Aug 102011

By Teri Walker–

The rich potash deposits in the Holbrook Basin are garnering increased attention from mining interests and initial results of drilling in the untapped deposits are showing that interest is well founded, according to American West Potash CEO and President Pat Avery.

American West Potash, a Denver-based subsidiary of Prospect Global Resources, is one of three mining interests presently drilling wells in the Holbrook Basin to verify historic findings that a large, thick, mineral-rich deposit of potash underlies lands east of Holbrook, near and beneath Petrified Forest National Park.

Avery said the results of drilling American West has undertaken to date appear to bear out the conclusions of an Arizona Geological Survey report issued in 2008 by Oil and Gas Administrator Steven Rauzi that there could be from 210 million to 1.75 billion tons of recoverable potash at relatively shallow depths, accessible at between 1,000 and 1,450 feet below the surface.

American West, a publicly traded company, has engaged Stewart Bros. and Sunbelt Drilling to drill 14 wells, 12 of which are complete, to secure core samples of the potash deposits under American West’s control.

With the recent finalization of royalty arrangements for nearly 100 private mineral estate sections, American West now has about 100,000 acres of nearly contiguous, private and state mineral sections, with the capability of securing more holdings.

Avery said initial findings show the Holbrook Basin could support “world-scale” mining operations for a long time to come.

Avery said test results appear to confirm the potash deposits could be at the higher end of Rauzi’s predicted range, and estimates that it’s possible American West could draw up to two million tons of potash from its holdings for up to 50 years. From there, annual tonnage extracted would phase down over a number of years, and eventually the site would be solution-mined for another 20 years or so.

American West would require approximately 400 permanent employees to manage mining operations at that scale, including about 350 non-salary and 50 salary personnel.

Avery anticipates the company would have a $400 million to $500 million annual operating budget, including salaries, maintenance and supplies.

His company wants to hire from the local workforce, and plans to set up its headquarters for this operation in Holbrook.

“Holbrook has I-40, the railroad, an airport and consistent Internet service,” said Avery. “As far as we’re concerned, Holbrook is the hub of our operations.”

By the time its exploration phase is done, American West will have commissioned 70 miles in seismic testing. The testing is being conducted by Zonge International and interpreted by Boyd RPS in Calgary, Canada. Results from the first 50 miles of testing show the deposits to be flat, consistent and non-faulted. These are ideal conditions for potash mining, allowing operators to drill straight through areas, rather than having to make costly diversions around faults and other obstructions.

While in Canada, where the world’s richest and largest potash deposits have been found to date, potash mining can take place in excess of 3,500 feet, requiring operators to work through water aquifers to access the minerals, American West holdings are revealing potash found at depths averaging about 1,400 feet.

Avery said some of the thickest deposits of potash are being found under the land holdings American West purchased from the Karlsson Group.

These favorable geological factors are contributing to lower extraction costs, which should significantly impact American West’s revenues. Existing infrastructure in the area also works in American West’s favor.

“I’ve had to spend hundreds of millions in some places, bringing in rail, roads and power,” said Avery. “Here, everything is already in place.”

In short, Avery is pleased with conditions surrounding his company’s Holbrook Basin exploration.

“Based on our potash mining experience, these (test) results would make mining competitive with any other world facility,” said Avery. “Added with the shallow depth to ore, mild processing climate, great infrastructure and nearness to year-round ag markets and exports, this would be a competitive, low cost venture.”

Results from the exploration and geologic prove up stage are expected to be complete in September. Avery said if results are as good as expected, American West will proceed with securing permits, a process that is expected to take 12 to 15 months, then commence with construction, which should take about one year before mining operations begin.

Of his interactions with local entities and private land owners, Avery said, “It’s great working in the Apache and Navajo County area. The Holbrook mayor, city manager, businesses and community have been very supportive. Everyone has asked, ‘What can we do to help make this potash a reality?’ We really appreciate this.”

Image courtesy of Arizona Geological Survey

Three exploratory mining operations are presently conducting testing of the Holbrook Basin east of Holbrook. Wells represented along the eastern area of the figure are operated by American West Potash. Hunt Oil wells are roughly those in the southern portion of the figure, with Passport Potash drill sites along the west and southwest flank.

Image courtesy of Arizona Geological Survey

American West Potash is completing testing of Holbrook Basin potash deposits to prove up the findings of historic reports and that of Arizona Geological Survey Oil & Gas Administrator Steven Rauzi, who in 2008 reported the Holbrook Basin could hold up to 2.5 billion metric tons of potash.