Buffalo Potash (TSXV: BUFF) has outlined a billion-dollar future for its flagship Disley Project, releasing a preliminary economic assessment that values the asset at more than $1 billion.
The assessment, conducted by Micon International, gives the project an after-tax net present value of US$1.1 billion and an internal rate of return of 30%. The estimate, which is based on an average price of US$393.60 per tonne MOP, is built around a proposed solution mine with multiple phases of development.
“The team and I believe the Disley Project represents the next generation of Saskatchewan potash solution mining and are excited to begin development of the Initial Production Module, which will be the first leg of this buildout and is expected to bring soluble-grade potash production online within the next 12 months,” commented Steve Halabura, CEO of Buffalo Potash.
Production targets are set at approximately 1.1 million tonnes of potash per year. This includes 1,000,000 tonnes of granular-grade muriate of potash and an additional 125,000 tonnes of soluble-grade product.
The project’s scale is supported by a maiden mineral resource estimate that identified 1.67 billion metric tonnes of measured and indicated resources. With an average grade of 34.8% KCl, the company estimates the mine could remain operational for more than 50 years, however the study was based on a mine life of 25 years.
Initial capital expenditures are projected at $639 million, a figure that includes a $128 million contingency. Sustaining capital over the life of the mine is estimated at $483 million. On the operational side, Buffalo expects to produce potash at a cash cost of roughly $55 per tonne, positioning it toward the lower end of the global cost curve.
In terms of strategy, Buffalo intends to move forward with a feasibility study for its larger mining blocks while simultaneously constructing an initial production module. This module is designed to bring soluble-grade potash online ahead of the full-scale granular production.
The initial production module will see 125,000 tonnes per year of soluble-grade potash production, and is designed as a low capital entry point for operations. That initial module is said to have initial capital requirements of just $29.2 million.
Additional development phases, consisting of Disley East and then Disley West, will see two separate full scale solution mines brought online, each with a production capacity of 500,000 tonnes per year of granular muriate of potash.
Chief Executive Officer Steve Halabura described the results as the culmination of years of geological and strategic work. The company’s next steps involve finalizing the technical details required to transition from assessment to construction, with construction at the initial production module expected to begin by July of this year.
Buffalo Potash last traded at $1.00 on the TSX Venture.
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