Apr 042012

By Teri Walker —

Passport Potash Inc. officials have received the long-awaited estimate of the potash resources lying beneath the company’s land holdings in the Holbrook Basin, and are pleased with the report’s findings.

German consulting and engineering firm ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau mbH, specialists in the potash and salt industry, unveiled Passport’s NI 43101 compliant mineral resource estimate on Monday, and said it believes Passport’s property contains sufficient mineral resources to justify further investment in the mining project, starting work on a pre-feasibility study to identify the best mining method, verifying the economic feasibility of the project, and to eventually transform the designation of the potash resources from “indicated and measured resources” to “reserves” suitable for mining.

ERCOSPLAN estimates Passport has 125.6 million tonnes of indicated mineralized material (ore mass) with an average potassium chloride (KCl) grade of 14.29 percent (equivalent to an indicated resource of 17.96 million tonnes of KCl) and 587.8 million tonnes of inferred mineralized material with an average KCl grade of 12.2 percent (equivalent to an inferred resource of 71.71 million tonnes of KCl.)

Passport President and CEO Joshua Bleak points out that these results were derived from only 40 percent of Passport’s land holdings, and he expects the numbers to increase as exploration drilling continues across the company’s remaining holdings.

Bleak said the results of ERCOSPLAN’s report bode well for his company’s plans to develop a potash mine in the Holbrook Basin, indicating there is plenty of potash, available in favorable conditions, to satisfy investors in a future mining operation.

Foremost among those favorable conditions, Bleak says, is the relatively shallow depths of Passport’s potash deposits. Bleak says a significant amount of Passport’s potash deposits are found at about 1,000 feet beneath the surface. Considering the bulk of the U.S. potash supply is found at depths greater than 6,000 feet, according to the U.S. Geological Survey, the costs of bringing Passport’s potash to the surface would be significantly less than in other U.S. deposits, as well as those in major potash producing countries such as Canada and Russia where deposits are deep, based on time and cost to haul the mineral from beneath the surface alone.

The favorable depth is found across the basin, with potash layers averaging 1,200 to 1,300 feet beneath the surface in the area, according to the Arizona Geological Survey.

Other favorable conditions are the existing transportation and utility infrastructure–rail, roads, power, interstate and relative proximity to shipping ports–which reduces mine developer capital investment by hundreds of millions of dollars.

To date, as Bleak pointed out, his company has only explored about 40 percent of its land holdings. Passport is continuing to drill exploratory wells to gain a more precise estimate of the potash present beneath the company’s land holdings. As of March 29, the company had completed 33 drill holes, began drilling its 34th hole and was prepping eight more holes for core extraction. Bleak says the company has spent close to $5 million just in drilling operations.

As the company continues with drilling, Bleak said he is also focused on firming up all of the company’s land and mineral agreements. Passport is in talks with the Hopi Tribe and the state about tracts of tribal and state land intermingled with Passport’s current holdings. The company is still exploring options related to the Fitzgerald Ranch property. In recent months, Bleak’s company opted out of a letter of intent to purchase a portion of HNZ Potash’s operation, although Bleak doesn’t see any decisions related to available land in the basin as final.

For now, Bleak wants to concentrate on better developing the resource picture so the company can transition quickly to feasibility and economic assessment activities, then, hopefully, on to mine planning.

Based on what ERCOSPLAN has reported to date, along with existing reports about the Holbrook Basin potash picture, Bleak thinks his company is well positioned to attract investors for a mine.

Bleak said each of the companies working in the Holbrook Basin, which include American West Potash, based in Denver, Colo., and HNZ Legacy, a subsidiary of Hunt Oil of Texas and NZ Legacy of Arizona, in addition to Passport, face the similar dilemma of convincing investors and the potash industry that Arizona has potash.

The U.S. itself isn’t a major potash producer, relying on imports to meet the majority of its potash demand. Until recently, Arizona simply didn’t register on the potash radar. Slowly, the state is gaining some name recognition in the international potash conversation.

“ERCOSPLAN carries a lot of weight–they work with all the major producing potash companies and the top juniors. So, what they say about a project or an area carries a lot of weight.

“The further we develop this basin, the more reports that come out on these projects, the more attention it’s going to bring to the basin. Each of these favorable reports, whether they come from Hunt or American West or Passport Potash, bring credibility to our basin and have a benefit basin wide,” said Bleak.

Speaking of his company’s plans, should future studies and drill results continue to be favorable, Bleak said, “We really want to be here. Our desire is to be here and to make this project work, to be a part of the community.”