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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Salt Lake Potash Limited | LSE:SO4 | London | Ordinary Share | AU000000SO44 | ORD NPV (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.45 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSO4
RNS Number : 5547P
Salt Lake Potash Limited
11 October 2019
11 October 2019 AIM/ASX Code: SO4 SALT LAKE POTASH LIMITED -------------------------
OUTSTANDING BANKABLE
FEASIBILITY RESULTS FOR LAKE WAY
Salt Lake Potash Limited (SO4 or Company) is pleased to report the results of its Bankable Feasibility Study (BFS) for the commercial scale development of its 245,000t per annum Sulphate of Potash (SOP) project at Lake Way (Project).
Highlights
The results of the BFS demonstrate that the Project will generate outstanding returns through:
Strong financial results
-- Exceptional economics with estimated project post-tax NPV(8) of A$479 million (pre-tax NPV(8) of A$696 million) and post-tax IRR of 28% (pre-tax IRR 38%)
-- Steady state Project EBITDA of A$111 million annually and average annual after tax free cash flow of A$78 million (A$83 million during first 5 years)
-- Strong cash flows and low capital costs result in early payback period of 3.5 years
Low capital and operating costs
-- First quartile operating costs for global SOP producers with a C1 cash cost estimate of A$302/t (US$205/t)
-- Low development capital requirements of approximately A$254 million (US$173 million), including contingency of A$21 million, which is supported by the close proximity to infrastructure
Significant Lake Way Ore Reserve
-- High-grade Probable Ore Reserve of 5.4Mt SOP (2.4Mt contained potassium atan initial grade of 6.8kg/m(3) ) underpins a 20-year life of mine
-- Increase in the paleochannel basal sands Mineral Resource Estimate of 57% to 6.0Mt SOP in Total Porosity (2.2Mt in Drainable Porosity) supports additional production bores
-- Excess of sulphates at Lake Way enables production of an estimated 245,000t per annum of premium grade SOP with the addition of 42,360t per annum KCl
Premium product
-- Very high grade potassium (>53% K(2) O) product confirmed, with a low chloride (<0.1% Cl) and insoluble particle (<0.1%) content and dissolution rate of 95% in one minute
-- Premium grade specifications from pilot plant testwork support premium pricing
-- BFS completed using a modelled sales price of US$550/t
Fast-tracked production
-- Existing Mining Leases on Lake Way tenements have provided an advanced permitting pathway for early development activity
-- Completion of the first stage of evaporation ponds has enabled dewatering of super saturated brine (25kg/m(3) SOP) from the Williamson Pit to commence
-- Plant commissioning forecast Q4 2020, utilising salts produced from the Williamson Pit brine
TONY SWIERICZUK
SO4 Chief Executive Officer
"We are extremely excited to release the Lake Way Project BFS with such outstanding economic results. Significant work has been undertaken by the Company since the Lake Way Scoping Study which has further strengthened the Project fundamentals. The BFS demonstrates the ability to significantly increase the production rate and optimise development capital while maintaining our position as a low cost producer.SO4 has completed the first stage of on-lake construction and will continue with progressive development of remaining commercial scale evaporation ponds planned from Q4 2019."
Study Performance
Strengthening the Scoping Study results
The BFS incorporates a number of changes to the previous Scoping Study, including a revised processing methodology to include the addition of potassium chloride (KCl) which has increased the annual production rate to 245,000t and delivered improved economic outcomes. While the addition of KCl to the process plant has increased the C1 cash cost from the previous estimate in the Scoping Study, SO4 estimates it will achieve better capital intensity and maintain its position as a low cost producer at US$205/t while significantly improving project economics.
Changes in key financial metrics for the Project from the Scoping Study to the BFS are summarised in Table 1.
Table 1: Comparison of key financial metrics
Metric Unit Scoping Study BFS % change ====================== ======= ============== ======== ========= Production tpa 200,000 245,000 22.5% ====================== ======= ============== ======== ========= Life of mine years 20 20 _ ====================== ======= ============== ======== ========= First production Qtr Q4 2020 Q4 2020 _ ====================== ======= ============== ======== ========= C1 cash cost A$/t 264 302 14.4% ====================== ======= ============== ======== ========= Capital cost A$m 237 254 7.2% ====================== ======= ============== ======== ========= Capital intensity A$/t 1,185 1,038 (12.6%) ====================== ======= ============== ======== ========= NPV(8) (post-tax) A$m 381 479 25.7% ====================== ======= ============== ======== ========= IRR (post-tax) % 27% 28% 3.7% ====================== ======= ============== ======== ========= NPV(8) (pre-tax) A$m 580 696 20.0% ====================== ======= ============== ======== ========= IRR (pre-tax) % 33% 38% 15.2% ====================== ======= ============== ======== ========= EBITDA(1) A$m 90 111 23.3% ====================== ======= ============== ======== ========= Payback period years 3.2 3.5 7.9% ====================== ======= ============== ======== ========= Probable Ore Reserve Mt K - 2.4 _ ====================== ======= ============== ======== =========
Note 1: Refers to average annual Project cash flows during steady-state production.
SO4 has significantly advanced development of the Project since the Scoping Study, including completion of 125ha of evaporation ponds which are now filled with high grade brine (25kg/m(3) SOP) from the Williamson Pit. This has provided the Company with additional insight into the critical evaporation processes and provided opportunities to further improve design and construction of the remaining evaporation pond network.
Fast tracked production to maximise value
The optimised capital expenditure plan has considered a staged approach to pond construction that aligns with the plant ramp-up schedule and steady-state production requirements, enabling some initial capital expenditure to be deferred for a period of up to 12 months. The first stage of solar evaporation ponds (125ha), that are now complete
Lowest quartile operating costs
The results of the BFS demonstrate the potential for very low operating costs. It is estimated that the Project will have one of the lowest operating costs of any SOP operation globally with a C1 cash cost of A$302/t (US$205/t).
Robust economics
The BFS further demonstrates the potential for the Project to support an exceptionally high margin over a 20-year life of mine through the production of high grade, premium SOP. This combined with the low capital intensity delivers very strong returns with a post-tax IRR of 28%.
Market analysis by CRU Consulting and Argus Media Group, supported by internal SOP sales and marketing expertise, indicates a significant opportunity for SO4 to capture additional pricing upside associated with the premium potassium grade and solubility properties of the specifications produced during pilot plant testwork.
Table 2: Comparison of key financial metrics(1)
Hot Features
Premium
SOP price Breakeven US$400/t US$450/t US500/t Base US$600/t US$650/t
US$307/t US$550/t
=================== =========== ========= ========= ======== ========== ========= =========
NPV(8) (post tax) - 187 285 382 479 575 672
=================== =========== ========= ========= ======== ========== ========= =========
Note 1: Equivalent adjustment to the value of potassium assumed for KCl input cost.
The BFS demonstrates that, even in the most extreme downside pricing scenarios, the Project continues to deliver robust economic returns. The breakeven pricing scenario of US$307/t is at a significant decrease to the current SOP price.
Project funding advanced
SO4 has previously announced that it reached an agreement with Taurus Funds Management (Taurus) for financing up to US$150m for the Project. The Company has commenced drawdown of the initial US$30m tranche of this facility. SO4 is working with Taurus to finalise documentation of the full facility and access the remaining portion of funding, with completion of the BFS being one of the key conditions precedent.
Next steps
With the successful completion of the BFS, SO4 will accelerate development of the full commercial scope for the Project. The Company is quickly advancing on multiple fronts with several key developments over the coming months:
-- Detailed design and documentation has commenced with the appointment of: GR Engineering Services for the process plant; Coffey Tetra Tech, Tetra Tech Proteus and Cardno for on-lake infrastructure
-- Continued construction on Lake Way with the commencement of the next stage of evaporation ponds and brine extraction infrastructure
-- Procurement of long lead items -- Execution of key offtake agreements with preferred partners
Key Project Metrics
Table 3: Key Project Metrics
Element Unit Value
========================================= =========== ========
Physical
========================================= =========== ========
Life of mine years 20
========================================= =========== ========
Annual SOP production tpa 245,000
========================================= =========== ========
Production plan
========================================= =========== ========
Ore reserve
========================================= =========== ========
Brine volume GL 474
========================================= =========== ========
Brine grade (LOM average) kg/m(3) K 5.0
========================================= =========== ========
Contained potassium Mt 2.4
========================================= =========== ========
Production method(1)
========================================= =========== ========
Trenches km 132
========================================= =========== ========
Bores No. 18
========================================= =========== ========
Evaporation ponds
========================================= =========== ========
Halite ponds ha 686
========================================= =========== ========
Harvest ponds ha 96
========================================= =========== ========
Recovery of potassium from brine % 91%
========================================= =========== ========
Process plant
========================================= =========== ========
Operating time hours/yr 7,600
========================================= =========== ========
Harvest salt to plant Mtpa 2.27
========================================= =========== ========
KCl addition tpa 42,360
========================================= =========== ========
Recovery of potassium from harvest salt % 84%
========================================= =========== ========
Operating and capital costs
========================================= =========== ========
Operating costs
========================================= =========== ========
Mine gate cash operating cost A$/t 240
========================================= =========== ========
Transport and handling cost A$/t 62
========================================= =========== ========
C1 cash cost A$/t 302
========================================= =========== ========
Capital costs
========================================= =========== ========
Direct cost A$m 157
========================================= =========== ========
Indirect cost A$m 76
========================================= =========== ========
Contingency A$m 21
========================================= =========== ========
Total capital cost A$m 254
========================================= =========== ========
Financial performance
========================================= =========== ========
Price (FOB) US$/t 550
========================================= =========== ========
Exchange rate A$/US$ 0.68
========================================= =========== ========
Discount rate % 8%
========================================= =========== ========
NPV(8) (post-tax) A$m 479
========================================= =========== ========
IRR (post-tax) % 28%
========================================= =========== ========
NPV(8) (pre-tax) A$m 696
========================================= =========== ========
IRR (pre-tax) % 38%
========================================= =========== ========
EBITDA(2) A$m 111
========================================= =========== ========
Post tax annual cash flow(2) A$m 78
========================================= =========== ========
Payback years 3.5
========================================= =========== ========
Note 1: Refers to initial trench and bore development included in the capital cost estimate.
Note 2: Refers to average annual Project cash flows during steady-state production.
Project Overview
Lake Way is located in the Northern Goldfields Region of Western Australia, less than 15km south of Wiluna. The Lake Project tenements comprise approximately 280km(2) .
SO4 currently holds nine Mining Leases and six Exploration Licences (refer Company Announcements dated 23 July 2019 and 8 October 2019) which cover the whole of the Lake Way surface and key strategic areas off-lake, including the extensive paleochannel and proposed process plant and village area. The Company has secured several Miscellaneous Licenses within the surrounding Lake Way area to support key infrastructure including process water bore fields, gas pipelines and access roads.
The recently completed transaction with Blackham Resources Ltd (Blackham), the owner of the adjacent Matilda-Wiluna Gold Operation, has secured access to process water rights in the Southern Borefield, in addition to key tenement acquisitions.
Lake Way has a number of compelling advantages which make it an ideal site for SO4's initial SOP operation, including:
-- Granted Mining Leases with approvals to undertake the initial long lead construction items (Stage 1 evaporation ponds complete, Stage 2 evaporation ponds targeted to commence in Q4 2019)
-- The site has excellent freight solutions being adjacent to the Goldfields Highway, which is permitted for heavy haulage that supports direct access of quad trailer road trains to Geraldton
-- The Goldfields Gas Pipeline is adjacent to SO4 tenements, running past the eastern side of the Lake
-- Existing site haul roads and service roads including the Williamson Pit Causeway that connects the proposed process plant area to the on-lake production ponds
-- The Wiluna Airport which is located 5km south of the main township and provides foundational infrastructure to support operations
-- Access to an exceptionally high grade brine of 25kg/m(3) of SOP from the Williamson Pit, which has enabled the Company to fill the Stage 1 evaporation ponds and commence on lake production
-- The high grade brines at Lake Way will deliver lower capital and operating costs due to lower extraction and evaporation requirements
-- The presence of clays in the upper levels of the lake which are amenable to low cost, on-lake evaporation pond construction
Contributors to the Study
The BFS has been developed and managed by a high-qualified internal team from SO4, with support from leading independent consultants and contractors as required. Table 4 outlines key contributors to respective areas of the BFS.
Table 4: BFS Contributors
Study area Contributor
=========================== ====================================================
Industry Analysis and SO4, Argus Media Group, CRU Consulting
Marketing
=========================== ====================================================
Resource and Reserve SO4, Groundwater Science, HydroGeoEnviro
Estimate
=========================== ====================================================
Mine Planning SO4, Ad-Infinitum
=========================== ====================================================
Brine Extraction SO4, Cardno, Coffey Tetra Tech, Tetra Tech
Proteus
=========================== ====================================================
Brine Evaporation SO4, Ad-Infinitum, Coffey Tetra Tech, Tetra
Tech Proteus, Knight Piésold
=========================== ====================================================
Process Plant SO4, CPPC Ltd, Saskatchewan Research Council,
Wood Group, GR Engineering Services
=========================== ====================================================
Non-process Infrastructure SO4, GR Engineering Services
=========================== ====================================================
Product Logistics SO4
=========================== ====================================================
Environment & Approvals SO4, Bamford Consulting Ecologists, Botanica
Consulting, Bennelongia Environmental Consultants,
Pendragon Environmental Solutions
=========================== ====================================================
Land Access, Native SO4
Title, Heritage and
Social Responsibility
=========================== ====================================================
Project Implementation SO4, GR Engineering Services
=========================== ====================================================
Operations Management SO4
=========================== ====================================================
Capital and Operating SO4, GR Engineering Services, Turner & Townsend
Costs
=========================== ==================================================== Risk Analysis SO4, EPM Group =========================== ==================================================== Economic Analysis SO4, CAM Financial Modelling =========================== ====================================================
Mineral Resources and Ore Reserves
A Mineral Resource Estimate for the whole of Lake Way was first reported to the ASX 18 March 2019. The Lake Way mineral resource consists of a potassium rich brine contained in the superficial lake bed sediment (or lake playa) and underground paleochannel.
Since publication of the March 2019 Mineral Resource Estimate, additional test pumping and passive seismic geophysical surveys have enhanced understanding of the route and dimensions of the paleochannel. This has led to a significant increase in the volume of the Indicated resource within the paleochannel, as well as an upgrade of a portion of the paleochannel resource to the Measured category.
HydroGeoEnviro completed a number of column leach tests to substantiate the leaching potential of potassium from the retained porosity of the lake bed sediments. This testing supports the modelling of changes in potassium grade over the life of mine, in particular the effects of rainfall recharge and lake filling events.
The resource estimate has been converted to a Probable Ore Reserve with the development of a complex numerical hydrogeological model. The model is based on results from the extensive field programme and considers modifying factors such as recharge and evapotranspiration to develop the life of mine production plan.
Paleochannel Indicated Resource Increase
The initial paleochannel model reported in the March 2019 Mineral Resource Estimate was developed using data from a number of sources including:
-- Historic Western Australian Mineral Exploration (WAMEX) reports
-- 2018 sterilisation drilling program completed by Blackham
-- SO4 test pits and trenches (where they intersect the base of the lake bed sediments)
-- Test pumping of two historical boreholes installed by Western Mining Corporation (WMC) in 1992
-- Preliminary passive seismic geophysical surveys.
Recent geological modelling has incorporated additional passive seismic lines which has significantly improved accuracy in both the horizontal and vertical domains. This has led to an increase of approximately 60% in the paleochannel volume.
The stratigraphy from boreholes that were part of the 1992 WMC Mount Keith water supply investigation drilling programme (Woodward-Clyde, 1992) provides a log of the depth to basement and a thickness of the overlaying the paleochannel basal sands. The stratigraphy has been used to calibrate the geophysical results for depth to basement and provides a basis for proportioning the channel volume.
The top elevation of the paleochannel basal sands has been updated in the model to reflect data from available bores reported in the WAMEX database. This shows a consistent location of the top elevation and provides a more comprehensive picture of the paleochannel basal sand aquifer; with a clear thickening of lake bed sediments to the east and a paleochannel basal sands volume 60% greater than the March 2019 estimate.
Paleochannel Hydraulic Performance
The phased aquifer testing program has been completed at Lake Way using two of the 1992 WMC production bores, TB3-4 and TB 5-7. These bores were initially tested at constant pumping rates between 2L/s and 5L/s for a 24 hour duration (refer ASX announcement March 2019). TB3-4 was subsequently retested at a flow rate of 5L/s for a duration of 10 days.
The water level responses to pumping indicated no apparent connection between the shallow lake bed sediments and the paleochannel aquifer. This has confirmed that the shallow lake bed sediments and paleochannel sands at Lake Way make up two broadly distinct aquifer units, separated by the very low permeability lake bed sediments. Refer to Appendix C for recent test results.
Lake Bed Sediment Grade
Brine leaching tests were completed to improve understanding of how (and how much) mineral salt contained within the retained porosity of the lake bed will be mobilised as a result of recharge events. This is critical to inform overall extractability of the resource and modelling of potassium grade over the life of mine.
Brine Leaching Tests
HydroGenEnviro (2019) completed twelve column tests on lake bed samples retrieved from Lake Way. The samples were tested in the laboratory to understand the effect on potassium grade at increasing pore volumes of water flushing through the sediments, to approximate potassium grade during rainfall recharge. Results are presented in Appendix C.
Total potassium flushed from the samples equated to an average of 3.0kg potassium per cubic metre of sediment (range 2.3 to 3.7). Mobilisation was achieved quickly, with most potassium leached within 2 to 3 pore volumes. These values are consistent with the Mineral Resource Estimate and the parameters applied in brine grade depletion modelling incorporated into the production plan.
The testwork validates the mechanism for mobilisation of potassium held in the retained porosity by rainfall and run-off to the playa surface.
Reporting of Mineral Resources
The Company engaged Groundwater Science Pty Ltd, an independent hydrogeological consultant with substantial salt lake brine expertise, to review the updated Mineral Resource Estimate reported in this announcement in accordance with the JORC Code (2012 Edition) and the AMEC Guidelines for Resource and Reserve Estimation for Brines (AMEC Brine Guidelines) as accepted by the JORC.
Lake Bed Sediments
The lake bed sediments remain as reported in the March 2019 Mineral Resource Estimate with the north zone of the lake being classified in the Measured category and the southern zone classified in the Inferred category.
Williamson Pit
Brine from the Williamson Pit has been pumped into the Stage 1 evaporation ponds and the resource is now considered to be largely depleted.
Paleochannel Sediments
Volume
The volume of the clays above the basal sands that infill the paleochannel has been calculated in the geological model. The volume is 15,200Mm(3) which represents an increase of 54% over the March 2019 estimate.
