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South Harz Potash wraps Ohmgebirge pre-feasibility, picks up Sollstedt mine and releases maiden ore reserve

Published 22/05/2024, 09:50 am
© Reuters.  South Harz Potash wraps Ohmgebirge pre-feasibility, picks up Sollstedt mine and releases maiden ore reserve
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South Harz Potash Ltd (ASX:SHP) has declared a maiden ore reserve for its flagship Ohmgebirge Potash Development, part of the 100%-owned South Harz Potash Project in central Germany.

Enhanced sustainability and reduced costs

The company has also wrapped up a pre-feasibility study (PFS) for the project that demonstrates positive economics.

As part of the PFS process, South Harz has agreed on non-binding key terms for the acquisition of the neighbouring Sollstedt mine property from Deusa International GmbH.

The Sollstedt acquisition includes extensive underground and surface infrastructure, including multiple operating shafts, which will facilitate underground access and ventilation for mining Ohmgebirge.

The move is expected to significantly reduce pre-production capital expenditure compared to a greenfield alternative, accelerate the timeline to first production and achieve substantial savings in forecast pre-production capital costs.

These savings are projected to be multiple times the €40 million cash consideration agreed upon completion.

The purchase is contingent upon achieving full project financing and a positive final investment decision (FID) for Ohmgebirge.

Robust brownfield development

The PFS emphasises the project’s competitive edge as a brownfield development with low transport costs, resulting in a strong netback pricing profile.

Led by Hatch and supported by ERCOSPLAN and K-UTEC, the study outlines an initial 19-year life-of-mine with an average output and sales of 930,000 tonnes per annum of Muriate of Potash (MOP) with a 60% potassium oxide (K2O) content.

The project boasts a cash operating cost of US$147 per tonne, an average realised potash price of US$441 per tonne, and a net operating margin of 67%.

Net present value (NPV) at an 8% discount rate is US$1,029 million pre-tax and US$602 million post-tax, with internal rates of return (IRR) of 17.8% and 14.4%, respectively. The pre-production capital expenditure is estimated at US$1,152 million.

Using existing shafts and underground infrastructure at Sollstedt would significantly reduce pre-production capital expenditure and operational costs, positioning the project attractively within the global unit cost curve.

Executive transition to drive lean operations

In a shift to a leaner corporate structure, current non-executive chair Len Jubber has been appointed as executive chair while managing director and CEO Luis da Silva will transition out of the business by May 31.

Dr Reinout Koopmans will assume the role of lead independent director. This transition aims to streamline operations and enhance long-term efficiency as South Harz progresses with the Ohmgebirge project and the integration of the Sollstedt acquisition.

The South Harz board has extended gratitude to da Silva for his valuable contributions and wished him success in his future endeavours.

“Significant day”

Executive chair Len Jubber said: “This is a significant day in the relatively short history of South Harz Potash.

“Agreeing key terms for the acquisition of the neighbouring Sollstedt property has delivered a transformational development pathway for Ohmgebirge, which enables us to truly capitalise on the regional mining and infrastructure context in which the project is located.

“The unique brownfield features incorporated into the Ohmgebirge PFS demonstrate that it is possible to develop and operate a world-class potash mine in Germany, in the heart of Europe, profitably and responsibly in the modern era.

“I would like to thank Lawrence, Luis da Silva, and the entire South Harz team, plus all of our contract partners, for their work and commitment to the delivery of this PFS.”

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