Potash Ridge Corporation - Blawn Mountain presentation, March 2014
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Transcript of Potash Ridge Corporation - Blawn Mountain presentation, March 2014
Premium Potash Project
Driven by a
Proven Management TeamTSX : PRKOTCQX : POTRFMarch 2014
FORWARD LOOKING STATEMENTS
2
Certain statements in this presentation may constitute "forward-looking" statements which involve
known and unknown risks, uncertainties and other factors which may cause the actual results,
performance or achievements of Potash Ridge Corporation (the "Corporation"), or industry results, to
be materially different from any future results, performance or achievements expressed or implied by
such forward-looking statements. When used in this presentation, such statements use such words
as "may", "would", "could", "will", "intend", "expect", "believe", "plan", "anticipate", "estimate" and other
similar terminology. These statements reflect the Corporation's current expectations regarding future
events and operating performance and speak only as of the date of this presentation. Forward-looking
statements involve significant risks and uncertainties, which include, but are not limited to the factors
discussed under “A Cautionary Note Regarding Forward Looking Statements” and "Risk Factors" in
the Corporation’s Annual Information Form dated March 27, 2013, and should not be read as
guarantees of future performance or results, and will not necessarily be accurate indications of
whether or not such results will be achieved. Although the forward-looking statements contained in this
presentation are based upon what management of the Corporation believes are reasonable
assumptions, the Corporation cannot assure investors that actual results will be consistent with these
forward-looking statements. These forward-looking statements are made as of the date of this
presentation and are expressly qualified in their entirety by this cautionary statement. Subject to
applicable securities laws, the Corporation assumes no obligation to update or revise them to reflect
new events or circumstances.
Focused on near term sulphate of
potash (“SOP”) production at its
Blawn Mountain property in Utah
3
SOP 645,000 tons average per annum
40 year Project Life backed by reserves
EXPERIENCED AND PROVEN MANAGEMENT
OVER 80 YEARS COMBINED EXPERIENCE
Guy Bentinck President & CEO
Chartered Accountant;20 years mining/resource experience
Sherritt: CFO and SVP Capital Projects
Ross Phillips Chief Operating Officer
10 years experience in large resource and energy sector projects
Sherritt, Capital Power
Jeff Hillis Chief Financial Officer
Chartered Accountant;10 years mining sector finance, including CFO of several public mining companies
Iberian Minerals, Excellon, Falconbridge
Paul Hampton VP, Project
Management
Geologist and Metallurgical Engineer;
~30 years experience in design, construction, start-up and management of mineral processing facilities
SNC, Washington Group, Outotec
4
Laura Nelson VP, Government and
Regulatory Affairs
Extensive experience in government relations, permitting and power planning, including the successful permitting a large mine in Utah
Red Leaf Resources, Utah Government
COMPETITIVE ADVANTAGES
40 year mine life, with mineral reserves of 426 million tons of ore
Large mineral deposit containing premium-quality potash and alumina rich material
645,000 tons of SOP per annum over life of mine
Mining friendly jurisdiction, established infrastructure nearby, designated
development lands and efficient state permitting
PFS completed November 2013: $1.0 billion NPV at 10%; 20.5% after tax IRR;
excludes potential revenue from alumina rich material
Historical work expedites project development; proven production process
Lower risk surface mining deposit; expected low cost producer
5
POTASH OVERVIEW
6
No known substitute
Increasing world population
Growing per capita income
Decreasing arable land
Increasing use of biofuels
POTASH WORLD DEMAND +5% EXPECTED ANNUAL
DEMAND TO 2016; SOP HIGHER GROWTH POTENTIAL
POTASH:
ESSENTIAL TO THE WORLD’S FOOD SUPPLY
7
POTASSIUM AND SULPHUR ARE ESSENTIAL NUTRIENTS
SOP: PREMIUM FERTILIZER
Sulphate of Potash
(SOP)
Muriate of Potash
(MOP)
50% K2O Equivalent 60% K2O Equivalent
17% S 0% S
<1.0% Cl 45% Cl
4.8 million tonnes sold in 20131 50 million tonnes sold in 20131
Improves yield, quality, taste
and enhances shelf life1
Crop quality/yield diminish as
chloride builds up1
1 CRU 2013 8Chemical makeup assumes 92.5% K2SO4 and 95% KCl product
Consumption of
SOP restricted by
limited production
capacity, with little
expansion potential
SOP share of potash
market:
Current: 5 Mt
Potential: 10-12 Mt
Trend toward high
nutrient fertilizers
Trend towards pricing of
SOP based on
incremental revenue
through yield/quantity
improvements vs.