Porosity
The total porosity and drainable porosity remain unchanged from the March 2019 estimate, where the total porosity applied is 40%. Drainable porosity is applied as a low value of 3%, based on the fine-grained lithology of the host sediment which will retain much of the contained brine.
Brine Grade
Brine grade is inferred to be continuous from the lake playa to the base of the paleochannel sediment. The average grade is 15.2kg/m(3) SOP. The assumption is based on observed brine grade continuity at two sites where bores in the paleochannel basal sand report brine grades consistent with the grades in the overlying lake bed sediment.
Paleochannel Basal Sand
Volume
The extent and thickness of the paleochannel basal sand resource is defined by the geological model. The total volume of the unit is estimated to be 1,100Mm(3) which represents a 60% increase from the March 2019 estimate.
Porosity
The total porosity and drainable porosity remain unchanged from the March 2019 estimate, where the total porosity applied is 40% and drainable porosity applied is 15%.
Brine grade
Brine grade is derived as the average value of the samples taken during pumping tests completed in bore TB3-4 and TB5-7. The average SOP grade for both the Measured and Indicated components is 13.6kg/m(3) SOP. No spatial interpolation was completed.
Reported Mineral Resource
The total Measured Mineral Resources Estimate from the northern lake bed and the paleochannel calculated using Drainable Porosity is estimated at 2.0Mt, an increase of 15% from the March 2019 estimate, and 7.6Mt using Total Porosity, an increase of 11% from the March 2019 estimate.
The total Indicated Mineral Resource Estimate within the remaining portion of the paleochannel calculated using Drainable Porosity is estimated at 2.0Mt, an increase of 43%, and 5.3Mt using Total Porosity, a 43% increase.
The remaining lake bed and paleochannel clay resource is classified as Inferred.
The Mineral Resource estimate for Lake Way (inclusive of the Ore Reserve reported in Table 6) is detailed in Table 5.
Table 5: Lake Way Mineral Resource
Resource Total volume Brine grade Mineral Tonnage Mineral Tonnage
component from total porosity from drainable porosity
=============== ======================== ====================== ========================== =============================
Total Brine SOP Brine SOP
K Mg SO(4) porosity volume tonnage Drainable porosity volume tonnage
(Mm(3) (kg/m(3) (kg/m(3) ) (kg/m(3) % (Mm(3) (Mt) % (Mm(3) (Mt)
) ) ) ) )
=============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ==========
Measured
=============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ==========
North lake bed
sediment
(0.4-8.0m) 1,060 6.8 8.0 27.6 0.43 452 6.9 0.11 117 1.8
=============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ==========
Paleochannel
basal sands 119 6.1 8.2 25.0 0.40 48 0.7 0.15 18 0.2
=============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ========== Indicated =============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ========== Paleochannel basal sands 981 6.1 8.2 25.0 0.40 384 5.3 0.15 147 2.0 =============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ========== Inferred =============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ========== South lake bed sediment (0.4-8.0m) 316 6.8 8.0 27.6 0.43 135 2.0 0.11 35 0.5 =============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ========== Paleochannel sediment 15,200 6.8 8.0 27.6 0.40 6,080 92.2 0.03 456 6.9 =============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ========== Total 107.1 11.4 =============== ====== ======== ========== ======== ======== ====== ======= ==================== ====== ==========
Brines by their nature are not a static resource as they are subject to groundwater movement, dilution and grade depletion over time. Reporting both Total Porosity and Drainable Porosity allows the reflection of this dynamic resource environment, including the consideration of the recharge, leaching and physical diffusion impacts on the mine plan and production output.
The impact of the recharge and physical diffusion in the development and long term abstraction of a brine resource is discussed in subsequent sections.
Reporting of Ore Reserves
The Ore Reserve estimate is based on the brine volume and grade that will be produced for a defined period and a specific abstraction scheme. The grade of produced brine will change over time as leakage, mixing and rainfall-recharge occurs within the aquifer.
The Ore Reserve is based on a production plan comprising a combination of surface trenches and bores. The brine pumping rate and brine grade incorporated in the production plan is based on the results of detailed numerical modelling of the lake bed sediments and paleochannel. The model outlines the brine production profile from a combination of surface trenches and bores, capable of delivering 118,700t per annum of contained potassium to the evaporation ponds.
The initial brine extraction rate after a 12-month ramp-up period is 18.2GL per annum with 71% of brine to be sourced from trenches and the remaining 29% from bores. Over time the production plan will shift to compensate a decline in brine grade within the lake playa and maintain the steady-state production requirements of 118,700t per annum of contained potassium to the evaporation ponds, with increased brine sourced from bores. During the final years of the mine plan, an expanded network of bores will be used to source 47% of the total brine from the paleochannel.
The numerical model used to simulate the production plan employs the aquifer properties used in the Mineral Resource Estimate and incorporates other modifying factors (such as recharge and evapotranspiration) to predict brine production and brine grade over the life of mine. A steady state calibration and extensive sensitivity analysis was undertaken.
Two models were developed to simulate production of the resource:
-- A regional groundwater flow model was developed to simulate the combined brine production from a trench network and a paleochannel borefield to meet the proposed production target of 118,700ktpa of contained potassium at Lake Way for 20 years.
-- Cross-sectional flow and transport models were developed to estimate the decline of brine grade with time, and to test the dependence of the predictions on density and viscosity.
The models were used to define the base case production plan that will achieve annual brine abstraction of 118,700kt of contained potassium, delivered to the evaporation pond network.
To test the robustness of the model, an approach of testing assumptions to failure was employed and the predicted scenario stress-tested monthly for a total length of 20 years (representing the projected mine life). Annual production scenarios were simulated to understand the volume of brine required on a year by year basis.
The cross-sectional flow and transport models indicated that the brine grade in the lake playa begins to decline during the early years of operation. Given the grade decline modelled in the trench network, the annual production rate is achieved by increasing flow from the paleochannel (where the grade remains constant) and holding flow from the lake playa constant (where the grade declines).
To extract 2.4Mt of contained potassium over the life of mine, a total volume of 474GL will be pumped from the total porosity within the lake playa and paleochannel at an average grade of 5.0kg/m(3) contained potassium over the life of mine.
The sustaining capital plan includes allowance for additional trenches and bores required to maintain the production rate as brine grade declines.
No cut-off grade has been applied given the large potential of the paleochannel, the manageable dilution rate and the excess of sulphate with respect to potassium (enabling the addition of KCl to the production process).
The Ore Reserve estimate for Lake Way is detailed in Table 6. The brine flow rate and grade estimates are based on modelling and extrapolation of testwork which provides an Ore Reserve classed as Probable.
Table 6: Lake Way Probable Reserve
Mine Brine Potassium Potassium
duration volume tonnage grade(1)
========== ======== ========== ===========
(years) (GL) (Mt) (kg/m(3) )
========== ======== ========== ===========
20 474 2.4 5.0
========== ======== ========== ===========
Note 1: Average grade to be sourced from trenches and bores over LOM.
2.4Mt of contained potassium includes 60% produced from the Measured resource category, and 40% produced from the Indicated resource category. No brine from the Inferred resource category is included in the Ore Reserve.
The results of the test pumping and the consistent nature of the brine grade within the paleochannel mean that the Measured and Indicated Mineral Resource Estimates have been converted to a Probable Ore Reserve.
The northern zone of the lake playa has been classified as a Measured Mineral Resource Estimate for the initial 8m at surface. This resource has been converted to a Probable Ore Reserve given the effects of variable recharge, dilution and liberation of the mineral salts contained within the retained porosity across the lake bed surface.
Production Plan
The life of mine production target of 245,000t per annum of SOP is supported by an annual salt harvest of 2.27Mt per annum (which provides direct feed to the process plant) and KCl addition.
Brine required to produce these harvest salts will be sourced from a network of trenches constructed in the superficial lake bed sediments and bores that pump brine from the underground paleochannel. 132km of surface trenches and 18 bores will provide an initial brine abstraction rate of 18.2GL per annum to deliver 118,700t per annum of contained potassium to the evaporation pond network. Construction of additional bores and ongoing trench management provides for efficient abstraction that manages changes in brine grade and consistently delivers the required 118,700t per annum of contained potassium over the life of mine. This supports the production rate of 245,000t per annum with the addition of 42,360t per annum KCl.
The brine transfer system (BTS) will deliver brine from trenches and bores to the evaporation ponds and facilitate efficient movement of brine. The pond network comprises a series of evaporation ponds that are designed to manage various forms of salt that precipitate as water is evaporated and brine concentration increases. The production plan utilises six 'trains' of primary evaporation ponds in sequence to maintain a continuous supply of harvest salt that delivers approximately 107,200t per annum of contained potassium to the plant. This provides for a recovery rate greater than 91% for the primary pond network.
In addition to the primary pond network, a recovery pond network is used to recover and recycle potassium contained in the brine stream from the process plant (i.e. potassium not captured during initial processing cycle) and supply additional harvest salts to the plant.
Brine Extraction
Brine will be extracted from Lake Way using the two methods of surface trenching and vertical bores.
Brine abstraction requirements and system design is based on numerical hydrogeological modelling (SO4), hydraulic design and civil engineering studies (Cardno Engineering), geotechnical investigations and stability analysis (Coffey Tetra Tech) and BTS design and specification (Proteus Tetra Tech).
The trench and bore layouts consider the presence of deeper lake bed sediments in the middle and east of the lake and location of the paleochannel along the eastern lake edge. Key features of the brine extraction and transfer network include:
-- Paleochannel bores located along the northern and eastern edges of the lake
-- North-south pipeline to collect borefield brine and route it into the trench network for transfer to the pond network. Some bores are piped directly into nearby trenches where possible.
-- Trenches located along the eastern and middle parts of the lake, where lake bed sediments are deeper with higher yield
-- Trench network flow is generally east to west with a northern collection sump east of the Williamson Pit
-- Trenches in the south of the lake flow northward, to a southern collection sump near Halite Pond H1
-- Brine collected at the northern and southern sumps is pumped into a brine channel network for conveyance to the Halite ponds
-- Positioning of evaporation ponds in areas with thin lake bed sediments and shallow basement rock, where low brine yield is expected, to reduce the resource sterilised by the evaporation ponds.
The production plan has been configured to ensure that harvest salt will be available to meet process plant ramp-up requirements. Construction of initial surface trenches on the north-west lake playa is anticipated to commence in Q4 2019. Initial bores and excavation of the remaining surface trenches across the middle and east lake playa will be staged throughout 2020. Future stages of trench and bore development are planned to sustain steady-state operations over the 20 year life of mine.
Brine Evaporation
Solar evaporations ponds covering 909ha will be constructed on the lake playa. These ponds will be used to concentrate the brine extracted from the Lake Way resource and precipitate potassium-containing harvest salts. The location of Lake Way is ideal for a solar evaporation process. Data from the Lake Way weather station has been correlated with historical data from nearby weather stations at Wiluna Township and Wiluna Airport to provide an average water evaporation rate for the project of 3896mm per annum (10.7mm/day) and average rainfall of 260mm per annum (net evaporation of 3,636mm per annum).
The operational area of the evaporation ponds is distributed between various pond types based on mass balance modelling that supports the 245,000t per annum SOP production rate. The sizing of each pond type is detailed in Table 7.
Table 7: On-lake Ponds
Pond Area =========== ====== Halite 686ha =========== ====== Kainite 87ha =========== ====== Carnallite 9ha =========== ====== Bitterns 60ha =========== ====== Recovery 67ha =========== ======
The evaporation pond network includes allowance for buffer storage as part of the Halite ponds, which is required to manage the seasonal variations in evaporation pond brine demand. A recovery pond network is also included to recycle potassium containing salts from the process plant brine streams and maximise overall potassium recovery.
SO4 engaged Ad-Infinitum to complete evaporation modelling and pond design for the Project. Geotechnical consulting services were provided by Coffey Tetra Tech and the inter-pond BTS was designed by Tetra Tech Proteus.
Evaporation Pond Chemistry
The composition of brine entering the evaporation pond network is detailed in Table 8 and represents the initial composition of brine to be extracted from the lake playa and paleochannel. This composition is based on sample data from Lake Way which was collected during hydrogeological investigations, site evaporation trials and process test work. Buffer storage capacity will be used for pre-conditioning to ensure that consistent brine composition is delivered to the primary pond network over the life of mine.
Table 8: Brine inflow to primary pond network
Composition Unit Value ============= ====== ======== K mg/L 6,578 ============= ====== ======== Na mg/L 77,431 ============= ====== ======== Mg mg/L 7,940 ============= ====== ======== Ca mg/L 494 ============= ====== ======== SO(4) mg/L 27,336 ============= ====== ======== Cl mg/L 130,896 ============= ====== ========
Evaporation Pond Configuration
The evaporation ponds are configured to provide capability and flexibility that will support a staged construction plan, ramp-up to meet initial plant demand and long-term production outcomes. The evaporation-concentration route for the project is represented by the pond flow schematic.
The adopted pond configuration provides operational control across six zones (or trains) to simplify the operating strategy. Six trains of multi-cell Halite and Kainite ponds will feed two downstream Carnallite ponds. Flow of brine from the Carnallite ponds will then be captured by a single bitterns pond.
Evaporation Pond Layout
All ponds are located on-lake providing significant benefits for both cost and operational efficiency. The specific site conditions were reviewed to determine the most suitable evaporation pond location and layout. The basis of the layout is to:
-- Locate ponds in areas of low brine yield, to minimise the sterilisation of the available brine resource
-- Target areas where the lake bed sediment layer is thin and basement is shallow, to minimise cut-off wall depths required, and reduce seepage of unlined ponds by keying into low permeability weathered basement materials
-- Locate harvest ponds to the west of the lake, to minimise harvest salt haulage distances to the plant
-- Align ponds with the prevailing wind direction to maximise evaporation
-- Enable harvest pond access directly from the Williamson Pit causeway
-- Where possible, locate pond networks adjacent to each other for efficient operation and a shared walled construction methodology to optimise capital requirements
The on-lake evaporation pond layout provides the required evaporation surface area and optimises transfer pumping and salt haulage distances. Co-location of the ponds has been used to minimise seepage and enable efficient control of brine flow and chemistry.
Evaporation Pond Design and Construction
Pond requirements have been specified by Ad-Infinitum and embankment design provided by Coffey Geotechnics, with input from internal SO4 expertise.
Site trials have validated the use of sheet piles as an optimised alternative solution to traditional earthworks for perimeter embankments. This method of wall construction is available for on-lake ponds and will significantly reduce construction time, improve seepage control and lower costs. The sheet piles will be driven through the lake bed sediments into the underlying lower permeability residual or weathered basement layer to provide a seepage cut-off.
A review of geotechnical information, seepage estimates, pond layout, design criteria, lessons learned during the recent construction works, and operational requirements has been completed and the following evaporation pond design adopted:
-- Evaporation pond walls will be constructed from either sheet piles or mine waste from the Williamson Pit.
-- Halite H1 has been constructed from mine waste and will remain as currently constructed with a berm height of 1.5m.
-- Halite H2 will be located adjacent to and adjoining the existing H1 pond, and similarly be constructed of mine waste with HDPE lining on the upstream embankment face. A cut-off key of recompacted clay materials will be utilised.
-- The remaining Halite ponds and Kainite/Carnallite harvest ponds will be constructed from sheet piles with a perimeter cut-off wall to at least base of sediment layer to control seepage.
-- Internal pond walls will consist of mine waste berms and be trafficable where required to provide access to pump stations.
Ponds will be constructed in a staged approach that provides adequate capacity to meet the production plan and is optimised to defer capital expenditure where possible. There are four construction stages for the evaporation ponds.
Salt Harvest
The primary pond network is designed to support 12 months of steady-state salt growth before harvest. To enable a continuous harvest strategy, pond construction is staged to meet process plant ramp-up requirements and salt production is sequenced across the six trains of ponds where each train has sufficient capacity to deliver two months of primary feed to the plant.
The recovery pond network will be managed using the same operating approach to that adopted for the primary pond network. Production ponds will be continuously harvested over a 12-month period. The salt harvest methodology adopted by SO4 is consistent with that deployed in similar operations around the world. Temporary pumps are required to transfer excess brine from pond cells to be harvested and dewater the entrained brine from salt contained within those cells. A grader and excavator will be used to load harvest salts into double combination 'side tip' road trains for direct feed to the process plant.
Some halite salt will be harvested annually and used to construct and maintain on-site infrastructure including pond walls and access roads. Similar to salt harvesting within the production ponds, temporary pumps will be used to 'de-brine' ponds. Graders, excavators and side-tipping trailer trucks will be used to reclaim, transport and stockpile an upper layer of halite salt.
Process Plant
The process plant design has been developed based on considerable test work and subject matter expertise from leaders in the potash production industry.
The key design parameters for the process plant are shown in Table 9.
Table 9: Process plant design basis
Parameter Value
========================= ===========================
Flowsheet configuration Feed preparation, reverse
flotation, conversion and
SOP crystallisation
========================= ===========================
Harvest salt feed 2.27Mtpa
========================= ===========================
KCl addition 42,360tpa
========================= ===========================
SOP production 245,000tpa
========================= ===========================
Process plant operating 7,600h/yr
time
========================= ===========================
Process plant potassium
recovery 84%
========================= ===========================
Product composition
========================= ===========================
SOP grade >98%
========================= ===========================
%K(2) O equivalent >53%
========================= ===========================
Target Cl content <0.1%
========================= ===========================
Target Mg content <0.2%
========================= ===========================
Potassium-containing harvest salts will be treated in a processing plant and converted to SOP product using the production process. Steady-state plant feed of 2.27Mtpa of harvest salt with the addition of 42,360t per annum KCl will support annual production of 245,000t of SOP.
Process water requirements to the crystalliser area is 1.5GL per annum with a total requirement of 1.7GL per annum to the process plant and associated equipment.
Process Flowsheet Testwork
Saskatchewan Research Council (SRC) was engaged to conduct an extensive metallurgical test program and further define the process flowsheet for the Project. More than five tonnes of harvest salts from trial evaporation ponds at Lake Way were sent to SRC to complete the test work. The testwork included harvest salt characterisation, feed preparation, flotation, kainite conversion and SOP crystallisation. Process flowsheet enhancements were considered during this bench scale testing phase, namely KCl addition. The testing phase culminated in a number of bench scale closed loop locked cycle tests, and finally a continuous pilot operation.
Process Flowsheet
The harvest salts from Lake Way include an excess of sulphate (SO(4) ) with respect to potassium. The BFS has considered the opportunity for addition of KCl as a reagent to the crystallisation circuit, to take advantage of excess sulphate that can be converted to SOP and increase overall production for the Project. To realise the flexibility of the project, the plant will be designed with two operating modes, either with or without KCl addition.
A simplified representation of the proposed flowsheet for the Project.
Harvest salts from the evaporation pond network will be delivered to the plant feed preparation area.
