Oct 262011

By Teri Walker–

One of the companies exploring the potash mining potential in the Holbrook Basin east of Holbrook has received better than hoped for news indicating the company should move forward with further steps toward mine development.

“Even after a year of study, it’s more than I thought it’d be,” said American West Potash President and CEO Pat Avery.

On Thursday, American West Potash unveiled its “2011 Potash Resource Assessment” of land holdings in the Holbrook Basin, and the findings verified more potash than expected, and encouraged the company to keep moving forward with further study and drilling.

Before the report was issued, Avery had estimated his company might expect to recover one million to two million tons per year of potash, a mineral used primarily in manufacturing fertilizer. Avery said his company now envisions developing a facility that would process at least two million finished tons of potash per year, with the potential for two-and-a-half million to three million finished tons, for at least the next 40 years.

North Rim, a geoscience and engineering consulting firm based in Saskatoon, Saskatchewan, Canada, prepared the report, titled an NI 43-101, which verified American West has more than 700 million tons of potassium chloride (KCL or sylvite) and more than 80 million tons of potassium oxide (K2O) under its control, with the possibility for those quantities to increase as American West proceeds with more exploration drilling to identify additional deposits under the 94,000 acres it controls.

In the resource report, North Rim found that American West’s potash resource was similar to that found in the Carlsbad, N.M., potash mines, which are currently operated by Intrepid Potash. The Carlsbad mines have been in operation since 1929, and the first ore came out of the ground in 1931. North Rim says American West’s potash ore grade is very similar to Carlsbad, but with even fewer impurities, which would reduce processing costs.

Currently, the United States imports about 80 percent of its potash, with the three existing American potash mining operations producing a total of 1.5 million tons of the mineral resource.

The 43-101 is an instrument based on Canadian Institute of Mining guidelines, which is one of the leading standards for demonstrating a mining resource. The report provides an independent, third-party expert assessment of a mining resource that is shared with bankers and investors.

Previously, Avery had estimated a one- to two-million-ton per year potash mine would call for about 400 permanent employees, with an average salary of about $70,000 to $75,000. He explained that although the mine is expected to withdraw more ore per year, it doesn’t necessarily translate to a significant increase in jobs, rather it’s more likely the size and power of equipment would be increased to support the higher volume.

“We’re excited, we support these companies and we want Holbrook to be their home,” said Holbrook Mayor Jeff Hill.

“We are committed as a city to being able to meet the demands of a growing city,” Hill continued. “We’re going to have a boom. Through good police, good fire departments and solid infrastructure, we’ll be able to support this growth.”

Hill referred to the mapping of the city’s sewer system conducted in recent years, along with the just-released wastewater flow study, as valuable tools the city is using to identify needed infrastructure improvements.

“If a 100-home subdivision goes in on the hill, we want to be able to say, ‘Yes, we can support that,’” Hill said.

“Mining has always been and remains a critical part of Arizona’s economy,” said Matthew Benson, director of communications for Governor Jan Brewer. “We’re certainly early in the process, but this report is promising because it could provide quality jobs in rural Arizona where we need them.”

American West had been awaiting the results of the 43-101 before it could begin with additional steps involved in starting up a mining operation. The company has contracted with TetraTech, an engineering, renewable energy and construction services consulting firm, to develop a preliminary economic assessment, which is due mid-November. TetraTech will evaluate the economic viability of the project, looking at such things as capital and operating costs, and potential cash flows.

Avery said additional drilling “will provide even more certainty” about the quantity and location of potash, and he expects to identify millions of additional tons to add to the company’s inventory.

“Based on the solid results of the 43-101, American West Potash will be quickly moving into feasibility studies, mine planning and permitting over the next six months,” Avery said.

Part of American West’s planning will include cultural resource inventory, environmental assessments and continuing to coordinate with Petrified Forest National Park. American West’s holdings surround the park, and with the park’s recent acquisition of the 26,000-acre Hatch Ranch, for which American West holds the mineral rights, mining operations may eventually take place under the park’s expansion area. The company has been working with park staff to identify potential mine facility locations that would keep mining operations from being visible to park visitors.

“We’ve been assuming for several months this was a going proposition. We continue to believe it’s going to happen and appreciate American West working as closely with us as they are,” said Petrified Forest National Park Superintendent Brad Traver.

The two other mining companies exploring in the Holbrook Basin, HNZ Potash and Passport Potash, have not yet released the findings of their resource analysis.

Photo by Teri Walker

American West Potash drilled 12 exploration wells to assess the potash resource present beneath the surface of the company’s land holdings in the Holbrook Basin.

Photo by Teri Walker

Petrified Forest National Park Superintendent Brad Traver (left) and American West Potash President Pat Avery review optimal locations for surface mining facilities.