SOURCE: VantageWire.com - When assessing most typical potash production operations, most investors associate production with large cap companies, and billion dollar mines. The costs associated can often be a large barrier to entry for juniors looking to develop their asset. But thanks to a deposit of potash brine in Utah, Mesa Exploration [MSA:CA] is looking to replicate the production success of bigger outfits at a fraction of the cost.
Currently developing its Bounty Potash Project, Mesa is targeting a surface potash and magnesium brine deposit in western Utah’s lifeless salt flats in the Great Salt Lake Desert. The project consists of 104 square miles of potash leases and prospecting permit applications, all with excellent access to existing rail, road, and power infrastructure to tie it all in.
THE BOUNTY PROJECT
Located 15 miles to the north of Intrepid Potash’s [IPI:NYSE] Wendover operation, the Bounty is similar both in size and grade to the major producer. Historic drilling indicates that Bounty has the potential to replicate Wendover. For the last 75 years, Wendover has been producing 100,000 tons of potash, and 200,000 tons of magnesium chloride annually, using a system of potash brine collection ditches, solar evaporation ponds and a flotation mill to process potash, magnesium chloride and salt. Further estimates peg that there are still another 125 years of reserves still remaining.
This all bodes well for Mesa, especially due to the unique advantages and lower costs of surface brine operations, as compared to expensive underground mines like those found in Saskatchewan. Lower construction capital requisites, and far lower operating costs top the list of advantages for this unique type of deposit. As well, the project finds an advantage in more inexpensive exploration costs, simple permitting, a milling process that is far less complicated in comparison to other mining operations. Judging by Wendover’s near 200 year life expectancy, these operations are nearly immortal in terms of mine life. They keep going and going.
The process involves ditches and solar ponds that evaporate excess water in order to concentrate the target materials. Because ditches and ponds gather and concentrate the brine, heavy equipment such as haul trucks and loaders, along with typically intrusive and expensive mining necessities such as open pits, tailings accumulators, waste dumps, underground workings and shafts, crushing circuits, explosives and ventilation systems are no longer required. Eliminating these elements leads to a significant reduction in operating costs. Lower operating costs lead to higher netbacks, which serve to only boost the bottom line.
Lower costs also lead to faster turnaround times, as raising capital under these market conditions can be better sought after when production appears right around the corner. While the mining industry as a whole continues to plug along in its turn around, it’s at this time that it’s more important than ever to focus on the rapid development of assets into profitable mines.
Since the Bounty Project’s deposit is practically at or near the ground’s surface, this asset could feasibly be put into production at a mere fraction of not only time, but cost as well. Management believes that it can drill out the entire project for less than $200,000, in under a few weeks. That’s practically unheard of in this industry, and the same can’t be said for many mineral deposits. It’s not often that an entire exploration program can be delivered for less than a quarter of the price of a house.
BOUNTY’S POTENTIAL: PAST AND PRESENT
If going based on the historic drilling, sampling and mapping performed by Quintana Petroleum, Mesa’s Bounty Project could potentially host 5 million tons of potash and 10 million tons of magnesium chloride. But, at that time Quintana’s resource estimation was limited to only the top 10 feet of the brine aquifer, due to the depth limitation of the auger drilling equipment used at the time.
Now, thanks to modern innovations in drilling technology, the resource has the potential to grow substantially. Mesa believes that it’s more likely that the brine will be 15 to 20 feet thick. The belief is that the resource will be somewhat similar to that found at the Wendover mine. However, a qualified person has not yet done the sufficient work in order to classify the historical estimate as a current day standard compliant mineral resource.
So the next order of business for Mesa is to work on securing drilling permits for exploration work to be carried out in 2013. Putting together fresh drilling results will help to culminate in generating an updated NI-43-101-compliant resource estimation. Once a 43-101 resource is in hand, it will be used as the basis for a preliminary economic assessment, along with engineering designs for a new system of drainage ditches, evaporation ponds and processing facilities for optimal mining.
Mesa’s team is flush with mine building experience, including permitting and financing. Management is based out of Vancouver, BC, but an experienced exploration and technical team is also filling multiple sets of boots on the ground in Reno, Nevada and Salt Lake City, Utah.
One of the key members of the technical team is Dr. Wallace Gwynn. A geologist with a 40 year career under his belt, Gwynn brings a wealth of experience directed in the niche knowledge of brine mineral production from the Great Salt Lake and adjacent salt flats of Utah.
Also joining Gwynn on the team is geologist James Kohler. Currently serving as president of Utah Geosystems, Kohler is the former Utah branch chief of solid minerals and senior geologist for the US Bureau of Land Management. Rounding out the who’s who of Utah brine experience for Mesa is the infusion of the services of Utah-based North American Exploration, who are providing a range of geotechnical and mine development services.
Mesa currently has only 14.7 million shares issued and outstanding, 50% of which are held by insiders and institutions, a level of control that is rare in this industry.
THE BOTTOM LINE
As mining stocks climb back up into the hearts and portfolios of investors, it’s important for the junior players to indicate how they’re going to get from Point A to Point B. For Mesa, the roadmap does not involve any fateful twists or turns, nor the necessity to chase the equity markets for massive fundraising in order to construct a billion dollar mine.
The path is relatively simple. Exploration costs are estimated to be less than most mortgages. A favourable comparable is only 15 miles away in the form of Wendover, which has been producing at a steady clip for 75 years, and hasn’t even hit the halfway mark. And in Mesa’s back pocket is a historical resource that can only be improved upon, given the lack of depth that the previous outfit was able to fully explore.
Mesa presents a unique opportunity to become a potash producer, for a fraction of the cost. Given the conditions of the target, it appears that they’ve assembled the right minds all under one roof to see to it that this projects sees the blue sky that it ultimately deserves.
G. Joel ChuryFor the Bottom Line Report
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