The harvest salts will be fed to attrition/scrubbing banks to liberate salts before reverse froth flotation at ambient temperature. Flotation tails consisting of mostly halite are de-brined, via a belt filter, and the resulting halite solids are deposited on the halite waste stockpile for subsequent disposal back onto the lake. The resulting brines from the flotation concentrate and tails are recycled back to the flotation brine tank.
Potassium bearing salts from the flotation step are fed to the conversion tanks where they are contacted with high sulphate conversion brine and turned into schoenite. The schoenite concentrate, from conversion, is sent to the sodium chloride (NaCl) leach tank to dissolve any residual halite, if necessary, with the addition of water. The schoenite slurry is then de-brined via a centrifuge with the schoenite cake being fed into the SOP crystalliser system. The spent conversion brine centrate is pumped to the on-playa solar recovery pond to recover the dissolved potassium, which will be recycled back to the plant as feed salt.
The SOP crystalliser system involves many recycle streams. This stage of the process plant essentially combines schoenite and water, at the appropriate process conditions, to convert the schoenite feed salt and KCl (if added) to high quality SOP.
The SOP crystalliser system has three major components consisting of a SOP crystalliser, SOP leach tank and a schoenite cooling crystalliser. Schoenite salt from the conversion process and recycled secondary schoenite from the schoenite cooling crystalliser are reacted with hot water and recycled SOP centrate from the SOP centrifuge. A slurry from the SOP crystalliser reports to the SOP leach tank where additional hot water is added to complete the reaction and dissolve remaining impurities. The SOP leach tank also thickens the slurry before being sent to the SOP centrifuge.
The sulphate rich brine from the SOP crystalliser overflow is cooled in a schoenite cooling crystalliser to produce secondary schoenite which is recycled to feed the SOP crystalliser. The remaining cooled crystalliser mother liquor is recycled back to the process for conversion of kainite salts to schoenite.
A slurry from the SOP leach tank, consisting of high-grade SOP in sulphate rich brine, will be dewatered and dried in direct gas-fired rotary dryer. SOP from the rotary dryer is sent to be stockpiled in an enclosed shed, before being loaded into bulk trucks for transport to market.
The plant layout maximises gravity feed opportunities and minimises pumping and material transfer requirements throughout the process flow. Allowance for site topography, cultural and climatic conditions, and proximity to the on-lake evaporation ponds were high priority constraints considered during the design process.
Major Infrastructure
The Project location offers a strategic advantage when considering proximity to key infrastructure including a major state highway, existing site access roads, gas pipeline, airport and raw water borefields with access to granted groundwater licences.
The support infrastructure for the Project encompasses fit for purpose facilities that optimise capital expenditure, maximise operational efficiency and provide for future expansion.
The site layout which co-locates the mine operations, administration and associated facilities with the process plant, workshops and warehousing. This area is located out of flood zones, and facilities orientated based on the predominant wind patterns.
Road access
The Project is located along the Goldfields Highway which extends approximately 800km from south of Kambalda in the Goldfields to Meekatharra in the Mid-West. The Lake Way site will be accessed by an existing junction on the Goldfields Highway which requires minor modification to accommodate the 'super' quad road trains that will be used for product logistics.
Unsealed access roads are required to connect the facilities for operational, maintenance and personnel movements around the Lake Way site. These roads will provide access to the gas lateral, Goldfields Gas Pipeline, raw water borefields, paleochannel bores and production ponds.
Power
The power requirements for the Project will be provided by a dedicated 12MW hybrid (solar-gas) power station under a supply agreement with a build, own, operate (BOO) contract. The BOO contract results in SO4 not incurring capital costs in relation to the Power Station, as these costs are translated into an on-going operating cost.
The power station will be located adjacent to the process plant and consist of modular natural gas fired reciprocating generator sets. Waste heat will be recovered from the generator exhaust and reused for the purpose of water heating, which will contribute to a reduction in overall gas demand.
Natural gas will be delivered to site via a connection to the Goldfields Gas Pipeline which runs along the eastern side of the Lake Way site. The natural gas lateral connection and access will be provided under BOO contract.
SO4 is committed to establishing renewable energy sources where possible and proposes to incorporate a hybrid power station that will include 2MW of solar generation capacity to supplement generation capacity and absorb future peak loading requirements.
Water
Raw water for the Project will be sourced from two borefields. A 5C abstraction licence has been granted by the Department of Water and Environmental Regulation (DWER) for the West Creek borefield and a 5C abstraction licence is in the process of being transferred from Blackham to SO4 for the Southern borefield. The total raw water supply for the project is 1.83GL per annum. 1.13GL per annum of the required water supply will be extracted from the existing Southern Borefield which consists of five existing operating bores, and the additional raw water requirement of 0.7GL per annum will be met by the West Creek Borefield.
Accommodation
The workforce will require a permanent accommodation village with a capacity for 100 personnel. The accommodation village will be temporarily expanded during the construction phase to include an additional 200 personnel.
Product Logistics
SOP product will be transported from Lake Way, approximately 780km, to Geraldton for bulk export to international markets. The road direct logistics solution will utilise dedicated super quad road trains and deliver SOP to an offsite storage facility in the Narngulu industrial area, approximately 14km from Geraldton Port.
During shiploading, product will be loaded into double road trains, trucked to Geraldton Port and discharged at the drive-over truck unloading circuit that connects to the Berth 4 shiploader. The super quad road trains will be used to backload KCl, imported through Berth 6 at Geraldton Port, from the offsite storage facility to Lake Way.
Product Marketing
Potassium is one of three primary nutrients required by all plants to varying degrees in order to grow. Among other benefits, potassium is critical to the transport of water in the plant, and as such becomes significantly more important in arid conditions. Potassium is of particular importance when growing crops under intensive conditions, to maximise yield.
KCl is the most widely used form of potassium in agriculture today. However, bringing significant levels of chloride to the soil can have drastic negative impact to the long-term capability to support plant growth, particularly where water is in short supply. SOP is the second most widely used potassium source. The benefits of SOP versus KCl include being chloride free or very low chloride containing and having sulphur incorporated in the molecule.
SO4 has reviewed existing market reports and commissioned leading market analysts CRU International Group and Argus Media, experts in the fertiliser industry, to provide specific analysis in order to build a reliable SOP industry outlook.
SOP demand and growth of consumption is driven by several factors. These include growth in crop area that requires SOP rather than KCl, increases in land area that suffers from water scarcity (as low water input means increased risk from salinity and therefore lowered yields) and increased export of cash crops (ie crops grown specifically for sale and not for own consumption) requiring higher quality produce and stronger resistance to transport stress.
Supported by the extensive test work and samples produced to date from Lake Way harvested salts, SO4's strategic intention is to provide a high quality, premium grade SOP to the market. Initially the Project will produce two products being (i) a high potassium content standard powder SOP and (ii) fertigation grade SOP. SO4 will explore the potential to increase the product offering to include a granular grade.
The specifications produced from the Lake Way pilot plant testwork are summarised in Table 10.
Table 10: Lake Way pilot plant specifications
Parameter Unit Specification ================== =============== ============== Potassium % K(2) O >53% ================== =============== ============== Sulphate % SO(4) >55% ================== =============== ============== Chloride % Cl <0.1% ================== =============== ============== Insolubles % <0.1% ================== =============== ============== Total solubility g/100g H(2) O 11.8 ================== =============== ============== Dissolution rate % in 1 minute 95% ================== =============== ==============
Historical analysis of the SOP market price and demand shows that consumers are willing to pay more for reliably higher quality. The Project will produce high quality SOP. Therefore, it is logical that the SO4 marketing strategy focus on maximising this quality advantage.
SO4 has engaged CRU International Group to provide a market report specifically on the Project. Based on the premium grade specifications that have been produced from results of the Lake Way pilot plant testwork, premium pricing upwards of 20% (CRU SOP Market Study, May 2019) should be achievable for the product. Supported by the CRU report, SO4 has utilised a life of mine SOP price of US$550/t (FOB) for the BFS.
Mining Tenure
Details of the mining tenements included in the Project to date are provided in Table 11. This includes tenements acquired as part of the Blackham Transaction announced 23 July 2019.
Table 11: Mining tenements for the Project
Tenement Holder Area (ha) Granted date Expiry date
========= ================ ========== ============= ============
M53/796 Kimba Resources 955.45 21/11/2001 20/11/2022
Pty Ltd
========= ================ ========== ============= ============
M53/797 Kimba Resources 950.85 21/11/2001 20/11/2022
Pty Ltd
========= ================ ========== ============= ============
M53/798 Kimba Resources 569.45 21/11/2001 20/11/2022
Pty Ltd
========= ================ ========== ============= ============
M53/121 Kimba Resources 658.50 03/03/1989 02/03/2031
Pty Ltd
========= ================ ========== ============= ============
M53/123 Kimba Resources 931.55 03/03/1989 02/03/2031
Pty Ltd
========= ================ ========== ============= ============
M53/253 Kimba Resources 970.40 14/10/1992 13/10/2034
Pty Ltd
========= ================ ========== ============= ============
M53/910 Kimba Resources 211.55 23/05/2002 22/05/2023
Pty Ltd
========= ================ ========== ============= ============
M53/147 Kimba Resources 650.10 05/10/1989 04/10/2031
Pty Ltd
========= ================ ========== ============= ============
M53/1102 Piper Preston 9,395.00 Pending -
========= ================ ========== ============= ============
Approvals
Lake Way is located in an area with a long history of minerals exploration and associated environmental assessment. SO4 has taken advantage of existing environmental knowledge to support the permitting of its early works programme and focus additional investigations required for permitting of full-scale operations.
Environmental work to date has not identified any social or environmental factors that could constitute fatal flaws or insurmountable obstacles to gaining necessary statutory approvals. The approvals for the Project are currently being progressed.
The referral for Stage 2 Project development works submitted to the Environmental Protection Agency (EPA) in March 2019 was determined not to require formal assessment under Part IV of the Environmental Protection Act 1986 (EPA non-assessment decision was received June 2019 and relates to the Lake Way SOP Demonstration Plant submission).
The Company has since received approval from the Department of Mines, Industry Regulation and Safety (DMIRS) for the Mining Proposal for on lake ponds and trench construction at Lake Way associated with Stage 2. The approval from DMIRS includes a disturbance area to construct ponds and trenches totalling up to 757ha.
The Company has obtained Ministerial consent to use the land under section 18 of the Aboriginal Heritage Act 1972. Further heritage approvals will be required and obtained in accordance with legislative requirements.
The Company has submitted the Works Approval to DWER. Obtaining this approval will enable SO4 to commence construction of the next stage of the Project, including significant areas of evaporation ponds and trenches.
Further approvals will be required for the full commercial scope of the Project with allowance for these approvals included in the Project schedule. The referral for the full scope was submitted to the EPA for assessment in September 2019.
Native Title and Heritage
SO4 has been working collaboratively with Tarlka Matuwa Piarku Aboriginal Corporation (TMPAC), the registered native title body corporate determined to hold native title rights and interests on trust for the native title holders over the area within which the Project is located. The Project is located on, and in the vicinity of Lake Way, which is an Aboriginal site and area of particular significance and sensitivity to the native title holders.
SO4 and TMPAC have entered into a native title exploration agreement and are finalising a comprehensive land access agreement that provides certainty for the Project, cultural heritage management protocols and lasting social and economic benefits to the native title holders.
A collaboratively working arrangement has been established with the Shire of Wiluna. This has enabled SO4 to establish a community contribution and presence that aligns with Company values, supporting the Shire of Wiluna's Strategic Community Plan vision and other community organisations that are essential to long-term sustainability of the region.
Economics
Operating Costs
The operating costs for the Project have been calculated on a bottom up approach utilising specific contractor terms, industry averages and operating experience where appropriate and based on the optimised mine plan for the 245,000t per annum base case.
Table 12: Operating Costs for the Project
Operating cost item Total
============================ =================
(A$/t) (US$/t)
============================ ======= ========
Labour 44.9 30.5
============================ ======= ========
Power 37.7 25.7
============================ ======= ========
Maintenance 23.2 15.8
============================ ======= ========
Reagents 74.2 50.5
============================ ======= ========
Consumables 29.3 19.9
============================ ======= ========
Miscellaneous 8.2 5.6
============================ ======= ========
General and administration 22.2 15.1
============================ ======= ========
Mine gate cash operating
cost 239.8 163.0
============================ ======= ========
Transport and handling
cost 62.5 42.5
============================ ======= ========
C1 cash cost 302.2 205.5
============================ ======= ========
Royalties 32.6 22.2
============================ ======= ========
Marketing 20.2 13.8
============================ ======= ========
Total cash operating
cost 355.1 241.4
============================ ======= ========
The C1 cash cost of US$205/t positions the Project as one of the lowest cost producers of SOP globally.
Capital Costs
The total development capital cost for the Project is estimated at A$254m which includes a contingency of A$21m. The capital intensity based on the 245ktpa production rate is a low $1,038/t.
The capital spend profile has been developed in line with the project schedule to achieve plant commissioning by Q4 2020. The capital spent will be over a period of 15 months starting in October 2019 with a majority of the initial capital spend to be incurred in relation to the evaporation pond and brine extraction construction.
Table 13: Development Capital for the Project
Capital cost item Total
========================= =======
(A$/t)
========================= =======
Brine Extraction 30.6
========================= =======
Brine Evaporation 28.1
========================= =======
Process Plant 76.9
========================= =======
Plant Infrastructure 12.4
========================= =======
Area Infrastructure 8.6
========================= =======
Regional Infrastructure 0.2
========================= =======
Total direct cost 156.8
========================= =======
Miscellaneous 11.5
========================= =======
Indirect cost 64.5
========================= =======
Contingency 21.4
========================= =======
Total capital cost 254.2
========================= =======
The sustaining capital estimate is A$4m per annum (A$16/t) resulting in a life of mine sustaining capital expenditure of A$71m.
Financial Modelling
The Project has been evaluated based on a discounted cashflow analysis with key inputs from the BFS including the 20 year mine plan, capital and operating costs and key financial assumptions. Key financial assumptions that were used in the financial evaluation of the Project are shown in Table 14.
Table 14: Key Financial Assumptions
Financial assumption Unit Value ========================= ======== ====== SOP price US$/t 550 ========================= ======== ====== Foreign exchange rate US$/A$ 0.68 ========================= ======== ====== Discount Rate (post-tax real) % 8% ========================= ======== ====== Taxes % 30% ========================= ======== ====== Government royalty % 2.5% ========================= ======== ====== Private royalty % 1.5% ========================= ======== ======
The financial macro-economic assumptions outlined above are supported by key market intelligent agencies. The Pricing assumptions are reflective of the premium grade SOP product to be produced from the Project.
The financial evaluation of the base case BFS outcomes for the Project are shown in Table 15.
Table 15: Key Financial Metrics
Financial metric Unit Value ============================== ====== ====== EBITDA(1) A$m $111m ============================== ====== ====== Average annual post-tax free cash flow(1) A$m $78m ============================== ====== ====== NPV(8) (post-tax) A$m $479m ============================== ====== ====== IRR (post-tax) % 28% ============================== ====== ====== NPV(8) (pre-tax) A$m $696m ============================== ====== ====== IRR (pre-tax) % 38% ============================== ====== ======
Note 1: Refers to average annual Project cashflows during steady-state production.
The project is forecast to produce A$4 billion in revenue over the life of the project with a cumulative post-tax cash flow of A$1.35 billion.
Sensitivity Analysis
Sensitivity analysis has been performed on post-tax NPV. Model inputs were flexed between a range of -20% to +20% in 10% increments. The analysis in Table 16 indicates that the Project is most sensitive to exchange rates and SOP price.
Table 16: NPV(8) sensitivity analysis
Sensitivity -20% -10% Base +10% +20% ================= ===== ===== ===== ===== ===== Capital costs 531 505 479 452 425 ================= ===== ===== ===== ===== ===== Operating costs 557 518 479 440 401 ================= ===== ===== ===== ===== ===== SOP price 245 362 479 595 712 ================= ===== ===== ===== ===== ===== AUD/USD 748 598 479 381 299 ================= ===== ===== ===== ===== =====
Sensitivity analysis of post-tax NPV against the base case discount rate has also been considered, with the results shown in Table 17.
Table 17: NPV(8) sensitivity analysis on base discount rate
Sensitivity 6% 7% Base 9% 10% =============== ==== ==== ===== ==== ==== Discount rate 614 542 479 423 374 =============== ==== ==== ===== ==== ====
The tornado chart highlights the sensitivity of post-tax NPV(8) at -20% and +20% of financial model inputs against the $479m base case scenario.
A number of scenarios have been analysed as part of the financial evaluation for the Lake Way BFS. This has highlighted the robustness of the Project even under the most extreme downside scenarios.
For the full version of this Announcement or further information please visit www.so4.com.au or contact:
Tony Swiericzuk / Clint McGhie Salt Lake Potash Limited Tel: +61 8 6559 5800 Colin Aaronson / Richard Tonthat / Ben Grant Thornton UK LLP (Nominated Adviser) Tel: +44 (0) 20 7383 5100 Roberts Derrick Lee / Peter Lynch Cenkos Securities plc (Joint Broker) Tel: +44 (0) 131 220 6939 Rupert Fane / Ernest Bell Hannam & Partners (Joint Broker) Tel: +44 (0) 20 7907 8500
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Appendix A - Competent Person Statement and Disclaimer
Competent Persons Statement
The information in this announcement that relates to Production Targets and Ore Reserves for Lake Way is based on, and fairly represents, information compiled by Mr Ben Jeuken, who is a member of the Australasian Institute of Mining and Metallurgy and a member of the International Association of Hydrogeologists, and Mr Robert Kinnell, who is a member of the Australasian Institute of Mining and Metallurgy and a Fellow of the Geological Society of London. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Kinnell is a full time employee of Salt Lake Potash Limited. Mr Jeuken and Mr Kinnell have sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which they are undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Jeuken and Mr Kinnell consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information in this announcement that relates to Exploration Results and Mineral Resources for Lake Way is based on, and fairly represents, information compiled by Mr Ben Jeuken, who is a member of the Australasian Institute of Mining and Metallurgy and a member of the International Association of Hydrogeologists. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Jeuken has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Jeuken consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information in this announcement that relates to Process Testwork Results is extracted from the announcement entitled 'Premium Grade Water Soluble Sulphate of Potash Produced from Lake Way Salts' dated 18 September 2019. This announcement is available to view on www.so4.com.au. The information in the original ASX Announcement that related to Process Testwork Results was based on, and fairly represents, information compiled by Mr Bryn Jones, BAppSc (Chem), MEng (Mining) who is a Fellow of the AusIMM. Mr Jones is a Director of Salt Lake Potash Limited. Mr Jones has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. Salt Lake Potash Limited confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.
