South Harz Potash Ltd (ASX:SHP) managing director Dr Chris Gilchrist says the company is making solid progress towards achieving an upgraded mineral resource estimate at the Ohmgebirge Potash Project in Germany, with drilling preparations and scoping study work progressing well.
In its latest quarterly update for the period ending June 30, the company highlighted its achievements on the back of an improving long-term outlook for the potash market.
Gilchrist said: “We are making solid progress towards achieving an upgraded mineral resource estimate at Ohmgebirge with preparations for the drilling of the confirmatory holes progressing well and scoping study work schedules agreed.
“The potash market fundamentals continue to strengthen with contract MOP prices of US$300 per tonne forecast for the next 12 months.
“The longer-term price outlook is also strengthening, presenting a particularly encouraging backdrop for the Ohmgebirge scoping study to be produced in Q1 2022.”
South Harz Potash has finalised discussions with providers of the various components of the Ohmgebirge scoping study and work will begin shortly once formal drilling permission is received, normally within 90 days of submission of the detailed drilling information.
This scoping study will include a detailed resource assessment by Micon International Co Ltd (Micon), and the inclusion of the results from the twin drill holes leading to a revised resource estimate.
The bulk of the scoping study will be compiled in advance of the drill core assays thereby minimising the time between drilling completion and study release.
An upgraded estimate to the indicated resource status will allow South Harz Potash to report technical and economic information on Ohmgebirge for the first time.
In addition to the resource upgrade, the study will also include details of the proposed mining and processing methods and an update of both capital and operating costs.
Resource confirmation drilling
The Ohmgebirge Project has an inferred resource of 325 million tonnes grading 13.1% K2O and SHP plans to drill two confirmatory holes to verify results from historic drill holes in order to update the mineral resource estimate.
Specialist deep drilling company Angers has been appointed to drill the first of the two confirmatory twin holes.
The appointment enabled the submission of the supplementary details required as the final step in the first hole’s regulatory process.
Following a successful permitting application, which has been guided by potash specialist consultants ERCOSPLAN Kali-Ingenieurbuero, and having secured drill rig availability, drilling of the first hole is expected to kick off in the December quarter of 2021.
South Harz notes that the potash market has picked up significantly over the past few weeks as post-COVID food security fears have fueled substantial crop price increases which, in turn, has driven fertiliser sales and prices upwards.
The company said market specialists were currently advising that contract sMOP (Standard Muriate of Potash) prices in the region of US$300 per tonne were forecast for the next 12 months and spot prices upwards of US$450 per tonne for delivered granular MOP had been reported in Brazil and Midwest USA.
Existing contract prices are increasingly becoming outliers and China is not forecast to settle any new 12-month contracts until Q4, at which time it is expected this will be around the US$330/t CFR mark representing an increase of US$83/t over existing contracts.
SHP’s scoping study will include an expert appraisal of the potash and industrial salt markets and will provide guidance price forecasts for a financial model.