RCS - South Harz Potash Ld - SEPTEMBER 2022 QUARTERLY ACTIVITIES REPORT

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01/11/2022 08:30

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RNS Number : 8759E  South Harz Potash Ltd  01 November 2022

ASX ANNOUNCEMENT

1 November 2022

 

 
SEPTEMBER 2022 QUARTERLY ACTIVITIES REPORT

South Harz Potash Limited (ASX:SHP) (South Harz or the Company) is pleased to
report on a milestone quarter in which the Company delivered a Scoping Study
for development of the flagship Ohmgebirge deposit at its 100%-owned South
Harz Potash Project in Thuringia, Germany (Ohmgebirge Development).

 

Highlights

 ·       Updated Ohmgebirge Mineral Resource estimate to 338Mt at 12.9% K(2)O, with
         extensive categorisation upgrade achieved (Indicated Sylvinite Mineral
         Resource of 258 Mt at 13.5% K(2)O).(1)
 ·       Scoping Study evidenced technical and financial robustness of vertical shaft
         access, underground mining operation at Ohmgebirge with conventional cold
         water leach - hot crystallization process producing approx. 1 Mtpa of premium
         MOP for sale predominantly into proximate European fertilizer markets.(1)
 ·       South Harz Board approved progression to a Pre-Feasibility Study (PFS), with
         completion scheduled by end Q4 CY2023.
 ·       Environmental and social impact assessment and permitting activities advancing
         in parallel with PFS.
 ·       Post quarter end, deeply experienced agriculture and potash senior executive,
         Mr Lawrence Berthelet, appointed as a Non-Executive Director.
 ·       Post quarter end, leading natural resources industry executive, Mr Luis da
         Silva, appointed Managing Director and CEO, effective 1 November 2022.
 ·       Cash balance of A$4.5 million at 30 September 2022 and zero debt.

South Harz Executive Chairman, Ian Farmer, commented:

"It has been an important quarter for South Harz with a significant update and
upgrade to the Ohmgebirge Mineral Resource estimate followed by the release of
the Ohmgebirge Scoping Study. Both events highlighted the significant latent
potential that this asset, and the broader South Harz portfolio, offers. The
Ohmgebirge Development is a Tier 1 potash project, with South Harz having a
real opportunity to become a new supplier of choice for potash in Europe and
beyond. The high quality of our recent Board and executive appointments
further adds to the underlying value of the business and provides the skills
and experience necessary to realise meaningful shareholder value as we advance
the South Harz Potash journey."

 

 

(1) Refer South Harz ASX releases dated 12 July 2022 and 8 August 2022. South
Harz is not aware of any new information or data that materially affects the
information included in these ASX releases, and the Company confirms that, to
the best of its knowledge, all material assumptions and technical parameters
underpinning the estimates in these releases continue to apply and have not
materially changed.

OHMGEBIRGE DEVELOPMENT

Updated Ohmgebirge Mineral Resource estimate

Results of the confirmatory drillhole program completed earlier this year were
used to upgrade a substantial proportion of the Ohmgebirge Mineral Resource
estimate to the Indicated category (see ASX release dated 12 July 2022). The
updated Mineral Resource is 338 Mt at 12.9% potassium oxide (K(2)O) totalling
approximately 44 Mt of contained K(2)O (see Table 1). This estimate comprises
290 Mt of Sylvinite (key focus seam for development) grading 13.5% K(2)O
(split approximately 89% Indicated and 11% Inferred categories) and 48 Mt of
Carnallite at 9.8% K(2)O (100% Inferred).

Table 1: Updated Ohmgebirge Mineral Resource estimate (July 2022)

 Mineralised Seam  Categorisation          Tonnage (Mt)  K(2)O (%)  K(2)O (Mt)
 Sylvinite         Indicated               258           13.54      35
                   Inferred                32            12.85      4
                   Sylvinite total         290           13.47      39
 Carnallite        Inferred                48            9.81       5
                   Carnallite total        48            9.81       5
 Total Resource    Indicated and Inferred  338           12.91      44

Minimum cut‐off grade ≥5% K2O; 15% geological loss applied to account for
potential unknown geological losses.