The information in this Announcement that relates to Processing and the Process Plant is based on, and fairly represents, information provided by Mr Kevin Martina, Professional Engineer, who is a Member of the Association of Professional Engineers and Geoscientists of Saskatchewan (APEGS), a 'Recognised Professional Organisation' (RPO) included in a list promulgated by the ASX from time to time. Mr Martina is employed by Wood Canada Limited, Saskatoon. Wood is engaged as a consultant by Salt Lake Potash Limited. Mr Martina has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Martina consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
Forward Looking Statements
This announcement may include forward-looking statements. These forward-looking statements are based on Salt Lake Potash's expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Salt Lake Potash, which could cause actual results to differ materially from such statements. Salt Lake Potash makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, to reflect the circumstances or events after the date of that announcement.
Appendix B - Summary of reserve estimate and reporting criteria
This ASX Announcement has been prepared in compliance with JORC Code 2012 Edition, AMEC Brine Guidelines and the ASX Listing Rules. The following is a summary of the pertinent information used in the Ore Reserve Estimate with full details provided in the body of the announcement and the JORC Code Table 1 included as Appendix D.
Material Assumptions and BFS Outcomes
Material assumptions used in the estimation of the production target and associated financial information are set out in Table B-1:
Table B-1 BFS Material Assumptions
Assumption Value
Project Start Date Q4 2020
-------------------------------
Cost and Pricing Basis 2019 Dollars
-------------------------------
Currency Australian Dollars (unless
otherwise stated)
-------------------------------
Foreign Exchange Rate (US$) US$0.68
-------------------------------
Cost Escalation 0%
-------------------------------
Revenue Escalation 0%
-------------------------------
BFS Accuracy +/-15%
-------------------------------
Capex Contingency Allowance 9%
-------------------------------
Mining & Processing
Measured Mineral Resource (Drainable 2Mt Measured
Porosity)
-------------------------------
Inferred Mineral Resource (Drainable 2Mt Indicated
Porosity)
-------------------------------
Portion of Production Target - Measured 60%
-------------------------------
Portion of Production Target - Indicated 40%
-------------------------------
Probable Ore Reserve 2.4 Mt contained potassium
-------------------------------
Trenches (production and transport) 132 km increasing to 165
km over LOM
-------------------------------
Paleochannel bores 18 (initial number, increasing
to 57 over LOM)
-------------------------------
Bore production rate (average) 8.4 L/s/bore
-------------------------------
Trench yield rate (flow) - minimum 4 L/s/km
-------------------------------
Trench yield rate (flow) - maximum 8 L/s/km
-------------------------------
Annual brine abstraction rate (initial) 18.2 Gl/a
-------------------------------
Brine chemistry (average lake brine 15.2 Kg/m(3)
SOP grade)
-------------------------------
Solar evaporation ponds 909 ha
-------------------------------
Annual production (steady state) 245 ktpa SOP (>53% K(2) O)
with KCl addition
-------------------------------
Life of mine 20 Years
-------------------------------
Overall system efficiency 82%
-------------------------------
Pricing
Sulphate of Potash (FOB) US$550/t
-------------------------------
Operating Costs
-------------------------------
Brine Extraction A$15.8/t
-------------------------------
Brine Evaporation & Harvesting A$26.2/t
-------------------------------
Process Plant A$173.1/t
-------------------------------
Plant Infrastructure A$0.8/t
-------------------------------
Area Infrastructure A$1.6/t
-------------------------------
General & Administration A$22.2/t
-------------------------------
Transportation A$62.5/t
-------------------------------
Sustaining Capital A$16.0/t
-------------------------------
Capital
-------------------------------
Brine Extraction A$30.6 million
-------------------------------
Evaporation A$28.1 million
-------------------------------
Process Plant A$76.9 million
-------------------------------
Plant Infrastructure A$12.4 million
-------------------------------
Area Infrastructure A$8.6 million
-------------------------------
Regional Infrastructure A$0.2 million
-------------------------------
Miscellaneous A$11.5 million
-------------------------------
Indirect Costs A$64.5 million
-------------------------------
Contingency A$21.4 million
-------------------------------
Other
-------------------------------
Royalties Govt - 2.5%
Other - 1.5%
-------------------------------
Corporate tax rate 30%
-------------------------------
Discount rate 8%
-------------------------------
Material outcomes from the Study are set out in Table 3 in the body of the Announcement.
Reserve Classification
The Ore Reserve is based on a production plan comprising a combination of surface trenches and bores. The brine pumping rate and brine concentration incorporated in the production plan is based on the results of detailed numerical modelling of the lake bed sediments and paleochannel. The model outlines the brine production profile from a combination of surface trenches and bores, capable of delivering 118,700t per annum of contained potassium to the evaporation ponds.
The numerical model used to simulate the production plan employs the aquifer properties used in the Mineral Resource Estimate and incorporates other modifying factors (such as recharge and evapotranspiration) to predict brine production and brine concentration over the life of mine. A steady state calibration and extensive sensitivity analysis was undertaken to enable the model to best represent the actual hydraulic system.
Two models were developed to simulate production of the resource:
-- A regional groundwater flow model was developed to simulate the combined brine production from a trench network and a paleochannel borefield to meet the proposed production target of 118,700ktpa of contained potassium at Lake Way for 20 years.
-- Cross-sectional flow and transport models were developed to estimate the decline of brine grade with time, and to test the dependence of the predictions on density and viscosity.
The models were used to define the base case production plan that will achieve annual brine abstraction of 118,700kt of contained potassium, delivered to the evaporation pond system.
To test the robustness of the model, an approach of testing assumptions to failure was employed and the predicted scenario stress-tested monthly for a total length of 20 years (representing the projected mine life). Annual production scenarios were simulated to understand the volume of brine required on a year by year basis.
Mineral Resource Depletion
Brines by their nature are not the same as conventional solid resources, as they are subject to groundwater movement, dilution and grade over time. Depletion is reported in the context of depletion of the Mineral Resource contained in the Total Porosity of the sediment. This assumes that both methods of production (trenches and bores) deplete the total resource, not only the fraction held in drainable porosity.
In the Lake Bed Sediments, the liquid brine is removed by pumping, but some mineral is left behind in the retained porosity. This mineral is mobilised by subsequent rainfall and lake flooding. Brine grade extracted from the trenches will decrease as potassium is produced over the life of mine. This is supported by brine leach testwork undertaken by the Company.
The paleochannel remains confined and under pressure for the duration of the planned production and is not dewatered by pumping. The hydrostatic pressure in the paleochannel is reduced by pumping, and groundwater is drawn toward the pumping bores. This water is replaced by water drawn into the paleochannel from the regional groundwater system, and vertically down by slow leakage from the overlying clay. The water drawn into the paleochannel replaces the water drawn out by pumping. Inflow both laterally from the regional system, and vertically from the overlying clay will transport additional dissolved potassium to the paleochannel. However, additional potassium has not been considered in the resource depletion calculation.
Ore Reserve Estimate
The Ore Reserve estimate for Lake Way is detailed in Table 6 in the body of the Announcement. The brine flow rate and concentration estimates are based on modelling and extrapolation of testwork which provides an Ore Reserve classed as Probable.
2.4Mt of contained potassium includes 60% converted from the Measured resource category (100% of the northern lake bed sediments and 10.6% of the paleochannel), and 40% converted from the Indicated resource category (the remaining 89.4% of the paleochannel). No brine from the Inferred resource category is included in the Ore Reserve and Production Target.
The results of the test pumping and the consistent nature of the brine grade within the paleochannel mean that the Measured and Indicated Mineral Resource Estimates have been converted to a Probable Ore Reserve.
The northern zone of the lake playa has been classified as a Measured Mineral Resource Estimate for the initial 8m at surface. This resource has been converted to a Probable Ore Reserve given the effects of variable recharge, dilution and liberation of the mineral salts contained within the retained porosity across the lake bed surface.
Modifying Factors
The Modifying Factors included in the JORC Code have been assessed as part of the BFS. The Company has received advice from appropriate experts when assessing each Modifying Factor.
A summary assessment of each relevant Modifying Factor is provided below.
Mining (Brine Extraction) - refer to section entitled 'Production Plan' in the Announcement.
The Company engaged an independent hydrogeological consultant with substantial salt lake brine expertise, Groundwater Science Pty Ltd, to complete the Mineral Resource Estimate for the Lake Way Project. The Principal Hydrogeologist of Groundwater Science, Mr Jeuken, has over 10 years of experience in groundwater resources assessment and management for mining. He has experience in salt lake brine potash evaluation, aquifer testing, wellfield planning and installation for mining, and the development of conceptual hydrogeological models.
The numerical hydrogeological model was produced by the Company and reviewed by an independent expert appointed by Mr Jeuken. Key details of the hydrogeological model and implementation of modifying factors to the Ore Reserve are summarized in the Table B-2 below.
Table B-2 Key modifying factors implemented in the numerical hydrogeological model used to simulate the brine production plan
Aquifer Parameter Value Basis
Lake Bed Brine Grade 6.8 kg/m(3) Mineral Resource Estimate
Sediment
----------------- --------------------------------- -------------------------------
Hydraulic 4 m/day Mean of:
Conductivity -5 Long term trench pumping
trials with piezometer
array
-30 Test pit pump-out
trials
-14 Hydraulic (Slug)
tests at piezometers
----------------- --------------------------------- -------------------------------
Total Porosity 0.43 Mean of 68 Laboratory
tests
----------------- --------------------------------- -------------------------------
Drainable 0.11 Mean of 5 long term trench
Porosity pumping trials and 68
laboratory tests of sediment.
----------------- --------------------------------- -------------------------------
Recharge Direct Rainfall based Run-off and recharge
on wetting threshold study.
and coefficient implemented Climate Data from Wiluna
on 20 year rainfall record. BOM Station
Catchment run-off based
on catchment run-off
model calibration to
adjacent gauged catchment
----------------- --------------------------------- -------------------------------
Dispersity No Dispersion Dispersion treated through
and Diffusivity dual porosity model.
----------------- --------------------------------- -------------------------------
Mixing Mixing of recharging Dual porosity model simulates
water with the brine mixing and transfer of
body was simulated by mineral from retained
dual porosity cross sectional porosity and drainable
models porosity
----------------- --------------------------------- -------------------------------
Paleochannel Brine Grade 6.1 kg/m(3) Mineral Resource Estimate
Basal Sand
----------------- --------------------------------- -------------------------------
Hydraulic 1 - 5 m/day 3 Pumping tests and lithology
Conductivity of sediment
----------------- --------------------------------- -------------------------------
Total Porosity 0.4 Lithology and benchmark
to equivalent material
----------------- --------------------------------- -------------------------------
Drainable 0.15 Lithology and benchmark
Porosity to equivalent material
----------------- --------------------------------- -------------------------------
Recharge Recharge to a confined Geological Model and
paleochannel is drawn Analysis of long duration
in as slow vertical leakage pumping trials.
from the overlying clay.
Vertical Hydraulic conductivity
of the clay was simulated
as 5 x 10(-4) m/day
----------------- --------------------------------- -------------------------------
Dispersity Not applicable / Not Brine drawn from overlying
and Diffusivity modeled clay will exhibit comparable
brine grade.
----------------- --------------------------------- -------------------------------
Mixing Not applicable / Not Brine drawn from overlying
modeled clay will exhibit comparable
brine grade.
----------------- --------------------------------- -------------------------------
Brine extraction requirements and system design is based on hydrogeological modelling (SO4), hydraulic design and civil engineering studies (Cardno Engineering), geotechnical investigations and stability analysis (Coffey Tetra Tech) and BTS design and specification (Proteus Tetra Tech).
Brine will be extracted from Lake Way using the two methods of surface trenching within the lakebed sediments and vertical bores targeting the basal sand aquifer of the paleochannel.
The two methods of extraction outlined in the Announcement are common practice for brine extraction. These extraction methods are used by the three main current operations which include Great Salt Lake in the US, Lop Nur Salt Lake (Luobupo) and SQM in Chile.
Brines by their nature are not the same as conventional solid resources, as they are subject to groundwater movement, dilution and concentration over time. Depletion is reported in the context of depletion of the Mineral Resource contained in the total porosity of the sediment. This assumes that the brine resource contained within the total porosity of the lakebed sediments is depleted with time. The brine grade within the paleochannel is unaffected by the dilution effects of recharge and is not expected to deplete with time.
In the Lake bed sediments, the brine drains into trenches via gravity and upward movement due to changes in pressure within the formation. Once into the trench the brine is removed by pumping, however a significant proportion of the mineral remains within the retained porosity of the formation. This mineral is mobilised by effect of recharge from rainfall and surface water inflow. Column leaching tests have shown that continued recharge and flushing has the potential to liberate between 80 and 100% of the mineral content held within the retained porosity over time. However, the brine concentration extracted from the trenches will decrease as potassium is produced over the life of mine. This is again supported by brine leach testwork undertaken by the Company.
The paleochannel remains confined and under pressure for the duration of the planned production and is not dewatered by pumping. The hydrostatic pressure in the paleochannel is reduced by pumping, and mineral rich groundwater is drawn toward the pumping bores. This brine is replaced by brine drawn into the paleochannel from the regional groundwater system, and vertically down by slow leakage from the overlying clay. The brine drawn into the paleochannel replaces the brine drawn out by pumping. Inflow both laterally from the regional system, and vertically from the overlying clay will transport additional dissolved potassium to the paleochannel.
No cut-off grade has been applied given the large potential of the paleochannel, the addition of KCl to the production process and the manageable dilution rate.
Processing (including Metallurgical) - refer to sections entitled 'Brine Evaporation' and 'Process Plant' in the Announcement.
SO4 engaged Ad-Infinitum to complete evaporation modelling and pond design for the Lake Way Project. Geotechnical consulting services were provided by Coffey Tetra Tech and the inter-pond brine transfer system was designed by Tetra Tech Proteus.
A series of solar evaporation ponds will be used to produce potassium-rich harvest salts from Lake Way brine.
Design activities have included process modelling to define evaporation pond requirements and harvest salts that will be produced, several phases of geotechnical investigations, and geotechnical and civil engineering of ponds. Process, mechanical, piping, electrical and instrumentation design was carried out for the inter-pond brine transfer system.
SO4 has conducted extensive site evaporation tests at Lake Way in evaporation ponds utilising several construction methods including mine waste from the Williamson Pit and sheet piles. An early works program has also been completed, involving design and construction of a 125-hectare evaporation pond. Lessons learned and data gathered during this project have been incorporated into the study.
Lake Way's process development relied heavily on experience applied by Wood Group, SRC and specialist consultants (Carlos Perucca Processing Consulting Ltd and Ad Infinitum) who are well experienced from working on similar operations. Production of SOP from lake brines is well understood and a well-established process.
SO4 has conducted extensive testing of lake brines and harvest salts from Lake Way. The testing conducted to date supports that lake brine can be concentrated economically, via solar evaporation, to produce mixed potassium sulphate double salts. It has also been shown that these salts, when harvested, can be economically converted into a valuable, high purity SOP fertiliser product.
More than 5t of harvest salts from trial evaporation ponds at Lake Way have been sent to SRC to complete test work, including harvest salt characterisation, feed preparation, flotation, kainite conversion and SOP crystallisation. Process flowsheet enhancements were considered during the bench scale testing phase, namely KCl addition. The testing phase culminated in a number of bench scale closed loop locked cycle tests, and finally a continuous pilot operation.
The program demonstrated that Lake Way harvest salt can be successfully converted to SOP using the identified process flowsheet, including; attritioning, crushing, conversion, flotation and crystallisation to produce an SOP product of very good chemical quality (>53% K(2) O equivalent).
Infrastructure - refer to sections entitled 'Major Infrastructure' and 'Product Transport and Logistics' in the Announcement.
Lake Way's proximity to the West Australian goldfields means relatively minor area infrastructure upgrades and modifications are required. Existing key infrastructure includes a major state highway, existing site access roads, gas pipeline, airport and raw water borefields with access to granted groundwater licences.
GR Engineering Services Limited were engaged to complete the non-process infrastructure (NPI) study work.
The Company has engaged with relevant authorities and asset owners to determine availability and capacity of existing infrastructure.
SO4 engaged experienced transport logistics companies with a local profile and relevant bulk haulage experience. SOP product will be transported 780 km from Lake Way to Geraldton using dedicated super quadruple (quad) road trains, for bulk export to international markets.
The road direct logistics solution will utilise an offsite storage facility in the Narngulu industrial area, approximately 14 km from Geraldton Port. During shiploading, product will be loaded into double road trains, trucked to Geraldton Port and discharged at the drive-over truck unloading circuit that connects to the berth four shiploader.
The super quad road trains will be used to backload muriate of potash (MOP or KCl), imported through berth six at Geraldton Port, from the offsite storage facility to Lake Way.
Marketing - refer to section entitled 'Product Marketing' in the Announcement.
Independent potassium sulphate and potash market forecasts and assessments were provided by experts CRU International and Argus Media Group.
These reports emphasised that the specifications proposed by SO4 of a potassium content (expressed as K(2) O) of >53% and chloride content of <0.1% placed the product into the premium range. The reports confirmed that it would be feasible for SO4 to monetise the high level of potassium in its product relative to the more commonly traded specifications of 50-51% K(2) O. There is also a premium pricing market for low chloride content where the level can consistently be maintained at below 0.5%.
The Company has previously entered into MOU's with Mitsubishi Australia Limited and Sinofert Holdings Limited setting out the basis for binding offtake agreements. The Company is progressing discussions with these parties and others with a view to signing binding offtake and marketing agreements for the future sale of its product.
Economic - refer to sections entitled 'Economics' in the Announcement.
Capital cost estimates have been prepared by SO4 and GR Engineering Services Limited, using a combination of cost estimates from suppliers, historical data, reference to recent comparable projects, and benchmarked construction costs for Western Australia. Costs are presented in real 2019 terms and are exclusive of escalation. The overall accuracy is deemed to be +/- 15%.
The capital cost estimate includes the cost of all services, direct costs, contractor indirects, EPCM/Owner's costs, non-process infrastructure, general area infrastructure and other facilities used for the operation of the Mine and Process Plant.
Operating costs have been estimated by SO4, and are based on a combination of first principles build-up, direct supplier quotes, and experience on similar projects with unit rates benchmarked to costs attributable to Western Australia. The operating costs also provide an annual allowance for sustaining capital works.
Labour costs have been developed based on a first-principles build-up of staffing requirements with labour rates benchmarked for the Goldfields region.
The operating and capital cost estimates build-up has been reviewed by Turner and Townsend.
Government royalties have been assumed at a 2.5% FOB gross revenue basis for the life of the project. Private royalties are 1.5% mine gate revenue.
Royalties account for an average life of mine cost of A$32/t per annum.
Rehabilitation and mine closure costs are included within the discounted cash flow modelling (OPEX) based on study outcomes.
