RCS - South Harz Potash Ld - AGM Update

DanakaliAnnouncement

02/11/2022 08:15

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RNS Number : 0491F  South Harz Potash Ltd  02 November 2022

ASX ANNOUNCEMENT

2 November 2022

 
2022 AGM CHAIRMAN'S SPEECH

The 2021/2022 financial year has been one of considerable change on the macro
front. As the world emerged from the Covid pandemic, crop prices rose and,
with that, the demand for fertilizers. This was followed by the Russian
invasion of Ukraine in March 2022, propelling food security and the
criticality of secure sources of supply of strategic resources into the
limelight.

As a consequence of these factors, and the sanctions on Russia and Belarus,
circa 30% of global potash supply has been restricted. The European Potash
price rose from US$395 per tonne in 2021 to over US$900  per tonne earlier
this year. These geopolitical changes will have a long-lasting effect on the
potash supply chain, positioning South Harz Potash well to provide an
alternative source of potash to key European markets and Brazil.

Your company took the opportunity to consolidate its balance sheet in December
2021 via a modest equity top-up of A$5.26 million. It also benefitted during
the year from the receipt of A$5.20 million of option conversion proceeds. The
company finished the financial year with A$6.6 million cash in hand, with the
cash position still in good standing as at the September quarter end at an
adjusted A$5.1 million.

In April we established the Süd Harz Kali office in Erfurt, Germany, to
accommodate our growing in situ team. This is the first time the company has
had a permanent physical presence in Germany and it is an important visible
local signal of our serious investment intent.

During the year we sank two confirmatory diamond drill holes at the Ohmgebirge
Project at a total cost of A$7.4 million. Pleasingly, the individual results
of these new holes were slightly better than the older holes that they
twinned. As targeted, the corroboration of this data permitted us to upgrade
approximately 89% of the sylvinite seam in the Ohmgebirge area from the
Inferred to the Indicated JORC Mineral Resource category.

This in turn allowed us to publish a comprehensive Scoping Study for the
Ohmgebirge Development on 8 August 2022. The Scoping Study demonstrated that,
based on grounded assumptions, an attractive development project exists on the
Ohmgebirge property. It shows the technical and financial robustness of a
vertical shaft access underground mining operation, with a conventional
cold-water leach and hot crystallization process, producing approximately 1
Mtpa of premium MOP. For a globally efficient pre-production capital
investment of approximately US$620 million, the Ohmgebirge Development can
produce at this level for a minimum initial operating life of 21 years.

It will also be highly unit cost competitive at a low projected net operating
cost of US$93 per tonne. Based on the conservative MOP price assumption
adopted of US$385 per tonne, it has an estimated NPV of around US$1.3 billion,
an IRR comfortably above 26%, and a 3.6-year payback from first production.
These results reflect South Harz's premium location, proximity to European
customers, the quality of the Ohmgebirge deposit, and the tried and tested
mining and processing approach that has been selected.

We set out to establish the technical and financial robustness of a modern,
low-impact mining development to produce premium MOP. We have had excellent
support from a formidable team of premium global geological and mining
industry consultants in undertaking this Scoping Study - some of whom have a
long history with, and deep expertise in, the South Harz district as the
cradle of potash mining globally. The Scoping Study was completed based on
their advice and input and it indicates that a highly robust project exists on
the Ohmgebirge property. This is the first hard modern data that has been
published on the potential for mining in the South Harz region and it bodes
well for the future potential of our other assets.

Given the Ohmgebirge Development's scale, projected economics and strategic
location, South Harz is well placed to explore the full range of potential
funding pathways available. Recent case studies of companies that have
successfully navigated this path include Horizonte Minerals, Danakali,
Adriatic Metals and Highfield Resources. In our case, funding opportunities
are also expected to be positively influenced by the growing global
recognition of the importance of potash, its strategic relevance in the
escalating global food security conversation and our strong ESG credentials

As part of the now commenced Pre-Feasibility Study (PFS) on Ohmgebirge, a
potential alternative development pathway approach will be prepared, in
parallel to the 1Mtpa case, based on an initial 500 ktpa development with a
further 500 ktpa capacity being added in later years. This scenario was
considered as part of the Scoping Study also, having only a slightly higher
overall forecast capital expenditure of US$668 million, but a significantly
lower pre-production capex requirement of US$443 million.