premiums over MOP
SOP – A DISTINCT & VALUABLE
POTASH PRODUCT
Fruits
Vegetables
Nuts
Horticultural Plants
Tobacco
Tea
Coffee
Dry/Salty soil
Especially valued for chloride sensitive crops,
SOP improves yields on high value crops such as:
9
SOP MARKET DYNAMICS
1CRU 201310
Europe24%
N. America
7%
C & S America
6%
China49%
Africa5% RoW
9%
SOP Consumption by Region
RegionProcess
Method
World
CapacityProcess Inputs Products
Avg Cost
/ Ton1
Future
Outlook
China/
Europe Mannheim2.3Mt
43%
MOP SOP
$453
High
Cost/by-
product
limits
growth
Sulfuric Acid Hydrochloric
Acid
Energy
EuropeMOP and
Kieserite
1.2Mt
22%
MOP SOP
$440
No
additional
deposits
Kieserite Magnesium
Chloride
Energy
China/
USA/
Chile
Salt Lakes1.9Mt
35%
Lake Brines SOP
$381
No
additional
suitable
lakes
Energy Magnesium
Chloride
Sodium Chloride
Existing SOP Production by Process
New sources of SOP from these existing
processes are unlikely due to lack of
primary sources and difficulties
surrounding secondary source production.
CRU predicts SOP consumption
of 9,500,000 tonnes per annum
by 2019 – where will this
production come from?
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009 2010 2011 2012 2013
POT - North America (MOP)
CMP - (SOP)
CURRENT PREMIUM 145% FOR SOP IN US
SOP PREMIUM PRICE TRENDS
U.S. $/tonne
11 1 Compass Minerals Q4 2013 Report, 2 Potash Corp Q4 2013 Report
Compass Q4/13 realized price $690/tonne1
Potash Corp Q4/13 realized price $282/tonne2
Recent quotes from blenders in Uberaba, Brazil $1,110/tonne
SIGNIFICANT GROWTH POTENTIAL
EASY ACCESS TO LOCAL MARKETS
SOP MARKET TARGETS
121 CRU 20132 From PRK Study August 2013, based on crops that are best suited for SOP
United States
SOP consumption: 385,000 tons1
Potential consumption: 920,000 tons2
Large scale production of chloride intolerant crops such as nuts in California
and citrus fruits in Florida drive a large part of US SOP demand. Consumption
of these crops continues – e.g. Almond crops have grown by 7% per year
since the mid 1990s.
Brazil
SOP consumption: 42,000 tons per year2 (0.4% of total potash
consumption)
Potential consumption: 2.1 million tons2
Brazil is the world’s largest grower of coffee, soybeans and citrus fruits, all
SOP crops. Low consumption is entirely due to lack of SOP availability.
China
SOP consumption 1.9 million tons per year1
Potential consumption: 4 million tons per year2
China produces close to half of the world’s fruits and vegetables, and nearly
one-third of the world’s tobacco and tea. SOP consumption almost doubled
between 2007 and 20121, with large untapped growth potential.
THE BLAWN MOUNTAIN PROJECT
13
ANTICIPATED INITIAL PRODUCTION IN 2017
PROJECT OVERVIEW
14
Large alunite deposit, which is expected to be
processed into SOP, and possible alumina rich
material
Average 645,000 tons of SOP per annum
Historical work expedites project development
Mineral deposit to be surface mined
Proven process backed by extensive metallurgical
testing
ORE TEST PIT
15
ALMOST 100 YEARS OF POTASH PRODUCTION
UTAH: AN ATTRACTIVE
MINING JURISDICTION
1Forbes Magazine, December, 2012 2Fraser Institute, April, 2013
Major resource producer
Existing potash production
Best state for business1
Top quartile mining jurisdiction2
16
OUR LAND ADVANTAGEState-owned land designated for
development
Efficient permitting process
Leasehold and royalty agreements
negotiated
No known adverse environmental or
social issues
Sufficient water nearby – rights
application made
Roads, rail, transmission and natural gas
nearby
Construction materials, equipment
suppliers and skilled labour force
17
MUNICIPAL AND STATE SUPPORT OF PROJECT
PREVIOUS WORK ACCELERATES PROJECT DEVELOPMENT
EXTENSIVE DEVELOPMENT COMPLETED IN 1970’s
18
• Approximately $25 million spent (~$100 million in today’s dollars).