On 5 August 2019, SO4 announced that it had reached an agreement with Taurus Funds Management for financing of up to US$150m for the Lake Way Project. The Company has commenced drawdown of the initial US$30m tranche of this facility. Having completed the BFS, access to the remaining portion of funding will become available upon satisfaction of conditions precedent to the Lender's satisfaction. Conditions precedent are customary for a project financing of this nature and include execution of financing agreements, satisfying the equity requirement based upon a Cost to Complete analysis and offtake agreements being agreed. Based on ongoing discussions, there is a reasonable basis that the Company will be able to raise any additional funding required for the Project with potential funding sources including, but not limited to, royalty financing, offtake agreements, convertible notes and traditional debt and equity.
Environmental - refer to section entitled 'Approvals' in the Announcement.
Environmental work to date has not identified any social or environmental factors that could constitute fatal flaws or insurmountable obstacles to gaining necessary statutory approvals. The Company has adopted a strategy of parallel lodgement of permit applications as a means of expediting project approvals and subsequent implementation.
The referral for Stage 2 Project development works submitted to the Environmental Protection Agency (EPA) in March 2019 was determined not to require formal assessment under Part IV of the Environmental Protection Act 1986.
The referral for the full commercial project scope was submitted to the Environmental Protection Authority (EPA) for assessment in September 2019.
Social, Legal and Governmental - refer to sections entitled 'Mining Tenure' and 'Native Title and Heritage' in the Announcement.
Details of the mining tenements included in the Project to date are provided in Table 11 in the body of the Announcement, including eight granted Mining Leases and one application for a Mining Lease. This includes tenements acquired as part of the Blackham Transaction completed on 8 October 2019.
Lake Way is located in an area with a long history of minerals exploration and associated environmental assessments. SO4 has taken advantage of existing environmental knowledge to support the permitting of its early works programme and focus additional investigations required for permitting of full-scale operations.
SO4 has been working collaboratively with the native title holders, Tarlka Matuwa Piarku Aboriginal Corporation (TMPAC), The Project is located on and adjacent to Lake Way which is a registered aboriginal heritage Site.
SO4 and TMPAC have entered into a native title exploration agreement and are finalising a comprehensive land access agreement that provides increased certainty for the Project, cultural heritage management protocols and lasting social and economic benefits to the native title holders.
A collaborative working arrangement has also been established with the Shire of Wiluna. This has enabled SO4 to establish a community presence that aligns with Company values, supporting the Shire of Wiluna's Strategic Community Plan vision and other community organisations that are essential to long-term sustainability of the region.
The Company takes legal advice in relation to social, legal and governmental requirements as necessary.
Appendix C - Summary of Resource Estimate and Report
This ASX Announcement has been prepared in compliance with JORC Code 2012 Edition, AMEC Brine Guidelines and the ASX Listing Rules. The following is a summary of the pertinent information used in the Mineral Resource Estimate with full details provided in the JORC Code Table 1 included as Appendix D.
In March 2019, the Company reported an updated Mineral Resource Estimate for Lake Way, of 1.8Mt in the Measured category from the northern lakebed sediments calculated using drainable porosity and 1.4Mt in the Indicated category from the paleochannel basal sands calculated using drainable porosity. The remaining area of the lakebed and the paleochannel clays were classified in the Inferred category.
Additional passive seismic lines to better delineate the route and dimensions of the paleochannel were completed during June and July 2019. The higher resolution and greater density of survey lines interpretation increased the length and volume of the paleochannel, which has resulted in an increase to the Mineral Resource Estimates for the paleochannel basal sands and paleochannel sediment, whilst additional aquifer testing has also enabled a portion of the paleochannel basal sands resource to be upgraded to the Measured category. The lake bed sediments remain as reported in the March 2019 Mineral Resource Estimate with the north zone of the lake being classified in the Measured category and the southern zone classified in the Inferred category. Brine from the Williamson Pit has been pumped into the Stage 1 evaporation ponds and the resource is now considered to be largely depleted.
The key data and interpretation that underpins the Mineral Resource Estimates are summarised as follows:
-- The Northern Lake Bed Sediment Measured Resource is based on extensive test pits, drillholes and trench pumping trials. This work has informed, geometry, brine grade, total and drainable porosity, and hydraulic conductivity of the aquifer. The work includes porosity determination by 5 long term trench pumping trials and 68 laboratory tests of sediment and hydraulic conductivity determination by; 5 Long term trench pumping trials with piezometer array; 30 Test pit pump-out trials, 14 Hydraulic (Slug) tests at piezometers.
-- The Southern Lake Bed Sediment Inferred Resource is based on geometry defined by historic drilling data. Brine concentration and porosity is extrapolated from the northern portion of the Lake. The reason for inclusion as an inferred resource is the high degree of spatial consistency in the northern part of the playa. All data points located on the playa exhibit an elevated brine grade. Experience at other salt lakes also demonstrates a high degree of spatial continuity in brine grade within the playa margin. Under salt lake playas brine concentration (grade) is relatively homogenous. The brine resource is generated in-situ by evaporation of a fairly consistent groundwater source which is subject to sporadic mixing and dilution at the lake due to infiltration of rainwater, and subsequent re-concentration by evaporation. These mechanisms generate a relatively homogenous brine concentration.
-- The Paleovalley Sediment Inferred Resource is based on geometry defined by historic drilling and recent seismic survey. Brine concentration is interpolated from the overlying lake bed sediment. Porosity is based on lithology and benchmarking to determinations in comparable lithology. The reason for inclusion as an Inferred Resource is the understanding of the hydrogeological setting. In Australian salt lake playas, extreme evaporation at the playa surface acts as a brine concentrator. Density cycling and diffusion of the brine results in a relatively consistent brine profile with depth. The production plan does not pump directly from the paleovalley clay and the production plan is insensitive to the porosity value applied to this unit.
-- The Paleochannel Basal Sands Resource is based on geometry well defined by historic drilling and recent geophysical survey. The historic drilling dataset includes a hydrogeological investigation into the paleochannel undertaken by WMC in 1992. This work included drilling four transects across the paleochannel within the study area and installation of test bores and piezometers. This work provides a valuable dataset that informs the hydrogeological structure of the paleochannel and the lithology of paleochannel sediment. Brine grade is interpolated the entire length of the channel from two tested boreholes. This extrapolation is warranted on the basis that the playa and paleochannel are a well-understood groundwater system. The playa acts as the brine generator and density cycling and diffusion distributed the brine with depth. The consistency in concentration with depth is demonstrated at the two bore sites and in the broader study of paleochannel hydrogeology in Western Australia. Porosity is based on lithology and benchmarking to determinations in comparable lithology. The 20-year production plan is insensitive to porosity since the channel is never dewatered. Brine produced from bores is replaced by inflow along the channel and by very slow vertical seepage from the overlying clays. The confidence of the Resource is upgraded to Measured in the 2.5km radius around a 10-day pumping trial that hydraulically tested the aquifer to that extent.
-- Following QA/QC as described below, the data set is considered suitable for estimation of a potash resource for the Project. Brine concentration QA/QC comprised:
o The primary laboratory was Bureau Veritas Minerals Laboratory in Perth. Approximately 1:10 Duplicate samples were sent to a secondary laboratory; Intertek, Perth. The average error was less than 2%.
o Analysis of charge balance was undertaken. Charge balance checks the sum of all positively charged ions against the sum of all negatively charged ions. Charge balance error was less than 2%.
o Multiple samples were taken and assayed over the course of the paleochannel bore pumping trials to check the consistently of the brine concentration and the assay.
Geology and Geological Interpretation
The geological, hydrological and hydrogeological interpretation for the lakebed resource remains as reported in the March 2019 Mineral Resource Estimate (refer ASX Announcement dated 18 March 2019).
Geology and Hydrogeology of the Paleochannel
The province is characterised by granite-greenstone rocks that exhibit a prominent northwest tectonic trend and low to medium-grade metamorphism. The Archaean rocks are intruded by East-West dolerite dykes of Proterozoic age, and in the eastern area there are small, flat-lying outliers of Proterozoic and Permian sedimentary rocks. The basement rocks are generally poorly exposed owing to low relief, extensive superficial cover, and widespread deep weathering. A key characteristic of the goldfields is the occurrence of paleochannel aquifers. These paleodrainages are incised into the Archean basement and in-filled with a mixed Tertiary and Quaternary sedimentary sequence.
The paleochannel sediments of Lake Way are characterised by a mixed sedimentary sequence including sand, silts and clays of lacustrine, aeolian, fluvial and colluvial depositional origins. These near-surface deposits also include chemically-derived sediments of calcrete, silcrete and ferricrete. Beneath eastern parts of the playa, there is a deep paleochannel that is infilled with Tertiary-aged paleochannel clay and basal sands in the deepest portion.
The paleochannel hosted resource is contained in the pore spaces of the sediment that infills the paleochannel structure. The sediment comprises silts and clays from surface to approximately 100m depth, and then coarse-grained sands and gravels at the base of the channel.
The silts and clays exhibits low permeability, the brine held in these sediments cannot be drained directly to bores because the permeability is too low to allow useful bore yields.
A proportion of the brine held in these sediments can be removed by underdrainage to the underlying Basal Sand unit.
Brine is removed from the Basal Sand unit by pumping from bores. This depressurises the Basal Sand unit and induces downward brine leakage from the overlying sediment. The rate of leakage will be very low.
Only a relatively small fraction of the total porosity can be removed from a fine-grained unit by this method, and as such no brine from the paleochannel sediments is incorporated into the Ore reserve calculation.
Drilling and Sampling Techniques
No additional drilling has been undertaken since March 2019.
Passive Seismic Survey Lines
A Horizontal to Vertical Spectral Ratio (HVSR) passive seismic survey was completed over 55 survey transects totalling 271 line kilometres over Lake Way. The HVSR passive seismic survey used the Tromino 3G ENGY seismometer and the HVSR survey method to detect the depth to hard bedrock below regolith cover, identify paleochannels in 2D and 3D, and gather subsurface layer information in paleochannels to assist with SOP brine exploration and resource estimation. The bedrock depth could then be used for direct drill planning and for paleochannel volume estimation.
HVSR passive seismic data were acquired by Atlas Geophysics and data were remotely assessed by Resource Potentials in Perth for quality control, editing, recording repeat stations and extensions, preliminary data processing, cross-section generation and providing client updates and preliminary results throughout the survey period.
The final HVSR passive seismic data were then processed, and velocity analysis completed with amplitude-depth cross-sections generated for each passive seismic survey transect. These data highlighted an interpreted fresh bedrock interface below Lake Way as an acoustic impedance contrast layer, as well as highlighting shallower layering within the unconsolidated sedimentary cover deposits.
Paleochannel Aquifer Tests
Aquifer tests comprising both stepped-rate test (SRT) and constant-rate test (CRT) pumping tests were previously reported in the March 2019 report.
In August 2019 bore TB 3/4 was retested and comprised a step-rate test (SRT), a 10-day constant-rate test (CRT) and recovery testing.
The static water level (SWL) before the testing commenced was 3.92mbgl. The pump used for aquifer testing was a 4" (100mm) Grundfos SP17-7 with a 7.5kW motor and the pump inlet was set at a depth of 81m. The size of the pump was limited due to the diameter of the bore being 6" (155mm).
The SRT was conducted with five (5) 100-minute steps at 2, 3, 4, 5 & 6l/sec. Maximum drawdown during the SRT was 43.24m.
The CRT commenced at a pumping rate of 5L/s. The test was conducted for 10days without incident. The maximum drawdown in the test bore was 44.57mbgl with 7.92m of drawdown in MB 3/4 Deep, the adjacent deep monitoring bore and 0.0m of drawdown in the adjacent shallow monitoring bore, MB 3/4 Shallow.
Following pump shutdown, the recovering water levels were monitored in the production and surrounding monitoring bores with water levels recovering to 84% in the production bore and 47% in the deep monitoring bore after 523 minutes.
Lakebed Sediment Brine Leaching Tests
Twelve 100mm diameter 300mm long (minimum) insitu cores were taken from Lake Way. The sediment cores were then prepared as leaching columns and 200 ml of <18<OHM> resistivity ("Milli-Q") water was added to the column via a funnel attached to a plastic watering rose. This delivered a gentle and even distribution of water onto the sediment column with minimum disturbance to the sediment surface.
Columns were allowed to percolate naturally overnight. The following day, a vacuum was applied until water began dripping from the base of the Buchner funnel. Once flow was established, the vacuum was either reduced or turned on/off manually to each column to ensure a slow rate of leaching. The vacuum was stopped when either the full volume of leachate was collected, or vacuum was lost to a column.
Once collected, the volume of leachate was recorded and analysed.
Sample Analysis Method
Passive Seismic Geophysics
The final outputs from the passive seismic study included:
-- HVSR amplitude-depth cross-sections and map layouts as image plots for all survey transects, including 3D geo-referenced images of windowed HVSR cross-sections without map layouts.
-- CSV file and 3D DXF files of the main acoustic impedance contrast layer in depth from surface and RL, with upper and lower uncertainties, using average shear wave velocities.
-- Georeferenced images of the depth to the main acoustic impedance contrast layer, with 2D contour vectors.
-- Geo-referenced images of the local Lake Way gravity survey data only, and a regional merged gravity data grid, including local Lake Way gravity anomaly profiles and contour files.
-- Final HVSR passive seismic data in ASCII format for archive and DMIRS reporting, along with an excel spreadsheet of all passive seismic station locations.
All survey coordinates in this report are in the GDA94 datum and MGA 51 projection, and HVSR cross-sections are plotted in RL elevations relative to SRTM heights.
Aquifer Pumping Test
A summary of the test pumping programme is presented in Table C-1 and the results of the analysis on Table C-2.
Table C-1 Summary of the 10 Day Test Pumping Programme at Bore TB3-4
Pumping Test Type Duration Pumping Rate (L/s) Bores Monitored Maximum Drawdown Radial Distance
(m) / Recovery from TB 3/4 (m)
Level (m) below
SWL (SWL, mbgl)
------------------- ------------------- ---------------- ------------------ ------------------
SRT 500 min (100 min 2, 3, 4, 5 & 6 MB 3/4 Shallow 11.91, 19.48, 13.1m
each) MB 3/4 Deep 27.04, 34.61 & 33.4m
43.24
------------------- ------------------- ---------------- ------------------ ------------------
CRT 240 hours 5 MB 3/4 Shallow TB 3/4: 48.49m 13.1m
MB 3/4 Deep MB 3/4 Shallow: 33.4m
0.0m (No
Drawdown)
MB 3/4 Deep:
7.92m
------------------- ------------------- ---------------- ------------------ ------------------
Recovery# 523 minutes 0 MB 3/4 Shallow TB 3/4: 7.58m 13.1m
MB 3/4 Deep (84% Recovery) 33.4m
MB 3/4 Shallow:
(No Drawdown)
MB 3/4 Deep:
4.18m (47%
Recovery)
------------------ ------------------- ------------------- ---------------- ------------------ ------------------
Notes: SWL - SWL Water Level. Method of measurement - water level logger, # time since pump-shutdown.
Table C-2 Results of the Test Pumping Analysis
Method of Analysis Transmissivity Storativity Boundary Conditions
(m(2) /day)
--------------- ------------ --------------------
- Leakance 1/B =
Hantush-Jacob 56 0.0002 0.0003 m(-1)
-------------------- --------------- ------------ --------------------
Brine grade was measured after the first hour and then after every 24 hours for the duration of the test. The results are shown in Table C-3.
Table C-3 Laboratory Analysis of Brine samples taken during the 10 day test
Time into Test Potassium Mg (mg/l) SO(4) (mg/l) TDS (mg/l)
(mg/l)
---------- ---------- ------------- -----------
1 Hour 6,340 8,130 25,600 256,174
-------------------- ---------- ---------- ------------- -----------
24 Hours (1 day) 6,250 8,090 25,400 255,320
-------------------- ---------- ---------- ------------- -----------
48 Hours (2 days) 6,320 8,140 25,300 257,337
-------------------- ---------- ---------- ------------- -----------
72 Hours (3 days) 6,320 8,130 25,400 254,805
-------------------- ---------- ---------- ------------- -----------
96 Hours (4 days) 6,280 8,090 25,800 253,556
-------------------- ---------- ---------- ------------- -----------
120 Hours (5 days) 6,280 8,060 25,800 256,842
-------------------- ---------- ---------- ------------- -----------
144 Hours (6 days) 6,310 8,180 25,900 255,674
-------------------- ---------- ---------- ------------- -----------
168 Hours (7 days) 6,370 8,170 25,400 256,107
-------------------- ---------- ---------- ------------- -----------
192 Hours (8 days) 6,380 8,130 25,900 253,751
-------------------- ---------- ---------- ------------- -----------
216 Hours (9 days) 6,330 8,140 25,600 241,614
-------------------- ---------- ---------- ------------- -----------
240 Hours (10
days) 6,320 8,130 25,700 255,942
-------------------- ---------- ---------- ------------- -----------
The results of the aquifer test analyses show that:
-- There does not appear to be any connection between the shallow lakebed sediments and the paleochannel aquifer. The shallow lakebed sediments and the paleochannel sand units within Lake Way make up two broadly separate aquifer units separated by the generally very low permeability lakebed sediments.
-- Only the production bores and adjacent deep piezometers associated with the test pumping of the paleochannel production bores showed diagnostic responses typical of bores located proximal to boundaries.
-- The bore is inefficient and partially penetrating (skin effects are 22m head loss at a flow rate of 5L/s) - only screens the top 10 m of a 22m thick aquifer and typically the coarse material is at the bottom and has been missed, the screenslot size is very small (0.5mm) and the gravel pack is very fine (0.8 to 1.6mm)
-- Relatively small drawdown (7.92m) was achieved in TB 3/4's deep monitoring bore, located 33m away after 10 days of pumping at 5l/s in a partially penetrating production bore, indicating the transmissive nature of the paleochannel aquifer unit at this locality.
-- Representative transmissivity (T) values adopted for the paleochannel aquifer unit ranged between 56 and 98m(2) /day.
The water quality analysis results from test pumping show the following:
-- Overall the analysis shows the groundwater quality from the Lake Way paleochannel aquifer to be hypersaline.
-- The paleochannel production bores tested ranged in 6,080 - 6,340 mg/l of potassium, 7,900 - 8,520 mg/l of Magnesium (Mg), 23,400 - 26,600 mg/l of SO4 & 241,000 - 283,000 Total Dissolved Solids (TDS).
Radius of influence of the 10 days test was 2.5 km, with both boundaries well defined by the data. On this basis it can be stated with confidence that a 5 km length of the paleochannel has been hydraulically tested and is therefore a measured resource.
Lakebed Sediment Brine Leaching Tests
The volume of brine, and therefore mineral contained within the retained porosity portion of the total porosity represents a significant resource. It has been suggested once the naturally drainable porosity has been depleted that the natural process of recharge from rainfall and surface runoff "refills" the aquifer and leaches out a portion of this mineral resource contained within the retained porosity.
The results of SO4's investigation of brine chemistry across the lake bed gives an average potassium concentration of 6,800 mg/L.
