Development-stage potash company Western Potash is actively pursuing financing for the development of its Milestone property in southern Saskatchewan. The property is located about 30 km south-east of Regina and 80 km south-east of Mosaic’s Belle Plaine mining lease, in an area which is home to one of the largest producing potash solution mines in the world.

Western Potash executive VP Dean Pekeski tells Mining Weekly that a recently completed feasi- bility study confirms that the Milestone asset is of sufficient size and grade to support primary and secondary potash solution mining for more than 40 years at an ultimate production rate of 2.8-million tons a year.

“The study included detailed capital and operational expenditure estimates with a production start-up in 2016. It also shows that the project’s resulting after-tax net present value is C$2.44-billion, with an internal rate of return of 18.6%, assuming a nominal discount rate of 10%,” says Pekeski.

“The lower capital intensity of the project combined with the plant’s efficient operations and high throughput produce a project with attractive rates of return and significant free cash flow. These factors, coupled with the detailed scope of project evaluation, the size and grade of the deposit, and the project development expertise of the management team, presents a unique oppor- tunity for investors and developers to secure an economical, reliable and long-term supply of potash.”

Environmental-impact assessment approval is expected in the first quarter of 2013.

Western Potash VP corporate development John Costigan reports that the company has taken another important step in the development of the project by reinforcing its negotiating team.

“UBS Securities Canada has been engaged to assist in evaluating alternatives related to securing the financing for the Milestone project. We continue our focus on identifying and reviewing the various alternatives available to help secure financing for construction development – whether in the form of a financing, joint venture or other structure,” he says.

The company aims to build Canada’s most efficient potash solution mine, with commercial production expected to start in 2016.

“Our vision is to become a world-class potash producer in Saskatchewan. First you deliver a world-class engineered project, which I believe we have done. We then continue the process by selecting a world-class partner interested in actually building a profitable potash mine in a low-risk, politically stable potash jurisdiction,” says Costigan.

“It provides an opportunity for our company to gather comments and concerns from various sources, and consider them during the design of the project. Early on, we determined that it was important to create and maintain relationships with local residents, communities, First Nations and Metis communities who may be potentially affected by the project.

“Consequently, the engagement approach was an integral component in the planning and environmental-impact assessment process. Various activities were carried out to establish and maintain engagement activities with members of the nearby communities. These activities included formal presentations, community information sessions and informal meetings with nearby residents. Efforts were made to engage the communities and rural munici- palities located closest to Miles-tone with the purpose of providing an understanding of the project and the potential effects it could have on the region. Going forward, we plan to maintain this engagement,” says Pekeski.

He says the key drivers for the company’s growth going forward are based on global potash supply and demand.

“Growing populations, decreas- ing amounts of arable land for each person, rising disposable income in developing regions (driving consumers to switch to protein-rich diets) and growing use of biofuels all are positive signs of growth in the potash industry,” comments Pekeski.

In terms of challenges related to exploration and project development in Canada, Costigan comments that financing is the greatest hurdle.

“This is why we see so many ‘flavour of the month’ companies springing up. By going outside the traditional sources of financing in North America and acces- sing overseas capital that is hungry for real development opportunities, these challenges are being met. I think it’s a shame we can’t finance these projects within North America,” says Costigan.

He also believes the junior sector has become very fragmented.

“The market expects the formulaic ‘discovery and sale’ and seems to have lost the ability to recognise true development opportunities.

“I see a reduction in exploration and development activity in the sector as investors become more disillusioned with the lack of consistency and results. The focus on short term, high return, albeit with flow-through dollars, has resulted in thousands of companies created to exploit that specific demand. However, what we at Western Potash are looking for is true investment and not trading opportunities,” he says.

Visit Western Potash Corp at PDAC 2013 at booth #3219.