Scoping Study (August 2022) highlights

The Ohmgebirge Development Scoping Study demonstrated the technical and
financial robustness of a vertical shaft access, underground mining operation
at Ohmgebirge with a conventional cold water leach - hot crystallization
process producing approximately 1 Mtpa of premium Muriate of Potash (MOP)
product for sale predominantly into proximate European fertilizer markets (see
ASX release dated 8 August 2022).

Key highlights of the proposed project development include:

·     Outstanding, first world jurisdiction in a region rich with
infrastructure and potash mining history.

·     Relatively shallow, thick potash deposit of simple and well
understood mineralogy.

·     Adopted mining and processing mechanics are long established and
extensively proven in the district.

·     Low-impact development based on self-imposed commitment to zero
permanent waste piles on surface.

·     Equal commitment to zero water discharges, which have historically
been a defining feature of the industry.

·     Expected utilisation of grid power, which in Germany is already
approximately 50% from renewable sources.

·     Delivered operating costs projected to be in the bottom half of the
global unit cost curve.

·     Capital intensity of development forecast to be comfortably below
average for equivalent scale operations.

·     Proximity to European market offers huge cost and carbon footprint
advantages versus other suppliers.

·     Asset domicile increasingly valuable given heightened geopolitical
tensions and supply chain challenges.

·     Clear strategic opportunity for South Harz to become a new supplier
of choice for potash in Europe.

·     Tier 1 scale with broader South Harz Project resources delivering
potential for multiple developments.

·     Range of potential funding pathways available given scale,
projected economics and strategic location.

Table 2: Key Ohmgebirge Development Scoping Study outcomes (August 2022)

 Key parameter                                                        Unit       Point      Range

estimate
estimate

 Key outcomes
 Ore throughput                                                       Mtpa ROM   4.5        -
 Initial life-of-mine                                                 years      21         -
 K(2)O head grade                                                     %          13.5%      -
 MOP output and sales (+60% K(2)O)                                    Mtpa MOP   1.0        -
 Industrial salt sales (+99% NaCl)                                    Mtpa MOP   1.0        -
 Pre-production capital expenditure                                   US$M       620        589 - 651
 Cash operating cost (AISC, delivered NW Europe) - pre salt credits   US$/t MOP  172        163 - 181
 Industrial salt price (delivered NW Europe)                          US$/t      79         -
 Cash operating cost (AISC, delivered NW Europe) - post salt credits  US$/t MOP  93         88 - 98
 Weighted average FOB Hamburg equivalent potash price                 US$/t MOP  385        -
 NPV(8%) (post-tax, real basis, ungeared)                             US$M       1,279      1,215 - 1,343
 IRR (post-tax, real basis, ungeared)                                 %          26.6%      25.3% - 27.9%
 Annual free cash flow post ramp-up                                   US$M pa    229        217 - 240
 Payback following commissioning                                      years      3.6        3.4 - 3.8
 Project net cashflow (post-tax)                                      US$M       3,928      3,732 - 4,124

Further substantial upside potential

The Scoping Study utilises a weighted average FOB Hamburg equivalent MOP price
of US$385/t. This includes an assumed price of US$370/t for Standard European
MOP product, which compares with an average price for this product of
approximately US$340/t (real basis, FOB NW Europe) over the past decade, and a
currently substantially higher spot price. Conservative salt price and sales
volumes assumptions have also been adopted for the Ohmgebirge Development.
Clear potential upside to both inputs delivers the prospect of considerably
greater revenue realisation from both MOP and salt sales at Ohmgebirge than
currently incorporated.

The Ohmgebirge Development focuses on the mining, processing and sale of MOP
from solely the Ohmgebirge Sylvinite deposit (290 Mt resource). The broader
South Harz Potash Project comprises multiple deposits with total potash
resources exceeding 5 Bt. Substantial long-term opportunity exists in
developing multiple potash mining operations in the district. Opportunities to
partner proximate existing regional mine infrastructure with potential capital
and permitting synergies are also set to be examined.