By assuming a porosity value of 43% (0.43), as used in the Mineral Resource Estimate (MRE), the mass of potassium stored in each sediment core prior to leaching was calculated.
The total mass of potassium produced can be determined by calculating the mass produced in each flushing step (concentration times volumes) and totalling it. Of the 12 samples tested 9 provided a useable result.
Using the same pre flushing lakebed brine concentration as the MRE of 6,800 mg/L the percentage of flushing varied from 77% to 127%. The leaching results are shown on Table C-4.
Table C-4 Column Leach Testing Results
LYC LYC LYC LYC LYC LYC Pond Trench LYC LYC LYC LYC
Sample S01 S02 S04 S05 S06 S07 1 1 S10 S11 S12 S13
Volume
(cm3) 1125.0 1125.0 2708.0 2625.0 1166.5 1083.0 2166.4 2249.7 2208.1 1041.5 2333.0 1166.5
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Volume x
poro (ml) 483.8 483.8 1164.4 1128.8 501.6 465.7 931.5 967.4 949.5 447.9 1003.2 501.6
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Volume x
poro (L) 0.48 0.48 1.16 1.13 0.50 0.47 0.93 0.97 0.95 0.45 1.00 0.50
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mass of
K (mg) 3337.88 3337.88 8034.64 7788.38 3461.01 3213.26 6427.69 6674.91 6551.30 3090.24 6922.13 3461.07
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Flushed
mass of
K (mg) 3234.43 3360.89 0.00 6725.86 2666.48 4074.77 8100.69 6558.24 3639.81 2893.92 3504.17 3569.99
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
% of brine No No No
flushed 0.97 1.01 result 0.86 0.77 1.27 1.26 0.98 result 0.94 result 1.03
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Volumetric
Mass of
K (kg/m3) 2.88 2.99 0.00 2.56 2.29 3.76 3.74 2.92 1.65 2.78 1.50 3.06
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
The results show that the lake bed is a highly variable sedimentological and hydrogeological environment, this variability of the lake bed will affect hydraulic properties such as total porosity, effective porosity and specific yield.
When results produce a total mass of potassium flushed greater than the stored estimate this reflect uncertainty in the original brine concentration and the hydraulic properties (primarily total porosity) of the sample.
The total potassium flushed from the samples equated to an average of 3.0 kg potassium per cubic meter of sediment (range 2.3 to 3.7). Mobilisation was achieved quickly, with most potassium leached within 2 to 3 pore volumes. These values are consistent with the Mineral Resource Estimate and the parameters applied in brine grade depletion modelling incorporated in the production plan.
The test work validates the mechanism for mobilisation of potassium held in retained porosity by rainfall and run-off to the playa surface.
Resource Estimation Methodology
The resource estimation methodology remains as previously reported.
Williamson Pit
Brine from the Williamson Pit has been pumped into the Stage 1 evaporation ponds and the resource is now considered to be largely depleted.
Lake Bed Sediment
The Lakebed sediments remain as previously reported (refer ASX Announcement 18 March 2019).
Paleovalley Sediment
Volume
The volume of the clays above the basal sands that infill the paleochannel has been exported from the geological model created in Leapfrog. The volume is 15,200Mm(3) which represents an increase of 54% over the March 2019 estimate.
Porosity
The total porosity and drainable porosity remain unchanged from the March 2019 estimate, where the total porosity applied is 40%. Drainable porosity is applied as a low value of 3%, based on the fine-grained lithology of the host sediment which will retain much of the contained brine.
Solute Concentration
Solute concentration is inferred to be continuous from the lake playa to the base of the paleochannel sediment. The average concentration is 15.2kg/m(3) SOP. The assumption is based on observed brine grade continuity at two sites where bores in the paleochannel basal sand report brine grades consistent with the grades in the overlying lake bed sediment.
Paleochannel Basal Sand
Volume
The extent and thickness of the paleochannel basal sand resource is defined by the geological model created in Leapfrog. The total volume of the unit is estimated to be 1,100Mm(3) which represents a 60% increase from the March 2019 estimate.
Porosity
The total porosity and drainable porosity remain unchanged from the March 2019 estimate, where the total porosity applied is 40% and drainable porosity applied is 15%.
Solute concentration
Solute concentration is derived as the average value of the samples taken during pumping tests completed in bore TB3-4 and TB5-7. The average SOP concentration for both the Measured and Indicated components is 13.6kg/m(3) SOP. No spatial interpolation was completed.
Classification Criteria
Lake Bed Sediments (North)
The estimated resource in the northern part of the lake has a high degree of confidence.
The resource estimate and associated hydrological data set are considered adequate to support a mine plan. In this case the mine plan comprises design of a production trench network and construction of a groundwater flow simulation model to estimate and plan brine production rates. The resource is reported as a Measured Resource.
There has been no update to the estimated resource for the Lake Bed Sediments (North) and further information can be found in the ASX Announcement dated 18 March 2019.
Lake Bed Sediments (South)
The estimated resource in the southern part of the lake has a low degree of confidence.
The resource estimate is based on assumed continuity of grade and porosity and is not adequate to support a mine plan. The resource is reported as an Inferred Resource.
There has been no update to the estimated resource for the Lake Bed Sediments (South) and further information can be found in the ASX Announcement dated 18 March 2019. No brine from Lake Bed Sediments (South) resource estimate is included in the Ore Reserve and Production Target.
Paleovalley Sediment
The estimated resource in Paleovalley sediment has a low degree of confidence. The Resource estimate is based on assumed continuity of grade and porosity and is not adequate to support a mine plan. The resource is reported as an Inferred Resource.
The volume of the geological unit is well defined by a geological model based on detailed geophysical survey validated to an extensive drilling data set.
Brine grade is assumed to be continuous and consistent from the Playa surface to the base of the geological unit. This assumption is supported by only a limited number of data points where brine chemistry at surface and at depth are available.
Total Porosity and Drainable Porosity values are based on lithology logged in historic drilling and on benchmarking of comparable projects in Tertiary paleochannels in Western Australia. The values are not yet confirmed by test work.
Hydraulic properties of the units inferred from the lithology of the unit, and the response to pumping of two test bores.
No brine from Paleovalley Sediment resource estimate is included in the Ore Reserve and Production Target.
Paleochannel Basal Sand
The estimated resource in paleochannel basal sand has a high and moderate degree of confidence. The data is adequate to allow confident interpretation of the geological framework which is based on a good density of geophysical data and some historic drilling. The Resource is reported in part as a Measured Resource (10.6%) and an Indicated Resource (89.4%).
The test pumping data from the 10-day test and the consistent brine grade over that period is adequate to define a measured resource for the zone of influence for the test. Analysis of the time drawdown response in the pumping and deep monitoring bore indicates a radius of influence from the 10-day test as being 2.5 km, therefore it can be concluded that a 5 km length of channel has been hydraulically tested. Given that the channel on the tenements is 47 km long, 5 km represents 10.6% of the paleochannel length.
The continuity of brine concentration between very widely spaced samples is assumed and seen in the similar chemistry between TB3-4 and TB5-7. The estimate is adequate to inform the design of a numerical model which forms the basis of the mine plan. The remainder of the resource is reported as an Indicated Resource.
The paleochannel remains confined and under pressure for the duration of the planned production and is not dewatered by pumping. The hydrostatic pressure in the paleochannel is reduced by pumping, and groundwater is drawn toward the pumping bores. This water is replaced by water drawn into the paleochannel from the regional groundwater system, and vertically down by slow leakage from the overlying clay. The water drawn into the paleochannel replaces the water drawn out by pumping. Inflow both laterally from the regional system, and vertically from the overlying clay will transport additional dissolved potassium to the paleochannel. However, additional potassium has not been considered in the resource depletion calculation.
Results
The results of the Mineral Resource Estimate are summarised in the body of the report.
Cut-off Grades
Within the salt-lake extent no low-grade cut-off or high-grade capping has been implemented due to the consistent nature of the brine assay data. No aggregate intercepts have been calculated.
Mining and Metallurgical Methods and Parameters
It is assumed that the Brine resource will be mined by gravity drainage to a network of trenches excavated into the Playa Surface and an array of production bores completed in the paleochannel basal sand.
Pilot Plant test work has been completed to confirm the process flowsheet to be used at the Lake Way Project to recovery SOP from the Lake Brine (refer ASX Announcement 18 September 2019).
Environmental impacts are expected to be; localized reduction in saline groundwater level, surface disturbance associated with trench, bore, and pond construction and accumulation of salt tails. The project is in a remote area and these impacts are not expected to prevent project development.
The project is located with the Goldfields Groundwater Proclamation Area. A license to take groundwater will be required under the Rights in Water and Irrigation Act 1914. This Act is administered by the Government of Western Australia Department of Water and Environmental Regulation.
APPIX D - JORC CODE, 2012 EDITION - TABLE 1
Section 1 - Sampling Techniques and Data
Criteria JORC Code explanation Commentary
Sampling techniques Sampling involved the
* Nature and quality of sampling (e.g. cut channels, excavation of test pits
random chips, or specific specialised industry over the tenement area to
standard measurement tools appropriate to the a depth of 4mbgl or
minerals under investigation, such as downhole gamma weathered basement
sondes, or handheld XRF instruments, etc.). These whichever was encountered
examples should not be taken as limiting the broad first. Four trenches were
meaning of sampling. also dug to 4m depth.
A brine sample and
* Include reference to measures taken to ensure sample duplicate were taken from
presentively and the appropriate calibration of any each test pit and trench
measurement tools or systems used. for analysis. From the
test pump brine samples
were taken after 1 hour
* Aspects of the determination of mineralisation that and every 24 hours
are Material to the Public Report. thereafter until the end
of the test.
* In cases where 'industry standard' work has been done, Samples were taken
this would be relatively simple (e.g. 'reverse manually by initially
circulation drilling was used to obtain 1 m samples rinsing out the bottle
from which 3 kg was pulverised to produce a 30 g with brine from the pit
charge for fire assay'). In other cases, more or
explanation may be required, such as where there is trench and then placing
coarse gold that has inherent sampling problems. the bottle in the test
Unusual commodities or mineralisation types (e.g. pit or trench and
submarine nodules) may warrant disclosure of detailed allowing it to fill.
information.
Samples were analysed for
K, Mg, Ca, Na, Cl, SO(4)
, HCO(3) , NO(3) , pH,
TDS and specific
gravity.
Each test pit was
geologically logged and a
sample taken each 1m
depth.
Test pumping from the
trenches and test pits
used a diesel driven
trash pump coupled to a
level switch.
Test pumping from the
borehole was carried out
using an electric
submersible pump powered
by a diesel generator at
the surface.
Water levels in the
borehole, piezometers,
test pits and trenches
were logged manually and
by pressure transducer
with barometric pressure
and brine density
correction.
Column tests were carried
out on 12 samples in
order to understand the
leaching potential
of potassium (K) from
lake bed sediments at
Lake Way, Wiluna. The
results of the column
leaching
tests support modelling
of K grade during
production, primarily the
mass of K produced as
a function of K held in
pore space and mass of K
produced per unit volume
(kg/m(3) ).
The tests also assessed
the effect on K
concentration of
increasing pore volumes
of water
flushing through the
sediments, to approximate
K grade dilution during
rainfall recharge or
during the initial stages
of fresh lake filling
events.
------------------------------------------------------------- --------------------------
Drilling techniques 13 Shallow auger holes
* Drill type (e.g. core, reverse circulation, open-hole were drilled to a maximum
hammer, rotary air blast, auger, Bangka, sonic, etc.) depth of 7mbgl at a
and details (e.g. core diameter, triple or standard diameter of 100mm. A
tube, depth of diamond tails, face-sampling bit or continuous insitu core
other type, whether core is oriented and if so, by was abstracted for
what method, etc.). laboratory testing. The
core was not orientated.
Trenches and test pits
were dug with an
excavator.
Test pumping occurred in
pre-existing boreholes
drilled in 1992.
------------------------------------------------------------- --------------------------
Drill sample recovery A continuous insitu
* Method of recording and assessing core and chip sample was taken during
sample recoveries and results assessed. auger drilling.
Recoveries were 90%+,
below the
* Measures taken to maximise sample recovery and ensure water table all samples
representative nature of the samples. were 100% saturated, upon
retrieval the ends were
sealed with duct
* Whether a relationship exists between sample recovery tape to preserve the
and grade and whether sample bias may have occurred saturation. The samples
due to preferential loss/gain of fine/coarse were sent to Core
material. Laboratories Australia
Perth
branch for total and
drainable porosity and
hydraulic conductivity
analysis.
Given the homogeneous
nature of the lake
surface there is no bias
and the samples are
representative
of the lakebed.
Samples from the test
pits were logged each
bucket and a
representative sample
bagged.
100% of excavated sample
was available for
sampling. The ability to
see the bulk sample
facilitated
the selection of a
representative sample.
There is no relationship
between sample recovery
and grade and no loss of
material as a result
of excavation.
------------------------------------------------------------- --------------------------
Logging The geological logging is
* Whether core and chip samples have been geologically sufficient for the
and geotechnically logged to a level of detail to purposes of identifying
support appropriate Mineral Resource estimation, variations in sand/ clay
mining studies and metallurgical studies. and silt fraction within
the top 4 -7m. For a
brine abstraction
* Whether logging is qualitative or quantitative in project, the key
nature. Core (or costean, channel, etc.) photography. parameters
are the hydraulic
conductivity and
* The total length and percentage of the relevant storativity of the host
intersections logged. rock, which will be
determined
during test pumping of
the trenches.
The logging is
qualitative.
The entire depth was
logged in every case.
------------------------------------------------------------- --------------------------
Sub-sampling techniques Full insitu core was used
and sample preparation * If core, whether cut or sawn and whether quarter, for porosity
half or all core taken. determination.
Not applicable, core
* If non-core, whether riffled, tube sampled, rotary drilling.
split, etc. and whether sampled wet or dry.
At all test pits brine
samples were taken from
* For all sample types, the nature, quality and the pit after 24hours or
appropriateness of the sample preparation technique. once the pit had filled
with brine. The brine
samples taken from the
* Quality control procedures adopted for all pits are bulk samples
sub-sampling stages to maximise representivity of which is an appropriate
samples. approach given the
long-term abstraction
technique of using many
* Measures taken to ensure that the sampling is kilometres of trenches to
representative of the insitu material collected, abstract brine from the
including for instance results for field upper 4m.
duplicate/second-half sampling.
The brine samples from
the test pump were taken
* Whether sample sizes are appropriate to the grain after 1 hour and then at
size of the material being sampled. 24 hours and every
subsequent 24 hours. The
brine samples are bulk
samples from the
paleochannel aquifer
which
is an appropriate
approach given the
long-term abstraction
technique of using a
borefield
located along the length
of the paleochannel.
All the samples taken
were incorporated into a
rigorous QA / QC program
in which Standards
and Duplicates were
taken. The samples were
taken in sterile plastic
bottles of 250ml
capacity.
Excavated lake bed
samples were sealed in
plastic bags. For all
brine samples (original
or
check samples) the
samples were labelled
with the alphanumeric
code Y8001, Y80002.
Lake bed samples were
labelled with the test
pit locator LYTT01,
LYTT02 etc. and the depth
from which they were
taken.
------------------------------------------------------------- --------------------------
Quality of assay data and The brine samples were
laboratory tests * The nature, quality and appropriateness of the sent to Bureau Veritas
assaying and laboratory procedures used and whether Laboratories in Perth, WA
the technique is considered partial or total. with the duplicates
being held by SO4. Every
10th duplicate was sent
* For geophysical tools, spectrometers, handheld XRF to Intertek, an alternate
instruments, etc., the parameters used in determining laboratory for
the analysis including instrument make and model, comparison purposes.
reading times, calibrations factors applied and their
derivation, etc. No laboratory analysis
was undertaken with
geophysical tools.
* Nature of quality control procedures adopted (e.g.
standards, blanks, duplicates, external laboratory Soil samples and
checks) and whether acceptable levels of accuracy laboratory derived
(i.e. lack of bias) and precision have been hydraulic conductivity,
established. total porosity and
drainable porosity
samples were analysed by
Core Laboratories in
Perth WA. All
laboratories used are
NATA certified.
The leaching tests were
carried out at EGS
Services laboratories,
the procedures used were
appropriate and the
results consistent.
------------------------------------------------------------- --------------------------
Verification of sampling Not applicable due to
and assaying * The verification of significant intersections by consistent brine
either independent or alternative company personnel. concentration.
No twin holes drilled.
* The use of twinned holes.
All sampling and assaying
is well documented and
* Documentation of primary data, data entry procedures, contained on SO4's
data verification, data storage (physical and internal database.
electronic) protocols.
No adjustments have been
made to assay data.
* Discuss any adjustment to assay data.
------------------------------------------------------------- --------------------------
Location of data points All coordinates were
* Accuracy and quality of surveys used to locate drill collected by handheld
holes (collar and down-hole surveys), trenches, mine GPS.
workings and other locations used in Mineral Resource
estimation. The grid system is the
Australian National Grid
Zone MGA 51 (GDA 94)
* Specification of the grid system used.
Topography is controlled
by site specific lidar
* Quality and adequacy of topographic control. survey.
------------------------------------------------------------- --------------------------
Data spacing and The lake area contained
distribution * Data spacing for reporting of Exploration Results. within the tenements was
calculated by digitising
the lake surface
* Whether the data spacing and distribution is and removing the area
sufficient to establish the degree of geological and covered by the islands
grade continuity appropriate for the Mineral Resource and the dewatered area of
and Ore Reserve estimation procedure(s) and the Williamson pit,
classifications applied. the approximate area is
181.1km(2) . 49 test pits
and 5 trenches were
* Whether sample compositing has been applied. excavated over the
tenements
surface resulting in 1
excavation per 3.3km(2) ,
which is a high density
of investigation
for a salt-lake and
sufficient to establish
variations in depth to
basement, sedimentology
and local hydraulic
conductivity.
The valley resource
estimate (Paleochannel
Sediment and Paleochannel
Basal Sand) is controlled
by 199 historic
drillholes to define
basement depth and
overlying fill. This
includes 51 drillholes
completed by WMC
Resources Limited (WMC)
to define the groundwater
resources of the
paleochannel.
Two of these historic
bores were test pumped.
Each test pump represents
a single point source
from within the
paleochannel, and the use
of standard test pumping
analysis provides an
estimation of the radius
of influence of the
pumping which means that
a determined length of
the paleochannel has been
hydraulically tested.
Sample compositing not
applied.
------------------------------------------------------------- --------------------------
Orientation of data in There are no structural
relation to geological * Whether the orientation of sampling achieves unbiased or geological controls
structure sampling of possible structures and the extent to with respect to sampling
which this is known, considering the deposit type. the lake bed sediments.
