Sintoukola in the Republic of Congo is an interesting project area whichever way you look at it. It lies within the Congo Basin, which was formed during the breakup of the prehistorical Gondwana landmass to form the African and South American continents. During this separation, an early shallow marine basin became filled with around 1 kilometre of evaporitic sediments. In the 1950s, a French company exploring the basin for oil identified sylvinite and carnallite deposits 200 metres beneath the cover of sand. Half a century later, large new deposits have been delineated that could become the world’s next great potash mines.
The Sintoukola permit was secured by Congolese company Sintoukola Potash S.A., who brought it to the attention of ASX-listed company Elemental Minerals Limited (ASX: ELM) in 2008. ELM was immediately attracted to the project – particularly as there was encouraging existing data for it held in oil and potash exploration archives – and acquired a majority shareholding in Sintoukola Potash and its exploration permit.
ELM commenced drilling at Sintoukola in 2010, in the vicinity of two promising historical boreholes. It quickly became clear that there was indeed excellent potash there and ELM went on to drill out the Kola deposit, with Measured and Indicated mineral resources of 573 million tonnes grading 33% KCl sylvinite. An NI 43-101 Pre-Feasibility Study lead by SRK Consulting was completed for the Kola deposit in September 2012. The ore is hosted by two high-grade seams between 200 and 300 metres below surface, with simple geometry, uniform grade, very low deleterious components and huge upside.
However, as ELM Managing Director John Sanders explains, identifying this “high-grade, shallow sylvinite deposit” was only the beginning.
“The Sintoukola licence area is approximately 1,400 square kilometres, which we have partially explored, in order to deliver a pipeline of production and add shareholder value,” he says. “In addition to the initial Kola deposit, we recently delivered the Dougou carnallite deposit that contains 3 billion tonnes of high-grade, 22% KCl carnallitite, of which 1.1 billion tonnes is in the Measured and Indicated resource category.”
In addition to these two deposits is the less advanced but no less exciting Yangala Prospect, where ELM has completed two drill holes. These have 4.2 to 4.5-metre thick intersections grading at 59.5% and 57.7% KCl respectively: 35% higher than the highest-grade deposits in Canada, the world’s largest potash-producer.
“To our knowledge, there is no potash seam out there that comes close to that kind of grade over a significant thickness,” John remarks, adding that EML intends to complete further drilling there this year. In January of this year, ELM announced an Exploration Target of 235 to 470 million tonnes grading 55% to 60% KCl for Yangala.
Kola is ELM’s most advanced project, possessing completed Pre-Feasibility and Phased Implementation studies, as well as a 25-year mining licence with an ESIA completed to Equator Principal standards. Calculations so far point toward the project having low operating costs, supporting high returns. The Scoping Study recently completed on Dougou indicated that this prospect has the potential to become a low-capital and low-opex potash mine that John says will be reasonably quick to develop and get into production. The forecast Life of Mine operating cost of US$68 per tonne of MOP may be the lowest globally.
Contractor Meridian Drilling has played an important part in developing the Sintoukola projects so far, having completed 35 holes totalling 12,060 metres. John points out that potash drilling is more complex than most exploration drilling due to the material’s soluble nature and the special requirements for casing and grouting in the overlying sediments. “Despite these challenges, Meridian has exceled and achieved core recovery of essentially 100% throughout,” he adds. “Their team has always gone to lengths to meet timing and budgetary requirements.”
ELM will begin both the Bankable Feasibility Study for Kola and the Pre-Feasibility Study for Dougou mid-year. “Those feasibility studies will run in semi-parallel and should be completed by third-quarter 2016,” says John. “Completing these is our primary focus for the next 15 months and will assist us, among other requirements, to put project finance in place.”
In the medium term, ELM plans to bring on a strategic partner who will help bring its projects into production. The target is to begin constructing the project in 2017 and to be in production around two years after that.
When it comes to entering the market, ELM will have much more going for it than simply good geology and grades. The Sintoukola projects are extremely well positioned – even unusually so for projects of their type.
“Unlike most potash plays globally, Sintoukola is on the coast,” John begins. “If you look at competitor projects in Canada or Russia, their mines are around 1,000 kilometres inland. We have excellent logistics and existing infrastructure including a hard-top road all the way from the licence area to the port and city of Pointe Noire.”
The Republic of Congo makes a good base in which to operate, he adds: “benign” from both a political and commercial perspective. “Remarkably for an African country, the ROC is not stretched from an energy point of view in that it has surplus power,” he remarks. “Because it’s an oil producing country, it’s very well-serviced from an engineering and logistical perspective, and we’re also much closer to our target market of Brazil than our competitors.”
All these factors combine to put the Sintoukola projects in the lowest cost quartile of potash projects worldwide, which will enable significant margins and good returns for shareholders – which, at the end of the day, is ELM’s main goal.
“Potash itself is very attractive from a commercial perspective, but particularly so in our project due its grade and location,” says John. “We’re looking at significant free cash flows after Phase 1 that will finance subsequent expansion phases and, once we’re in production, shareholders will be able to enjoy a high revenue stream dividend. This is what makes the project so attractive to shareholders – the majority of whom have been with us from the start, and whom we anticipate will stay with us for the long haul.”