• Programs included:
Drilling, Resource estimate, Feasibility Study, mine plan, Engineering, Permitting and 3-year operation of a pilot plant processing up to 11 tons per day.
• Alumina originally primary product;
SOP was by-product
• Project ultimately shelved due to poor
economic conditions in early 1980s
• Potash Ridge owns all historical data
SIMPLE PROVEN FLOWSHEET
Alunite
Calcination
Water Leach
Alumina Rich Material
SOP SolutionCrystallizing Drying,
Compacting & SizingSOP
SO2Acid Plant Sulphuric Acid
19
Flowsheet similar to commercial-scale production
processes historically used in US, Australia and Azerbaijan.
RECENT EXTENSIVE TEST WORK CONFIRMS FLOWSHEET
• Plant to process 10.4 million tons per annum
• Metallurgical testing on-going for Feasibility Study
Crushing & Grinding
PREFEASIBILITY STUDY – SUMMARY
• Proven & Probable mineral reserves of 426 million tons;
• Reserves support 40 year mine life, with potential to increase life of operations through
exploration of two additional zones of known mineralization;
• Project after tax Net Present Value (“NPV”) of $1.0 billion using a 10% discount rate:
• Total sales of 26 million tons of SOP over life of mine;
• Unlevered after tax internal rate of return (“IRR”) of 20.5%; payback period of 5 years
after commencement of operations;
• Strong cash flow generation with cash flow from operations of $234 million per annum
excluding the two year ramp up period;
• Approximately 28% of direct capital costs are supported by packaged quotes
1Inclusive of by-product acid revenues and exclusive of royalties; no credit assumed for potential
revenue from the sale of alumina rich material. 20
Economic Indicators
NPV (after tax, at 10%) $1.0 billion
IRR (after tax) 20.5%
Payback period (from commencement of operations) 5 years
Average annual SOP production 645,000 tons
Average annual sulphuric acid production 1,440,000 tons
SOP price (average) $649/ton
Sulphuric acid price (average) $135/ton
Project life 40 years
Initial capital cost (including 15% contingency) $1,124 million
Operating cost (excluding royalties) $173/ton SOP
The economic evaluation is based on
the following assumptions:
• Site construction commences late
2015;
• Production ramp-up over 2 years
(2017-2018), reaching full
production in 2019;
• SOP pricing from CRU forecast
below current North American
SOP prices;
• Average tax rate of 35%.
SOP CAPITAL COST BREAKDOWN1
21
CAPITAL COST: $1.124 billion(15% contingency)
14% SOP Leaching, Crystallization
and Drying
42% Calcination13%
Crushing & Grinding
31% Contingency,Indirects and Infrastructure
1 Excludes utilities and other infrastructure
not incurred by Potash Ridge ($641 million):
Build-own-operate arrangements
under negotiation.
Acid Plant ($280 million)
Natural Gas Line ($83 million)
Water Treatment Plant ($60 million)
Expect to access government
funding programs
Rail Spur ($76 million)
Access road ($53 million)
To be incurred by Mine Contractor Mine Capital ($89 million)
OPERATING COSTS: $173/TON OF SOP
22
7% Other ($14M)
14%Royalties($33M)
Excludes credit for potential alumina rich material revenue.Includes 15% contingency (excluding non-energy and labour costs).