The variation in depth to
basement does control the
* If the relationship between the drilling orientation potential depth of future
and the orientation of key mineralised structures is trench systems
considered to have introduced a sampling bias, this to the west of Williamson
should be assessed and reported if material. pit and the main island.
Geological influence on
the brine is limited to
the aquifer parameters of
the host rock, namely
the hydraulic
conductivity, porosity
and storage parameters.
The drill holes are
vertical.
------------------------------------------------------------- --------------------------
Sample security SO4 field geologists were
* The measures taken to ensure sample security. responsible for bagging
and tagging samples prior
to shipping to
the BV lab in Perth and
the SO4 offices. The
security measures for the
material and type of
sampling at hand was
appropriate.
------------------------------------------------------------- --------------------------
Audits or reviews Data review is summarised
* The results of any audits or reviews of sampling in the report and
techniques and data. included an assessment of
the quality of assay
data and laboratory tests
and verification of
sampling and assaying. No
audits of sampling
techniques and data have
been undertaken.
------------------------------------------------------------- --------------------------
Section 2 - Reporting of Exploration Results
Criteria JORC Code explanation Commentary
Mineral tenement and land The Lake Way Project
tenure status * Type, reference name/number, location and ownership comprises tenements held
including agreements or material issues with third by Salt Lake Potash
parties such as joint ventures, partnerships, Limited (SO4 or the
overriding royalties, native title interests, Company)
historical sites, wilderness or national park and and includes those
environmental settings. recently acquired from
Blackham Resources Limited
(Blackham).
* The security of the tenure held at the time of
reporting along with any known impediments to SO4 holds tenements
obtaining a licence to operate in the area. covering the south east of
the lake, including
granted Exploration
licences
E53/1878, E53/1897,
Exploration Licence
Applications E53/2057,
E53/2059 and E53/2060, and
Mining Lease application
M53/1102.
The Company has
subsequently entered into
a Sales Agreement with
Blackham to acquire the
following
tenements; Exploration
licences E53/1862,
E53/1905, E53/1952,
E53/1863, Mining Licences,
M53/121,
M53/122, M53/123, M53/147,
M53/253, M53/796, M53/797,
M53/798, M53/910,
Prospecting Licences
P53/1642, P53/1643,
P53/1644 and P531645,
P53/1646, P53/1666,
P53/1667, P53/1668,
Miscellaneous
licence L53/51, L53/207,
Exploration Licence
applications E53/1966 and
E53/2049.
The Sales Agreement
completed on 7 October
2019.
------------------------------------------------------------ ---------------------------
Exploration done by other There is a database of
parties * Acknowledgment and appraisal of exploration by other approximately 6200
parties. boreholes across Lake Way.
The primary source for
the information is the
publicly available Western
Australian Mineral
Exploration (WAMEX) report
data base.
Recent sterilisation
drilling has also been
undertaken by Blackham to
the south and east of
the BRT area.
The majority of previous
work has been concerned
with investigating the
bedrock and calcrete
for gold and uranium, it
is of limited value in
defining the stratigraphy
of the lakebed sediments.
The data has been shown to
be useful in the
determination of the depth
to base of lakebed
sediments and has been
used to develop an overall
estimate of the volume of
lake bed sediments
that has been applied to
the mineral resource
calculations.
WMC undertook a process
water supply investigation
into the paleochannel down
the eastern
shore consisting of 7
lines. Five production
bores were installed and 4
tested, of these 4,
1 was prospective for
brine.
------------------------------------------------------------ ---------------------------
Geology The deposit is a salt-lake
* Deposit type, geological setting and style of brine deposit.
mineralisation.
The lake setting is
typical of a Western
Australian palaeovalley
environment. Ancient
hydrological
systems have incised
palaeovalleys into
Archaean basement rocks,
which were then infilled
by Tertiary-aged sediments
typically comprising a
coarse-grained fluvial
basal sand overlaid
by palaeovalley clay with
some coarser grained
interbeds. The clay is
overlaid by recent
Cainozoic
material including
lacustrine sediment,
calcrete, evaporite and
aeolian deposits.
------------------------------------------------------------ ---------------------------
Drill hole Information Thirteen auger holes were
* A summary of all information material to the drilled to a maximum depth
understanding of the exploration results including a of 7m. These holes were
tabulation of the following information for all insitu sampled
Material drill holes: for specific yield testing
in the lab and brine
samples were taken.
* easting and northing of the drill hole collar
Test pits and trenches
were excavated on the lake
* elevation or RL (Reduced Level - elevation above sea surface and one existing
level in metres) of the drill hole collar bore test pumped.
All auger, test pit,
* dip and azimuth of the hole trench and borehole
details and locations of
all data points are
* downhole length and interception depth presented
in the report.
* hole length.
* If the exclusion of this information is justified on
the basis that the information is not Material and
this exclusion does not detract from the
understanding of the report, the Competent Person
should clearly explain why this is the case.
------------------------------------------------------------ ---------------------------
Data aggregation methods Within the salt-lake
* In reporting Exploration Results, weighting averaging extent no low-grade
techniques, maximum and/or minimum grade truncations cut-off or high-grade
(e.g. cutting of high grades) and cut-off grades are capping has been
usually Material and should be stated. implemented
due to the consistent
nature of the brine assay
* Where aggregate intercepts incorporate short lengths data.
of high grade results and longer lengths of low grade
results, the procedure used for such aggregation Test pit and trench data
should be stated and some typical examples of such aggregation comprised
aggregations should be shown in detail. calculation of a hydraulic
conductivity,
transmissivity
* The assumptions used for any reporting of metal and drainable porosity for
equivalent values should be clearly stated. the whole sequence.
The brine analysis taken
during the test pump was
consistent throughout the
test. Aquifer
performance during the
test was analysed to
derive aquifer
Transmissivity and
storativity.
------------------------------------------------------------ ---------------------------
Relationship between The chemical analysis from
mineralisation widths and * These relationships are particularly important in the each of the test pits has
intercept lengths reporting of Exploration Results. shown the that the brine
resource is
consistent and continuous
* If the geometry of the mineralisation with respect to through the full thickness
the drill hole angle is known, its nature should be of the Lake Playa
reported. sediments unit. The
unit is flat lying all
test pits were excavated
* If it is not known and only the downhole lengths are into the lake sediments to
reported, there should be a clear statement to this a depth of 4m or
effect (e.g. 'down hole length, true width not basement, the intersected
known'). depth is equivalent to the
vertical depth and the
thickness of
mineralisation.
------------------------------------------------------------ ---------------------------
Diagrams All location maps and
* Appropriate maps and sections (with scales) and sections are contained
tabulations of intercepts should be included for any within the body of the
significant discovery being reported These should report.
include, but not be limited to a plan view of drill
hole collar locations and appropriate sectional
views.
------------------------------------------------------------ ---------------------------
Balanced reporting All results have been
* Where comprehensive reporting of all Exploration included in the body
Results is not practicable, representative reporting of the report or
of both low and high grades and/or widths should be Appendices.
practiced to avoid misleading reporting of
Exploration Results.
------------------------------------------------------------ ---------------------------
Other substantive All material exploration
exploration data * Other exploration data, if meaningful and material, data has been reported
should be reported including (but not limited to): within the body of this
geological observations; geophysical survey results; report and previous
geochemical survey results; bulk samples - size and MRE reports. This includes
method of treatment; metallurgical test results; bulk the results of the passive
density, groundwater, geotechnical and rock seismic surveying
characteristics; potential deleterious or undertaken. In total
contaminating substances. 55 passive seismic lines
have been run over the
lake and have been used to
identify the route
and dimensions of the
paleochannel aquifer.
------------------------------------------------------------ ---------------------------
Further work Drilling,
* The nature and scale of planned further work (e.g. hydraulic
tests for lateral extensions or depth extensions or testing and
large-scale step-out drilling). brine analysis
and grade
modelling of up
* Diagrams clearly highlighting the areas of possible to 18
extensions, including the main geological production
interpretations and future drilling areas, provided bores and 22
this information is not commercially sensitive. monitoring
bores within
the eastern
paleochannel to
upgrade the
confidence of
the resource
estimate.
------------------------------------------------------------ ---------------------------
Section 3 - Estimation and Reporting of Mineral Resources
Criteria JORC Code Explanation Commentary
Database Cross-check of laboratory assay
integrity * Measures taken to ensure that data has not been reports and database.
corrupted by, for example, transcription or keying Extensive QA/QC as described in
errors, between its initial collection and its use Section 3 Sampling Techniques and
for Mineral Resource estimation purposes. Data.
* Data validation procedures used.
------------------------------------------------------------ --------------------------------------
Site visits A site visit was undertaken by
* Comment on any site visits undertaken by the Mr Ben Jeuken from 29th to 30th
Competent Person and the outcome of those visits. April 2018. The Competent Person
visit was documented in Letter
Report SO4-18-1-L001 (Groundwater
* If no site visits have been undertaken indicate why Science, 2018).
this is the case. Numerous site visits have been
undertaken by Mr Robert Kinnell
in his capacity as the Exploration
Manager for SO4.
------------------------------------------------------------ --------------------------------------
Geological The shallow geological profile
interpretation * Confidence in (or conversely, the uncertainty of) the beneath the lake is relatively
geological interpretation of the mineral deposit. homogenous. The porosity of the
material is consistent with depth;
hence the geological interpretation
* Nature of the data used and of any assumptions made. has little impact on the resource
except to define its thickness.
The island is excluded from the
* The effect, if any, of alternative interpretations on resource estimate as access is
Mineral Resource estimation. not permitted. Mining the Williamson
Pit has resulted in an area of
approximately 4km(2) being dewatered.
* The use of geology in guiding and controlling Mineral This area has also been excluded
Resource estimation. from the resource estimate.
The paleochannel geometry in the
vicinity of the test pumped bore
* The factors affecting continuity both of grade and has been interpreted from geophysical
geology. cross sections, the thickness of
the paleochannel is taken from
the 1992 geological logs.
------------------------------------------------------------ --------------------------------------
Dimensions The area of the northern lake area
* The extent and variability of the Mineral Resource of the resource extends 139.5km(2)
expressed as length (along strike or otherwise), plan , the area of the southern lake
width, and depth below surface to the upper and lower area extends 41.6km(2) .
limits of the Mineral Resource. The top of the lakebed resource
is defined by the water table
surface;
on average 0.3m below ground surface.
The average thickness of the resource
is 5.3m as determined from the
leapfrog model.
The extent of the paleochannel
resource has been defined as a
result of modelling the historic
drillhole data, the WMC bores and
the recently completed passive
seismic geophysical surveys. The
length of the paleochannel on SO4
and Blackham tenements is
approximately
47km, the channel remains open
to the north, south and via the
Yeleerie tributary to the west.
The total volume of sediment
infilling
the paleovalley has been exported
from the geological model. The
volume is 16,300 Mm(3) . The extent
and thickness of the paleovalley
clays extending from 8m depth (Base
of LBS) to the top of basement
or Paleochannel Basal Sand is 15,200
Mm(3) .
The extent and thickness of the
Paleochannel; Basal sand resource
is defined by the geological model.
The total volume of the unit is
estimated to be 1,100 Mm(3) .
The Williamson Pit volume has been
estimated as 1.26M m(3) .
------------------------------------------------------------ --------------------------------------
Estimation Brine concentration was interpolated
and modelling * The nature and appropriateness of the estimation using both Ordinary kriging and
techniques technique(s) applied and key assumptions, including Voronoi polygons.
treatment of extreme grade values, domaining, The thickness of the lakebed
interpolation parameters and maximum distance of sediments
extrapolation from data points. If a computer was developed using the Leapfrog
assisted estimation method was chosen include a software package and an inverse
description of computer software and parameters used. distance weighted calculation applied
to the WAMEX boreholes database
covering Lake Way.
* The availability of check estimates, previous Average test pit spacing was 500m.
estimates and/or mine production records and whether No check estimates were available.
the Mineral Resource estimate takes appropriate No recovery of by-products was
account of such data. considered.
Deleterious elements were not
considered.
* The assumptions made regarding recovery of Selective mining units were not
by-products. modelled.
Correlation between variables was
not assumed.
* Estimation of deleterious elements or other non-grade The geological interpretation from
variables of economic significance (e.g sulphur for the WAMEX database and the
acid mine drainage characterisation). geophysical
cross sections were used to inform
a 3D geological model which was
* In the case of block model interpolation, the block used to define the thickness of
size in relation to the average sample spacing and the lakebed sediments as well as
the search employed. the location, width and depth of
the paleochannel.
Grade cutting or capping was not
* Any assumptions behind modelling of selective mining employed due to the homogenous
units. nature of the orebody.
Drainable porosity for the lakebed
sediments was calculated by analysing
* Any assumptions about correlation between variables. the test trench pumping data and
also from laboratory analysis of
samples.
* Description of how the geological interpretation was Total Porosity was determined by
used to control the resource estimates. laboratory analysis of samples.
55 seismic lines were run across
the lake. The lines were generally
* Discussion of basis for using or not using grade orientated east west in order to
cutting or capping. cross perpendicular to the
paleochannel,
some lines were also orientated
* The process of validation, the checking process used, north south in order to provide
the comparison of model data to drill hole data, and control for the east west sets.
use of reconciliation data if available. The lines were located approximately
2.5km apart.
The seismic response was calibrated
using the drill hole logs from
the WMC programme.
------------------------------------------------------------ --------------------------------------
Moisture Not applicable to brine resources.
* Whether the tonnages are estimated on a dry basis or See discussion of moisture content
with natural moisture, and the method of under Bulk Density.
determination of the moisture content.
------------------------------------------------------------ --------------------------------------
Cut-off No cut-off parameters were used.
parameters * The basis of the adopted cut-off grade(s) or quality
parameters applied.
------------------------------------------------------------ --------------------------------------
Mining factors Mining will be undertaken by gravity
or assumptions * Assumptions made regarding possible mining methods, drainage of brine from trenches
minimum mining dimensions and internal (or, if and by pumping from the deep
applicable, external) mining dilution. It is always paleochannel.
necessary as part of the process of determining Test pumping of 5 trenches was
reasonable prospects for eventual economic extraction undertaken to obtain preliminary
to consider potential mining methods, but the aquifer characteristics for the
assumptions made regarding mining methods and lakebed sediments.
parameters when estimating Mineral Resources may not The initial resource was based
always be rigorous. Where this is the case, this on the testing of two WMC bores
should be reported with an explanation of the basis located within the paleochannel.
of the mining assumptions made. During this phase of work one of
the paleochannel bores was retested
and a constant rate test run for
10 days, this provided greater
certainty around the aquifer
characteristics
over the limited length of the
radius of influence as result of
testing at this bore.
------------------------------------------------------------ --------------------------------------
Metallurgical The brine is characterised by
factors * The basis for assumptions or predictions regarding elevated
or assumptions metallurgical amenability. It is always necessary as concentration of potassium, magnesium
part of the process of determining reasonable and sulphate elements and distinctly
prospects for eventual economic extraction to deficient in calcium ions. Such
consider potential metallurgical methods, but the a chemical makeup is considered
assumptions regarding metallurgical treatment highly favourable for efficient
processes and parameters made when reporting Mineral recovery of Schoenite from the
Resources may not always be rigorous. Where this is lake brines (the main feedstock
the case, this should be reported with an explanation for SOP production), using
of the basis of the metallurgical assumptions made. conventional
evaporation methods.
------------------------------------------------------------ --------------------------------------
Environmental Environmental impacts are expected
factors * Assumptions made regarding possible waste and process to be; localized reduction in saline
or assumptions residue disposal options. It is always necessary as groundwater level, surface
part of the process of determining reasonable disturbance
prospects for eventual economic extraction to associated with trench and pond
consider the potential environmental impacts of the construction and accumulation of
mining and processing operation. While at this stage salt tails. The Project is in a
the determination of potential environmental impacts, remote area and these impacts are
particularly for a greenfields project, may not not expected to prevent Project
always be well advanced, the status of early development.
consideration of these potential environmental
impacts should be reported. Where these aspects have
not been considered this should be reported with an
explanation of the environmental assumptions made.
------------------------------------------------------------ --------------------------------------
Bulk density Bulk density is not relevant to
* Whether assumed or determined. If assumed, the basis brine resource estimation.
for the assumptions. If determined, the method used, Volumetric moisture content or
whether wet or dry, the frequency of the measurements volumetric porosity averaged 43%
, v/v.
the nature, size and representativeness of the
samples.
* The bulk density for bulk material must have been
measured by methods that adequately account for void
spaces (vugs, porosity, etc), moisture and
differences between rock and alteration zones within
the deposit.
* Discuss assumptions for bulk density estimates used
in the evaluation process of the different materials.
------------------------------------------------------------ --------------------------------------
Classification The data is considered sufficient
* The basis for the classification of the Mineral to assign a Measured resource
Resources into varying confidence categories. classification
to brine within the northern lakebed
sediments and a portion of the
* Whether appropriate account has been taken of all paleochannel within the radius
relevant factors (i.e. relative confidence in of influence of the test pumping.
tonnage/grade estimations, reliability of input data, An indicated resource was assigned
confidence in continuity of geology and metal values, to the remainder of the paleochannel.
quality, quantity and distribution of the data). An inferred resource was assigned
for the lakebed sediments to the
south and the paleochannel clays.
* Whether the result appropriately reflects the The result reflects the views of
Competent Person's view of the deposit. the Competent Person.
------------------------------------------------------------ --------------------------------------
Audits or No audit or reviews were undertaken.
reviews * The results of any audits or reviews of Mineral
Resource estimates.
------------------------------------------------------------ --------------------------------------
Discussion For both the lakebed sediments
of relative * Where appropriate a statement of the relative and the paleochannel the estimated
accuracy/ accuracy and confidence level in the Mineral Resource tonnage represents the in-situ
confidence estimate using an approach or procedure deemed brine with no recovery factor
appropriate by the Competent Person. For example, the applied.
application of statistical or geostatistical It will not be possible to extract
procedures to quantify the relative accuracy of the all of the contained brine by pumping
resource within stated confidence limits, or, if such from trenches. The amount which
an approach is not deemed appropriate, a qualitative can be extracted depends on many
discussion of the factors that could affect the factors including the permeability
relative accuracy and confidence of the estimate. of the sediments, the drainable
porosity, and the recharge dynamics
of the aquifers.
* The statement should specify whether it relates to No production data are available
global or local estimates, and, if local, state the for comparison.
relevant tonnages, which should be relevant to
technical and economic evaluation. Documentation
should include assumptions made and the procedures
used.
* These statements of relative accuracy and confidence
of the estimate should be compared with production
data, where available.
