Australian Potash adds blue-sky gold potential

Whilst Australian Potash may have made a splash in the potash space, the Perth-based resources – or agricultural – junior has also inked an interesting gold exploration deal that adds a blue-sky aspect to its flagship Lake Wells potash project in Western Australia at a time when the bullion market is running hard.

The company’s key asset at this stage is its fully owned Lake Wells sulphate of potash project located about 160km north east of Laverton in the Eastern Goldfields. After the release of a definitive feasibility study in August last year, Australian Potash has been focused on the front-end engineering design work, finalising offtake discussions and securing financing to develop the fertiliser project.

Last month the EPA confirmed a timetable for its assessment of the proposed $208 million Lake Wells sulphate of potash development ahead of a final ministerial approval decision in September.

According to the DFS, the operation will be a long life, high margin sulphate of potash – or fertiliser – producer, spitting out predicted cash flows before tax of a whopping $100 million a year on average over a mine life of 30 years from an average annual output of about 150,000 tonnes of premium grade potash fertiliser.

Other projections from the DFS include a very respectable net present value before tax of $665 million and life of mine cash cost of US$262/tonne.

However, Australian Potash has now added a second string to its bow with gold producer St Barbara committing to a significant drilling program in the search for gold at the Lake Wells project.

St Barbara plans to spend $5.25 million to earn a 70% interest in the gold project under the terms of a joint venture agreement. The exploration campaign St Barbara envisages includes up to 30,000m of air core, RC and diamond drilling across targets in the Lake Wells and Yamarna areas of the joint venture.

The results of exploration to date by St Barbara generated compelling analogies to the … Kundana goldfield endowed with in excess of 8 million ounces of gold.

Drilling is planned to kick off, subject to access, in September and should last until the end of the year. The beauty of the deal for Australian Potash is its 30 per cent interest in the JV is free carried through to completion of a bankable feasibility study on any gold orebody defined in the project area.

Having the $2.3 billion seasoned gold miner St Barbara on board for a serious look at the gold potential across the Lake Wells project area will help give Australian Potash another possible growth silo as it moves towards potash fertiliser production.

Is your ASX listed company doing something interesting? Contact: matt.birney@wanews.com.au