* Considering 3-4 mln tonne per year mine at Burr site
* To complete study on larger mine in 7-8 weeks
(Figures in U.S. dollars unless noted)
By Euan Rocha
TORONTO, Oct 15 Athabasca Potash API.TO is
studying the economics and feasibility of increasing the size
of its proposed Burr project in Western Canada, a top official
for the miner said on Thursday.
In its resource report filed with regulatory authorities a
year ago, the Canadian potash explorer had outlined capital
expenditure costs of slightly over C$2 billion to build a 2
million tonne per year potash mine.
However, the company is now exploring the feasibility of
producing 3 million to 4 million tonnes of potash annually from
the project, Chief Operating Officer Terry Walbaum, said in an
interview with Reuters.
Walbaum said the study on the revised mine size will likely
be completed and submitted to the company's board in the next
seven to eight weeks. The results will likely be a part of
Athabasca's pre-feasibility study, which was originally
expected to be completed in the third-quarter of 2009.
Based on Athabasca's most recent resource estimates,
analysts believe that the Burr project in the province of
Saskatchewan could result in a potash mine producing 2 million
tonnes annually for 50 to 70 years.
Although increased annual production would lower the
anticipated mine life, it could improve the economics of the
project by lowering the capital expenditure costs per tonne,
associated with the mine build.
Bank of Montreal analyst Joel Jackson estimates the Burr
project could cost about $2.5 billion for a 2 million-tonne
mine, which works out to capital expenditure costs of $1,250
By comparison, Jackson expects Potash One's KCL.TO Legacy
project to cost $1.9 billion for a 2.5 million-tonne mine,
giving capital expenditure costs of $752 per tonne.
The Legacy and Burr projects are two of the most
well-advanced new projects in Saskatchewan, a major producer of
global potash supply.
The Burr project is amenable to conventional shaft mining,
while Legacy is better suited to solution mining, which uses
water to dissolve the mineral from ore.
Building a conventional shaft mine involves higher up-front
capital expenditures than a solution mine, but over the long
run, operating costs for a solution mine tend to be higher than
those of conventional shaft mines.
A larger mine at Burr, while raising overall mine-build
costs, is likely to reduce capital expenditure costs per tonne
of annual production and allow projected costs per tonne to
compare more favorably with other proposed potash expansions in
the resource-rich province.
Moreover, lower capital expenditure costs per tonne and
higher output are likely to make Burr more attractive to
potential partners from emerging economies like India and
China, which are keen to secure long-term potash supplies.
Athabasca and most other junior potash explorers are
looking for partners to develop their projects, given the high
capital costs involved in building a potash mine.
Walbaum indicated that one of the primary motivating
factors for considering a larger mine was that emerging market
players are seeking projects that have large production
(Reporting by Euan Rocha; editing by Rob Wilson)