------------------------------------------------------------ --------------------------------------
Section 4 Estimation and Reporting of Ore Reserves
Criteria JORC Code Explanation Commentary
Mineral The Ore Reserve is made up of 100%
resource * Description of the Mineral Resource estimate used as of the measured resource for the
estimate a basis for the conversion to an Ore Reserve. northern lakebed sediments and
for conversion 10.6% of the paleochannel and the
to Ore indicated resource for the remaining
Reserves * Clear statement as to whether the Mineral Resources 89.4% of the paleochannel. No inferred
are reported additional to, or inclusive of, the Ore resources are included in the Ore
Reserves Reserve.
Mineral resources are inclusive
of the Ore Reserve.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Site visits A site visit was undertaken by
* Comment on any site visits undertaken by the Mr Ben Jeuken from 29th to 30th
Competent Person and the outcome of those visits. April 2018. The CP visit was documented
in Letter Report SO4-18-1-L001
(Groundwater Science, 2018).
* If no site visits have been undertaken indicate why Numerous site visits have been
this is the case. undertaken by Mr Robert Kinnell
in his capacity as the Exploration
Manager for SO4.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Study Status A Bankable Feasibility Study (BFS
* The type and level of study undertaken to enable or the Study) has been undertaken
Mineral Resources to be converted to Ore reserves. to convert Mineral Resources to
Ore Reserves.
The conversion of Mineral Resources
* The Code requires that a study to a least to Ore Reserves has been limited
pre-feasibility study level has been undertaken to to the Probable Reserves category.
convert Mineral Resource to Ore Reserves. Such The volume of available reserves
studies will have been carried out and will have has been determined by a complex
determined a mine plan that is technically achievable numerical model. Modelling has
and economically viable and that material modifying been completed giving consideration
factors have been considered. to the Australian Groundwater Modelling
guidelines (Barnett et al. 2012)
using the Modflow USG Transport,
Modflow Surfact, and Groundwater
Vistas 7 and taking into consideration
modifying factors such as recharge
and evapotranspiration.
The Ore Reserve has been completed
as a result of the Study with an
implied +/- 15% accuracy.
A mine plan has been developed
utilising all reserves for an initial
abstraction rate of 18.2GL/year
and production rate of 118,700
tonnes per annum delivered into
the evaporation ponds.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Cut off No cut off grade has been applied.
parameters * The Basis of the cut-off grade or quality parameters Grade depletion will be managed
employed. through incorporating additional
trenches and bores as well as within
the plant through the addition
of KCl.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Mining factors The volume of convertible Mineral
or assumptions * The method and assumptions used as reported in the Resource has been determined through
Study convert the Mineral Resource to an Ore Reserve the numerical modelling process.
(i.e. either by application of appropriate factors by Modelling has been completed giving
optimisation or by preliminary or detailed design). consideration to the Australian
Groundwater Modelling guidelines
(Barnett et al. 2012) using the
* The choice, nature and appropriateness of the Modflow USG Transport, Modflow
selected mining methods and other mining parameters Surfact, and Groundwater Vistas
including associated design issues such as pre strip, 7.
access etc. The numerical model was constructed
based on the parameters determined
during the field testing and analysis,
* The assumptions made regarding geotechnical such as test pit geology, test
parameters, grade control and pre production pumping results, geophysical surveys,
drilling. boundary conditions.
The numerical model was calibrated
to steady state using an iterative
* The major assumptions made and Mineral Resource model process to reduce the residual
used for pit and slope optimisation (if appropriate) error between the predicted and
observed data.
Sensitivity analysis was performed
* The mining dilution factors used to test assumptions made during
development of the models.
Model predictions for resource
* The mining recovery factors used recovery over the life of mine
incorporate trenches and bores
to the required flow and manage
* Any minimum mining widths used grade depletion.
Incorporation of rainfall and surface
water recharge based on a nominal
* The manner in which inferred Mineral Resources are 20-year period.
utilised in mining studies and the sensitivity of the Column tests to assess the liberation
outcome to their inclusion of salts from the retained porosity
as a result of fresh water recharge
events.
* The infrastructure requirements of the associated Incorporation of rainfall and surface
mining methods water recharge based on a nominal
20-year period.
2D Cross-sectional groundwater
flow and transport modelling to
assess grade depletion with time.
Brine will be extracted via gravity
inflow into a network of trenches
dug within the lakebed sediment
and a borefield installed along
the length of the paleochannel.
Test trenches were dug and their
stability observed over time as
well as their performance during
test pumping. Similarly, a bore
was test pumped within the paleochannel
both methods of abstraction were
deemed to be feasible and appropriate.
The field investigations informed
the length of trenches required
and the cost to install.
The geometry of the paleochannel
and the anticipated flows informed
the cost required to abstract a
sustainable yield from the bores.
The construction methodology and
costings have been developed for
the BFS.
A brine transfer system has been
developed, costed and hydraulically
modelled to ensure that the required
flow of brine can be delivered
to the evaporation ponds to deliver
118,700 tonnes of potassium per
annum.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Metallurgical The metallurgical process is appropriate
factors * The metallurgical process proposed and the for the mineralisation and similar
or assumptions appropriateness of that process to the style of techniques and plants are in operation
mineralisation elsewhere.
The test work incorporated several
stages of development including:
* Whether the metallurgical process is well tested * wind tunnel evaporation tests
technology or novel in nature
* bench scale metallurgical testing such as; crushing,
* The nature, amount and representativeness of flotation, conversion and crystallisation tests
metallurgical test work undertaken, the nature of the
metallurgical domaining applied and the corresponding
metallurgical recovery factors applied * larger scale field evaporation trials
* Any assumptions or allowances made for the * locked cycle flowsheet testing
deleterious elements
* pilot processing of 5t of site field trial evaporated
* The existence of any bulk sample or pilot scale test harvest salts
work and the degree to which such samples area
considered representative of the orebody as a whole
Harvested salt was sent to world
renowned potash laboratory, Saskatchewan
* For minerals that are defined by a specification has Research Council (SRC) for flowsheet
the ore reserve estimation been based on the development and testing.
approximate mineralogy to meet the specification. The flowsheet development program
has tested the complete flowsheet
from brine evaporation to produce
harvest salts and converting these
harvest salts to SOP, which has
included the following steps:
* Solar evaporation of Lake Way brine, on site, in
sequential evaporation ponds, to produce harvest salt
and to confirm site evaporation conditions
* Harvesting of potassium bearing salts for flowsheet
testing
* Crushing potassium bearing harvest salts from Lake
Way and determining mineralogy
* Preparing potassium bearing harvest salts for
flotation
* Flotation of halite waste salt from potassium bearing
harvest salts.
* Conversion of potassium bearing harvest salts to
schoenite using recycled crystalliser mother liquor
* Secondary schoenite crystallisation from cooled
mother liquor
Conversion of schoenite to SOP
product.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Environmental Environmental impact assessments
* The status of studies of potential environmental of mining and processing operations
impacts of the mining and processing operation. are well advanced, with some follow
Details of waste rock characterisation and the up hydrological, flora/fauna and
consideration of potential sites, status of design heritage studies still required
options considered and where applicable, the status in support of approvals for full
of approvals for process residue storage and waste scale operation. These will be
dumps should be reported. completed in Q3/Q4 2019.
Effectively no waste rock is generated
by the mining activity. Spoil produced
by establishment of on-playa infrastructure
has been tested and determined
to be non-acid generating (Pendragon,
2019). Chemistry of process residues
(halite, epsomite, bischofite)
is well understood. Geotechnical
assessment of proposed disposal
sites has been completed to allow
preliminary design of process residue
stockpiles to be completed. The
physical characterisation of process
residues has been completed. Final
design option will be confirmed
in Q1/Q2 2020.
Environmental applications for
storage of process residues from
Train 1 and Demonstration phases
of the Project implementation have
been lodged and are currently under
assessment. Environmental applications
for residue storages required for
full scale operation will be submitted
to government in Q3/Q4 2019.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Infrastructure The Infrastructure at the mine,
* The existence of appropriate infrastructure, includes a Processing plant, workshops,
availability of land for plant development, power, warehousing, associated buildings
water, transportation (bulk commodities), labour, including administration, first
accommodation or the ease with which the aid, mine rescue and training,
infrastructure can be provided or accessed. crib and ablutions reagents shed,
and lab facilities. All facilities
are in close proximity and walking
distance from each other.
The site has two access points
one for haul trucks delivering
salts from the on lake and the
other for normal traffic, including
LVs and product/service deliveries.
The Accommodation village is close
to the operations, but far enough
not to have any noise disturbance.
The village will combine a construction
camp and an operational camp to
a maximum of 300 rooms to start,
then as construction finishes,
it will be demobilized leaving
all common facilities and 100 operation
rooms. The camp includes recreational
facilities, waste water treatment
plant and RO plant for potable
water supply. The temporary Gen
sets will be replaced with permanent
power from the power station.
A new Gas fired power station will
accommodate the requirements of
all the sites power needs. and
located in close proximity to the
process plant to enable waste heat
recovery to be used in the Process
plant.
Diesel fuel will be delivered to
the mine in road trains and a central
fuel farm including 2x110kL tanks
to support the operation.
Raw water will be supplied from
2 bore fields. The capacity giving
a total supply of 1.8GL. The demand
of the process water plus potable
water is approximately 1.75GL.
West creek bore-field will be run
by diesel gen sets, and the Southern
bore field will utilise the existing
mains infrastructure to be run
by Blackham Resources Limited power
station supply. Two independent
HDPE pipe runs to supply raw water
to the site in a raw water pond.
Raw water will be treated to potable
water standards at the village
and distributed to other associated
buildings. The water will meet
the requirements of Australian
Drinking Water Guidelines.
Communications system to be installed,
including microwave backbone into
the site, plant wide WiFi system,
camp WiFi , and free to air TV,
Site wide private UHF radio system,
Interface to all raw water bores,
paleochannel bores and transfer
pumping stations. Full plant communications
for the process including CCTV
for critical plant items.
Access to the Goldfields Gas Pipe
line approximately 26km to supply
gas for the Power station and some
process drying and water heating
equipment.
Main road access will be via and
existing entrance on to the Goldfields
Highway with some minor modifications
to accommodate 60m super quad road
trains.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Costs The capital cost estimate was based
* The derivation of or assumptions made regarding on the following criteria;
project capital costs in the study * Work breakdown structure (WBS)
* The methodology used to estimate operating costs * Estimate base date of Q3 2019
* Allowances made for the content of deleterious * Engineering design concepts and quantities for
elements construction and fabrication
* The derivation of assumptions made of metal or * Direct labour hours and rates with allowances for
commodity prices for the principal minerals and co distributable costs
products
* Freight allowances
* Derivation of transportation charges
* A Labour 'norms' contracting strategy
* The basis for forecasting or source of treatment and
refining charges penalties for failure to meet specs
etc. * Self perform and contract
* The allowances made for royalties both government and * Use of estimates from key study contributors
private
* Budget pricing from vendors and contractors
The capital cost estimate was completed
to an accuracy meeting the criteria
of the Association for the Advancement
of Cost Engineering (AACE) Class
3 +/- 15% accuracy.
The operating cost has been developed
around cost elements with the primary
activities and items included.
The following assumptions have
been made associated with operating
costs and the base case operating
philosophy:
* Overall management will be undertaken by SO4.
* Owner operated operations for on-lake and process
plant production.
* A haulage contractor will be engaged to transport all
pond harvest salt to the process plant.
* A Haulage contractor will be engaged to provide all
transport of SOP product form the site to the
selected Port and back haulage of KCl to Wiluna.
* Contractor proposals have been received and form the
basis of transportation charges, port and shipping
charges.
* Accommodation villages will be Contractor operated,
with a BOO contract for the capital cost of the
village.
* FIFO flights for all personnel will be arranged and
managed by SO4 between Perth and Wiluna.
* Diesel fuel will be purchased in bulk and distributed
by SO4.
* Gas will be supplied as Liquid Natural Gas (LNG) by a
new lateral tie-in to the Goldfields Gas Pipeline
(GGP).
* Power will be provided via a Build Own Operate (BOO)
contractor.
* Carbon tax has been excluded.
* Allowances for maintenance down time have been
considered by operating unit.
* All costs are in Australian dollars (AUD).
* An exchange rate of AU$1.00 = US$0.68 has been used
during operations where necessary.
* GST has been excluded.
Pricing assumptions have been based
on an Independent market report
prepared for the Lake Way Project.
Transportation costs have been
based on a detailed proposal received
from a leading logistics/haulage
company.
Penalties and premiums applied
to the pricing assumptions are
based on market information and
supported by the independent market
report.
Government Royalties are based
on the prescribed rates for a "finished
product" being 2.5%. The SOP product
that will be produced and sold
from Lake Way will be in the form
of a finished product.
Private Royalties are based on
negotiated rates with the determined
Native Title group that covers
the Lake Way Project.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Revenue Grade is based on detailed pilot
Factors * The derivation of, or assumptions made regarding plant testing work undertaken on
revenue factors including head grade, metal or salts that have been processed
commodity price, exchange rates, transportation and from Lake Way.
treatment charges, penalties, net smelter returns Pricing assumptions have been based
etc. on an Independent market report
prepared for the Lake Way Project.
Exchange rates are based on the
* The derivation of assumptions made of metal and current spot rate.
commodity prices for the principal metals, mineral Transportation costs have been
and co products based on a detailed proposal received
from a leading logistics/haulage
company.
Penalties and premiums applied
to the pricing assumptions are
based on market information and
supported by the independent market
report.
Pricing assumptions of US$550 per
tonne have been based on an Independent
market report prepared for the
Lake Way Project.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Market The SOP market has been assessed
Assessment * The demand, supply and stock situation for the recently by experienced market
particular commodity, consumption trends and factors analysis organisations such as
likely to affect supply into the future CRU International (CRU) and Argus
Media Group (Argus). Additionally,
SO4 engaged Argus to complete a
* A customer and competitor analysis along with the specific market analysis on SOP
identification of likely market windows for the and on the supply/demand forecast
product taking into account the volume
that will enter the market from
SO4's Lake Way Project and other
* Price and volume forecasts and the basis for these likely new entrants and existing
forecasts capacity changes.
CRU and Argus studies considered
all the major SOP producers individually
* For industrial minerals the customer specification, and the smaller producers on a
testing and acceptance requirements to a supply geographic region basis. Customers
contract were considered on a geographical
region level to analyse regional
demand.
Argus and CRU employed best practice
techniques to evaluate supply/demand
balance and therefore likely price
impacts to develop several scenarios
for price and volume forecasts.
Non-binding MoUs have been signed
with potential customers.
The proposed SOP grades exceed
the market accepted specifications
in several key parameters.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Economic The material assumptions used in
* The inputs to the economic analysis to produce the the estimation of the production
net present value (NPV) in the study, the source and target and associated financial
confidence of these economic inputs including information are detailed in Appendix
estimated inflation, discount rate, etc B of this Announcement.
NPV sensitivity analysis to a range
of the material assumptions is
* NPV ranges and sensitivity to variations in the included in the section titled
significant assumptions and inputs. 'Economics - Sensitivity Analysis'
----------------------------------------------------------------------- -----------------------------------------------------------------------
Social SO4 has been working collaboratively
* The status of agreements with key stakeholders and the representative group, Tarlka
matters leading to social license to operate. Matuwa Piarku Aboriginal Corporation
(TMPAC), for the native title holders
over the area within which the
Lake Way Project is located. The
Project is located on, and in the
vicinity of Lake Way, which is
an area of significance and sensitivity
to the native title holders.
SO4 and TMPAC have entered into
a native title exploration agreement
and are finalising a comprehensive
land access agreement that provides
certainty for the Project, cultural
heritage management protocols and
lasting social and economic benefits
to the native title holders.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Other Whilst production has been modelled
* To the extent relevant, the impact of the following on the basis of average recharge
on the project and/or on the estimation and no account has been taken of the
classification of the Ore Reserves: impact of a cyclonic event on operations
and the resource. The project lies
outside the primary cyclone path
* Any identified material naturally occurring risks. for NW Western Australia, however
significant rainfall events associated
with cyclones have impacted the
* The status of material legal agreements and marketing area, the most recent being in
arrangements. 1994 - 1995.
The Company has previously entered
MOUs with Mitsubishi Australia
* The status of government agreements and approvals Limited and Sinofert Holdings Limited
critical to the viability of the project, such as setting out the basis for binding
mineral tenement status and government and statutory offtake agreements. The Company
approvals. There must be reasonable grounds to expect is progressing discussions with
that all necessary Government approvals will be these parties and others with a
received within the timeframes anticipated in the view to signing binding offtake
Pre-Feasibility or Feasibility study. Highlight and and marketing agreements for the
discuss the materiality of any unresolved matter that future sale of its product.
is dependent on a third party on which extraction of Environmental work to date has
the reserve is contingent. not identified any social or environmental
factors that could constitute fatal
flaws or insurmountable obstacles
to gaining necessary statutory
approvals. The approvals for the
Project are currently being progressed
and the Project schedule allows
for these approvals.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Classification The Ore Reserve estimate for Lake
* The basis for the classification of the Ore Reserves Way is detailed in Table 6 in the
into varying confidence categories. Whether the body of the Announcement. The brine
result appropriately reflects the Competent Person's flow rate and concentration estimates
view of the deposit. The proportion of Probable Ore are based on modelling and extrapolation
Reserves that have been derived from Measured Mineral of testwork which provides an Ore
Resources (if any). Reserve classed as Probable
2.4Mt of contained potassium includes
60% converted from the Measured
resource category (100% of the
northern lake bed sediments and
10.6% of the paleochannel), and
40% converted from the Indicated
resource category (the remaining
89.4% of the paleochannel). No
brine from the Inferred resource
category is included in the Ore
Reserve and Production Target.
The results of the test pumping
and the consistent nature of the
brine grade within the paleochannel
mean that the Measured and Indicated
Mineral Resource Estimates have
been converted to a Probable Ore
Reserve.
The northern zone of the lake playa
has been classified as a Measured
Mineral Resource Estimate for the
initial 8m at surface. This resource
has been converted to a Probable
Ore Reserve given the effects of
variable recharge, dilution and
liberation of the mineral salts
contained within the retained porosity
across the lake bed surface.
The results reflect the view of
the Competent Person.
----------------------------------------------------------------------- -----------------------------------------------------------------------
Audit or The numerical groundwater model
reviews * The results of any audits or reviews of Ore Reserve used to define the ore reserve
estimates. has been reviewed by Mr Hugh Middlemis
of Hydrogeologic Pty Ltd. Mr Middlemis
is an independent consultant with
over 18 years' experience in brine
hydrogeology and modelling.
The review concluded:
* The overall 3D and 2D modelling methodology,
including the predictive scenarios and selected
sensitivity/uncertainty assessments, are consistent
with best practice. The study is fit for the purpose
of guiding mining project feasibility assessments.
* Ongoing monitoring and other investigations will
provide additional data for future model refinements
and improvements in performance and for comprehensive
uncertainty analysis. Such progressive updates should,
in turn, be used to guide future monitoring and
management programs.
----------------------------------------------------------------------- -----------------------------------------------------------------------
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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