Total Cash Production Costs
Annual Average
Cost($)/Ton SOP
(Constant 2013 $US)
Direct Plant and Mine Cash Production
Cost $414
Credit for Value of Acid $(302)
Subtotal of Direct Plant and Mine Cash
Production Cost$112
Site G&A, Property Taxes & Corporate
Overhead$27
3rd Party Facility Charges $34
Total before royalty $173
Royalties $45
Total Cash Production Cost $218
Potash Ridge Salt Lakes MOP/ SulphateSalts
MannheimProcess
Cash Production CostsAvg Cost/Ton
$381
$440
$453
$173
Potash Ridge
Expected In Production
1 CRU 2013
1
1 1
PREFEASIBILITY STUDY –
RESERVES ESTABLISHED
Drilling to date has focused
only on two of the four areas
within the 15,400 acre land
parcel
Supports 40 years of
operations
Reserves demonstrate the
economic and technical
viability of the Project
23
Reserve Category
Total
Proven
('000
tons)
Probable
('000 tons)
Alunite Ore (ROM tons) 136,254 289,540 425,794
Ore (average K2O (%) grade) 3.56 3.49 3.51
Ore (average K2SO4 (%) grade) 6.59 6.46 6.49
SOP (tons) 8,457 17,970 26,427
Sulphuric Acid (tons) @ 98% Purity 18,888 40,136 59,024
Mineral Reserves by Category November 6, 2013
SULPHURIC ACID
24
Driven by local US Market – prices dependent on supply and proximity
Mountain West US market approximately 5.6 million tons per annum
Expected increase in this market from mine expansions and new mine development
Potash Ridge will provide stable supply to consumers
MOU in place for 20% of acid production
• Leaching process leaves alumina rich material which, with beneficiation, may be used as a substitute to bauxite as a feedstock into a Bayer alumina production facility.
• Metallurgical testing confirmed the alumina in this material is soluble in high temperature caustic solutions
• May also be acceptable as a raw material feed for low temperature refineries
• Further testing is underway to determine whether the alumina rich material could meet specifications for feed material in the production of ceramic proppants in North America.
• PFS economics do not include revenue from the sale of alumina rich material
25
UPSIDE POTENTIAL FROM LEACH RESIDUE
SOURCES OF SMELTER FEED TO CHINA
Blawn
Mountain,
Utah
Boke,
Guinea
Trombetas,
Brazil
Kingston,
Jamaica
Distance to Shandong Province, China (nm) 5,744 11,128 10,815 9,051
Port Long Beach Conakry Aratu Jamaica
MILESTONES
26
EXPECTED
43-101 Measured and Indicated Resource to support 30-year mine life
Issue Preliminary Economics Assessment
Commence metallurgical test program
Commence Pilot Plant Test work & produce SOP from test work
Complete baseline environmental surveys
Issue Prefeasibility Study supporting 40-year mine live
Submit Large Mining Permit Application
Complete metallurgical test program
Water Rights application approval
Air Quality Permit filed
Large Mining Permit approval
Issue Feasibility Study
Receive final permits
Construction start up
Ramp up
a a
a a
a a
a
2017
End 2015
End 2015
Early-Mid
2015
Q2 2014
End 2014
Q3 2014
Note: Timelines are based on obtaining sufficient financing to advance Feasibility Study
2014 to
End 2015
CAPITAL STRUCTURE
27
Millions
Common Shares 81.7
Non-voting Common Shares 5.0
Total Shares Outstanding 86.7
Warrants – $ 0.50 10.7
Warrants – $1.00 5.0
Broker options/warrants 3.4
Stock options 7.0
Total Fully Diluted Shares 112.9
As at December 31, 2013
INSIDERS HOLD 5%, 10% FULLY DILUTED
COMPETITIVE ADVANTAGES
40 year mine life, with mineral reserves of 426 million tons of ore
Large mineral deposit containing premium-quality potash and alumina rich material
645,000 tons of SOP per annum over life of mine
Mining friendly jurisdiction, established infrastructure nearby, designated
development lands and efficient state permitting
PFS completed November 2013: $1.0 billion NPV at 10%; 20.5% after tax IRR;
excludes potential revenue from alumina rich material
Historical work expedites project development; proven production process
Lower risk surface mining deposit; expected low cost producer
28
CONTACT US
29
Toronto office:
3 Church Street, Suite 600
Toronto, Ontario
M5E 1M2
Phone: 416-362-8640 ext 101
Salt Lake City office:
170 S. Main Street, Suite 500
Salt Lake City, UT
80101
Phone: 801-433-6027
www.potashridge.com