20,151||27,204||47,355|
|37000 Ancillary Facilities - Jal||205||154||359|
|Total Direct Capital||278,236||364,795||643,031|
|4.0 - Indirect|
|49200 Construction Support & Facilities||10,847||-||10,847|
|49300 Other Indirect Costs||17,864||-||17,864|
|Total Indirect Capital||48,188||-||48,188|
|Table 3: Steady State Operating Costs|
|Area||Total Cost (US$000)||Cost per Ton Mined|
|Jal Storage / Loading||$||422,351||5.20|
|Total Operating Cost||$||3,575,466||44.04|
ICP commissioned the CRU Group to conduct a market study on the application of polyhalite as a fertilizer which was completed in July 2016.CRU has estimated hypothetical polyhalite demand based on agronomic assumptions (crop nutrient uptake, soil conditions) related to reasonable application rates of polyhalite to acreage of higher value and irrigated crops for which the potential quality and yield benefits of secondary nutrient application are more likely to justify investment in polyhalite applications. Based on this agronomic demand model, CRU estimates polyhalite demand potential in the Americas by nation as the following: US - 5.8 million product tonnes Brazil - 3.4 million tonnes Mexico - 2.8 million tonnes This total demand of 12.0 million metric tonnes equates to approximately 13.2 million short tons. These estimates are hypothetical and assume an environment of perfect information and full acceptance by all growers of the benefits of micro-nutrient fertilizer application. CRU generated a product pricing schedule associated with the envisaged 2-million-ton production rate. The polyhalite price estimate was determined from the derived market value of a unit of low chloride potassium, magnesium and sulphur based on observed market prices for nutrients contained in MOP, SOP, SOPM, SSP and TSP. A basic assumption of these prices, therefore, is that the full market value of polyhalite's contained nutrients is realized, which would be best achieved by polyhalite's positioning as a premium fertilizer product. The initial sale price is calculated as $162 / short ton and the Life of Mine average of $203 / short ton. Financial Model Discounted cash flow modelling of the Project base case yields an after-tax, all equity internal rate of return (IRR) of 28.0% and a net present value (NPV) of $1,197 million at a discount rate of 8%. All cash flow amounts are expressed in September, 2016 US$, with no allowances for escalation. Table 3 outlines the key financial inputs and Table 4 presents the estimated revenue, disbursements, and resulting free cash flows of the Project.
|Table 3 Key Financial Inputs|
|Units||Imperial||This model has been constructed using imperial units.|
|Valuation Date||1-Jan-17||Assumed project construction start date of January 2017.|
|Capital Cost||US$368M||Initial Only (See Section 20 PEA for details)|
|Sustaining Capital||US$365M||Distributed over 42-year mine life (See section 20 PEA)|
|Operating Cost||US$44/ton||Includes all site and corporate costs (see Section 20 PEA)|
|Inflation||-||No escalation or inflation has been applied to the DCF model|
|Royalty||6.7%||This percentage represents the effective total royalty|
|Federal Tax||35%||Corporate tax rate of 35% was applied to profit as well as a 5.9% state tax|
|Polyhalite SalePrice||Varies||See Section 19 PEA for sales price detail|
|Exchange Rate||-||No exchange rates apply. All sales are Netback, FOB New Mexico|
|Table 4 Project Cash Flows|
|Description||Units||Total or Average|
|ROM Mineralized Material||kst-RoM||81,186|
|Gross Income from Mining|
|Gross Income (FOB-Plant)||$000s||$15,406,170|
|Jal Storage / Loading||$000s||$422,351|
|Total Operating Cost||$000s||$6,148,774|
|Depreciation and Amortization||$000s||$1,052,925|
|Federal Income Tax||$000s||($2,467,755)|
|State Income Tax||$000s||($415,993)|
Concluding StatementThe PEA represents an important milestone in the development of the Ochoa project as a future polyhalite producer and provides confirmation of the economic viability and robustness of the Project. About IC Potash Corp. IC Potash's shares are traded on the Toronto Stock Exchange (TSX) and in the United States OTCQX. For more information, please visit www.icpotash.com. Tweet this: @ICPotash announces PEA results. http://ctt.ec/Cb36 Qualified Persons The information in this press release was based on information contained in the PEA which was prepared by or under the supervision of the following qualified persons ("QP") who have approved the technical information contained in this news release:
- The Mine Design and economic analysis were prepared by Golder, under the supervision of Daniel Saint Don, P.Eng., an independent Qualified Person as defined under NI 43-101. Mr. Saint Don relied on other experts as necessary and as stated in the PEA.
- The Mineral Resource Estimation was prepared by Golder, under the supervision of Jerry DeWolfe, P.Geo, MSc., an independent Qualified Person as defined under NI 43-101. Mr. DeWolfe has reviewed the procedures, the results and quality control on the analytic results. The results were in line with expected values. A site visit allowed Mr. DeWolfe to verify and validate the geology. The quality assurance and quality control, the verifications and the onsite visit enable the disclosure of reliable Mineral Resources at the Project in conformity with CIM standards and National Instrument 43-101.
- The Processing section was prepared by Alva Kuestermeyer of Golder, an independent Qualified Person as defined under NI 43-101.
- The Capital and operating cost assumptions were compiled by Peter Critikos, an independent Qualified Person as defined under NI 43-101.