Next steps

The South Harz Board has approved progression to a Pre-Feasibility Study (PFS)
on the Ohmgebirge Development, which is scheduled for completion in Q4 CY2023.
The immediate focus of incoming Managing Director and CEO, Luis da Silva, is
the evaluation and optimisation of PFS delivery work plans.

The Company has engaged K-UTEC to carry out initial bench scale metallurgical
test work to confirm the selected process route and to confirm recoveries.
ERCOSPLAN will complete detailed geological modelling, with results to be
incorporated into future rock mechanical modelling to aid underground mine
design. Geotechnical work is ongoing using samples recovered from the recent
Ohmgebirge drillholes.

Requisite environmental and social impact assessment and permitting
requirements are well understood and set to parallel the next phases of
technical feasibility work.

In conjunction with progressing PFS workstreams, the Company is proactively
advancing financing initiatives, including preliminary discussions with future
potential strategic funding partners.

CORPORATE

Board and executive appointments

Effective 17 October 2022, Mr Lawrence Berthelet, a deeply experienced potash
executive commenced as a non-executive director of the Company and 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
(TSXV:APM), a leading Latin American silver producer, and President and CEO of
Phosphate developer, GB Minerals, leading the company through to its eventual
acquisition by Canadian phosphate producer, Itafos. Mr da Silva will commence
his role on 1 November 2022, and Acting Executive Chairman Mr Ian Farmer will
resume his role as Non-Executive Chairman.

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

Cash

South Harz's cash balance at 30 September 2022 was A$4.5 million (A$6.7
million at 30 June 2022). In early October the company received a A$0.6m
delayed VAT refund which should have been received in September but was held
up by an ad hoc tax audit. Otherwise our cash position would have been A$5.1m.

There were minimal options exercised during the quarter.

ASX additional information

South Harz provides the following information pursuant to ASX Listing Rule
requirements:

1.   ASX Listing Rule 5.3.1: Exploration and Evaluation Expenditure spend
during the quarter was A$639,000.

2.   ASX Listing Rule 5.3.2: No mining production or development.

3.   ASX Listing Rule 5.3.5: Payments to related parties during the quarter
totalled A$59,000.

Summary of tenement holdings as at 30 September 2022

 Küllstedt          Thüringen, Germany   Exploration  100%
 Gräfentonna        Thüringen, Germany   Exploration  100%
 Mühlhausen-Nohra   Thüringen, Germany   Mining       100%
 Ebeleben           Thüringen, Germany   Mining       100%
 Ohmgebirge         Thüringen, Germany   Mining       100%

 

This ASX release has been approved by Executive Chairman, Ian Farmer.

 
Investor and 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

  END NOTES

The information contained in this Quarterly Activities Report, including
detail related to the Company's past exploration results is extracted from, or
was set out in, the following ASX announcements:

·     The report released 12 July 2022, "Landmark Resource upgrade at
Ohmgebirge"

·     The report released 8 August 2022, "Ohmgebirge study evidences
world-class potash development"

·     The report released 10 October 2022, "Non-Executive Director
appointment"

·     The report released 24 October 2022, "Managing Director and CEO
appointment"

 

 

About South Harz

South Harz Potash (ASX: SHP) (South Harz) is a potash exploration and development company with its flagship project located in the South Harz Potash District region of Germany, midway between Frankfurt and Berlin.
The South Harz Project hosts a globally large-scale potash JORC (2012) Mineral Resource estimate of 5 billion tonnes at 10.6% K(2)O of Inferred resources and 258 million tonnes at 13.5% K(2)O of Indicated Resources across four wholly-owned project areas located favourably within central Europe.(1) This comprises three perpetual potash mining licences, Ohmgebirge, Ebeleben and Mühlhausen-Nohra, and two potash exploration licences, Küllstedt and Gräfentonna, covering a total area of approximately 659km².
With strong established infrastructure proximate to the key European market, the South Harz Project is well positioned to enable rapid economic development across multiple deposits.
South Harz Potash: Growing a responsible potash business in the heart of Germany

www.southharzpotash.com (http://www.southharzpotash.com)

 
 

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