Re: ELM - Elemental Minerals
March 08, 2010
Elemental Minerals Could Be Sitting On A Company-Making Potash Deposit In Congo-Brazzaville
By Charles Wyatt
www.minesite.com/aus.html
Before we get too deeply into the details of ASX-listed Elemental Minerals and its operations at the Sintoukola potash project in the Republic of Congo, one thing has to be made quite clear. The Republic of Congo is NOT the Democratic Republic of Congo (DRC). Chalk and cheese, or as Garry Thomas, a director of Elemental, puts it, “the same sort of difference as there is between North and South Korea.” Even North Americans, who tend not be too hot on the geography of Africa, will understand that one. For the purposes of this article, therefore, we will refer to it as Congo-Brazzaville, which is the name often used for this country in any case. It’s one of the most urbanized in Africa, as 70 per cent of its total population live in the south west of the country, either in between Brazzaville, the capital, or in the major port of Pointe-Noire, or else along the railway connecting the two. The tropical forest in the north of the country is virtually uninhabited, and the wide river Congo separates Brazzaville from the near-land locked DRC to the east.
Congo Brazzaville’s economy is based primarily on its petroleum sector, which is by far the country's major revenue earner. In fact it is the fifth largest oil producer in sub-Saharan Africa, and enjoyed a gross revenue from oil of around US$12 billion in 2008. And the success of multi-national oil and gas companies in Congo-Brazzaville has encouraged others to invest in the country. It has a western level of infrastructure, and the literacy rate is one of the highest in Africa. Its big neighbour has one of the lowest. President Sassou-Nguesso’s ambitious growth plans now call for new lead, zinc, and copper concessions and revitalization of the agricultural sector.
A country that knows where it is going, therefore, and one that already has experience in the potash business. Which is important, as that is where the future of Elemental Minerals lies. Last month a Canadian company, MagIndustries, received governmental, social and environmental approval to start construction of its US$1.2 billion Mengo potash project. This is being financed by the Chinese group COMPLANT. Initial design capacity is 600,000 tonnes of potash per year, and project’s the feasibility study claims that costs will be among the lowest in the world. Once operational, this mining project is expected to be the world’s first new entrant into the potash industry, as there’s little new supply forecast over the next five years.
The Sintoukola potash project, for which Elemental was awarded an exclusive licence in August last year, is also in the south west of the country and only 50 kilometres from Pointe Noire. This is a major factor in terms in terms of production costs, as many other potash deposits around the world are a long way from a suitable port.
The Sintikoula project covers an area of 1,436.5 square kilometres on the coastal plain, and historical wide spaced drilling confirms the presence of high grade potash mineralization in at least three target areas. Intersections include 3.9 metres at 26% K2O and 3.1 metres at 21.3% K2O. Sylvinite and carnallite mineralization was initially discovered on the project in the 1930s during oil exploration. It was drilled a bit in the ‘60s and ‘70s, but Elemental is making the first real attempt to delineate a commercial deposit. Based on this historic drilling, Elemental has identified an initial exploration target at Kola of between 170 million and 300 million tonnes of sylvinite with grades varying from 23.1% K2O to 23.5% K2O at a depth of 275 metres. That’s shallow in comparison with projects in Canada where the potash can lie at up to 900 metres in depth. The current plan is to boost this resource, bring it up to JORC standards, and use it as a base for a feasibility study later this year.
Sylvinite is what Garry Thomas is after, as carnallite contains magnesium, an impurity which makes it more complicated to refine. What Garry really wants to find is that the mineralization identified from historic drilling at the Kola and the Dougou targets actually constitutes a large unified sylvinite deposit. Dougou adjoins Kola and has reported, but unconfirmed, potash mineralization over an area of about 15 kilometres in strike length. From this it becomes clear that if things pan out as hoped, and the two join up, Elemental could be sitting on a major potash deposit, which could be a company maker.
Fortunately the company is well funded to take things to feasibility as it raised A$8.75 million from a placement to private investors last month, and has getting on for A$11 million in the kitty. Phase 1 of the exploration project which has now started will include topographical as well as seismic surveys, sample analysis and mineralogy, as well as drilling. According to the Australian stockbrokers Patersons, underground mining would take place by conventional room and pillar methods and the ore would then be put through a flotation facility to refine the potash. Brazil would be an ideal sales target from Pointe-Noire as 90 per cent of Brazil’s potash requirement has to be imported and it needs a lot as its soils tend to be marginally acidic. Shipping from Congo is expected to undercut transportation from Canada by around US$25 per tonne.
It is still early stage, but Elemental could be sitting on a sizeable potash resource in an ideal geographic position with access to water, cheap natural gas for power, and excellent infrastructure. People are also of particular importance at this stage. In the case of Elemental the company did not have a glittering career as a gold explorer before potash became the prize, but the chairman is Mark Jones who just happens to be a director of the Australian stockbroker Patersons, so no surprise that fundraising and promotion have been handled efficiently. Two other directors, Ian McPherson and John Sanders were involved in Uramin, the uranium company which realized huge profits for its investors when it was taken over by AREVA in 2007. And, as a leading broker in London who’s also a fan of Elemental remarked recently, “It always pays to follow success, and these two have put a sizeable amount of their profit from Uramin into this one”.