Our broader South Harz Potash Project exhibits world class potential. Being in
Germany we have the benefit of a sound legal jurisdiction. All types of
infrastructure are readily available, and we are in close proximity to both
northern European customers and ports. We already have a rich database of
geological information on all our properties with 303 historical borehole
results in total. The Ohmgebirge Development represents only 6% of our total
5.3 billion tonne Mineral Resource at South Harz. It is simply the first of
four potential potash development projects there. With time I believe we will
demonstrate Tier 1 scale, with the broader South Harz region capable of
delivering multiple development opportunities.

At South Harz, we have a deep commitment to building a strong social license
and to developing Ohmgebirge in a responsible and sustainable fashion. Our
local community engagement is already strong and our focus on environmental
stewardship is unwavering. Underground operations result in minimal surface
disturbance and lower carbon emissions, and we have stated our commitment to
low impact mining practices, including zero permanent waste piles on surface
and zero industrial water discharges. Our proximity to European markets also
delivers low freight-related carbon emissions versus competitors from Canada
and eastern Europe.

Looking ahead, we have designed our PFS and subsequent Definitive Feasibility
Study workstreams to deliver the right information at the right time into the
permitting process - so that it dovetails into the optimal route to approval.
All proceeding to schedule, we anticipate mine construction can commence in
mid calendar 2025. Key short-term milestones will be the site selection,
expected by the end of this calendar year, and the completion of the PFS by
the end of calendar 2023.

More recently we have announced board and executive appointments that further
add to the underlying value of the business and provide the skills and
experience necessary to realize meaningful shareholder value as we advance the
South Harz Potash journey.

Effective 17 October 2022, Mr Lawrence Berthelet, a deeply experienced potash
executive commenced as a non-executive director of the Company and a member of
its Technical Committee. Mr Berthelet brings more than 30 years' operational
and executive experience with major global potash and fertilizer firms
including The Mosaic Company, SNC-Lavalin and Agrium (previously Nutrien).

On 24 October 2022, the Company announced the appointment of Mr Luis da Silva
as Managing Director and CEO. Mr da Silva is a proven natural resources
business leader and executive with close to 30 years' experience in the mining
industry. Previous roles include President and CEO of Andean Precious Metals a
leading Latin American silver producer, and President and CEO of Phosphate
developer, GB Minerals, where he led the company through to its eventual
acquisition by Canadian phosphate producer, Itafos. Luis commences his role
today, and henceforth I will resume my role as Non-Executive Chairman.

A holistic review of the South Harz Board's size and structure is also
underway.

I would like to thank all South Harz personnel and contractors for their
contributions over the past year. It has been one of great advancement for our
business and I am grateful to each of you for your commitment and diligence.
Finally, I would like to thank you, our shareholders, for your ongoing support
over the year. I look forward to reporting on our successes in unlocking
shareholder value over the next year and beyond.

 

On behalf of South Harz Potash Limited,

Ian Farmer,

Non-Executive Chairman

Investor & Media Enquiries
 
 Ian Farmer                      Michael Vaughan                                                            Justine James

 Executive Chairman              Fivemark Partners                                                          Alma PR

 South Harz Potash Ltd           +61 422 602 720                                                            +44 20 3405 0205

 +44 7748 642 409                michael.vaughan@fivemark.com.au (mailto:michael.vaughan@fivemark.com.au)   shp@almapr.co.uk (mailto:shp@almapr.co.uk)

 
 ifarmer@southharzpotash.com

 

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