South Harz Potash Ltd (ASX:SHP)’s pre-feasibility study (PFS) for its flagship Ohmgebirge potash development in central Germany is on track to be completed early in the upcoming quarter, with plans to implement a lower cost structure focusing on internal project optimisation.
The company also advises that commercial partnership discussions with adjoining project and infrastructure owner, NDH-E/DEUSA International GmbH (Deusa), are progressing well.
Successful delivery of a definitive agreement with Deusa for long-term shaft access and utilisation will enable implementation of the targeted brownfield development pathway for Ohmgebirge. This pathway offers substantial time, capital cost and footprint advantages versus greenfield shaft construction.
Optimised development plan
South Harz says it plans to enter a lower-cost, internal project optimisation phase on Ohmgebirge once the PFS is completed. In making this decision, the company considered current global potash market conditions, including cyclically depressed price levels, that impact available opportunities for more rapid project advancement and financing.
During this phase, the company plans to systematically progress permitting on Ohmgebirge. This will allow the project to steadily advance and remain well positioned versus potash development competitors, while global potash market conditions improve (as is expected) over the next 12-24 months.
This planned optimisation phase is also expected to provide the opportunity for ongoing value engineering processes to be undertaken on final PFS capital and operating cost outcomes to reflect the present inflationary environment.
Potential commercial transaction
South Harz has also granted due diligence access and entered discussions with another party in respect of a potential commercial transaction.
As a result of this development, South Harz non-executive director Seamus Cornelius has stepped down from the South Harz board in order to avoid any potential or perceived conflicts of interest.