South Harz Potash Ltd (ASX:SHP) has released a scoping study for the Ohmgebirge deposit, which forms part of its flagship, namesake potash development in Germany.
The key study considers an underground mining operation at the potash hub, which will use conventional methods to produce around 1 million tonnes of muriate of potash (MOP) every year, predominantly destined for European fertiliser markets.
The SHP board has already greenlit the move to a pre-feasibility study (PFS), which is slated for completion late next year.
While the PFS will consider the 1-million-tonne production scenario, South Harz will also look into a two-phase alternative with a lower peak financing requirement.
In the meantime, work on environmental and social impact assessments, as well as permitting activity, will accompany the next stage of technical feasibility work as SHP moves to expedite Ohmgebirge’s development.
Highlight reel
South Harz plans to process 4.5 million tonnes of ore every year at Ohmgebirge over an initial 21-year mine life, generating a 26.6% internal rate of return and a US$1.28 billion post-tax net present value at an 8% discount.
As it gets the project ready to go, the potash stock is preparing to pay in the order of $589 million to $651 million to cover pre-production capital costs.
In this context, South Harz forecasts the development capital required will fall comfortably below the current average set by similar-sized operations.
What’s more, the company believes its proximity to the European market offers huge cost and carbon footprint advantages compared to other suppliers.
In addition, there are a range of potential funding pathways given the project’s scale, projected economics and strategic location.
Some more key metrics from the scoping study are outlined below:
“Seminal moment”
South Harz executive chairman Ian Farmer said the company was delighted to have completed the Ohmgebirge scoping study.
“It is a seminal moment for the company and the South Harz region as a whole as we demonstrate the latent commercial and social potential that this asset, and the broader South Harz Project, offers,” Farmer explained.
“This is the first time that the potash mining opportunities in the district, with its long, and sometimes tumultuous, history in mining have been evaluated based on modern, internationally recognised standards and procedures.
“I would like to take this opportunity to thank all South Harz personnel and consultants for their contribution to this preliminary, but robust, technical and economic evaluation."
Environmental stewardship is key
Ohmgebirge is a relatively shallow, thick potash deposit in a region rich with infrastructure and potash mining history.
This means that the mining methods SHP elects to adopt have a proven track record in the district, mitigating some of the risks tied to project development.
However, SHP is also eager to keep the potash project green by committing to zero water discharges, which have historically been a defining feature of the industry.
Ohmgebirge is also expected to draw from grid power — half of which comes from renewable energy sources in Germany.
Farmer continued: “At South Harz, we have a deep commitment to developing Ohmgebirge in a responsible and sustainable fashion.
“Without a social licence to operate, a natural resources business has nothing. We seek to advance Ohmgebirge and the South Harz Project in a way that never loses sight of this fundamental truth.
“Our local community engagement is already strong and our focus on environmental stewardship is unwavering.”