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The huge potential of Congo potash

The Republic of Congo (ROC), not to be confused with the neighbouring DRC, has the potential to develop into one of the world’s biggest potash miners over the next decade.

For those who are unaware there are two Congos.  The former Belgian colony of the Democratic Republic of Congo – the DRC – is the one which is mostly in the news, with its huge and rich base and other industrial metals, gold and diamond resources.  However, lying immediately to the west of much of the DRC on the northern side of the Congo river is the former French colony of the Republic of Congo (ROC – also known as Congo Brazzaville to more easily differentiate itself from its neighbour to the south.)

The ROC, like many African nations has had its own share of difficulties since it cast off its colonial yoke in 1960, but these have not been quite as violent as the problems which have continually beset the DRC over the years and there has been a relatively stable government in place under President Denis Sassou Nguessa since a bloody civil war in 1997.  While certainly not exactly a model modern democracy, the ROC has been relatively stable for the past decade and President Sassou has won succeeding Presidential elections, although with suspiciously high percentage majorities!

The ROC has so far not unearthed the huge metals riches of its southern neighbour, although it has some latent potential, but does have substantial reserves of oil and gas, the current mainstay of the economy, and there is significant international interest (particularly from China) in developing the minerals sector.  Notably, the country has massive good grade potash deposits which also have the advantage of being relatively close to the coast and there are a number of companies looking at advancing these to production – and most of these seem to have Chinese involvement.

The Congo evaporitic sequence contains the country’s world-class potash resources in the form of carnallite and sylvite. The salt sequence is reportedly some 500 m thick, although it does thin out at the edges of the deposits.  It is very consistent.  According to Elemental Minerals, one of the companies interested in developing the deposits, the evaporite sequence of the Congolese coastal basin consists of essentially flat-lying, but locally undulating salt layers of interbedded halite (NaCl), and other higher salts such as sylvite (KCl), carnallite (KMgCl3·6H2O), bischofite (MgCl2·6(H2O)), and minor anhydrite (CaSO4) and dolomite (CaMg(CO3)2) beds that extend from the onshore Congo Basin north and south to sedimentary basins in adjacent West-African countries, as well as west into offshore regions. Overall there are thought to be billions of tonnes of potash which could be mined by conventional methods and/or by solution mining.

There used to be a significant sized underground potash mine at Holle producing up to 450,000 tonne/year in this area of the ROC, but this was closed after the mine was flooded back in 1977, but the more recent strength of the global potash sector is seeing a huge resurrection of interest in the region..

The most advanced of the current ROC projects is MagIndustries’ Mengo development.  MagIndustries is Canadian registered and quoted (TSX: MAA) but with an all-Chinese board and management following the takeover of a majority interest by Shanghai-based Evergreen Resources in 2011.  It is proceeding with the development of a solution mine which it says is on one of the world’s largest undeveloped potash deposits (although it is on only a fraction of the known Congo potash horizons). The company’s immediate focus is to construct and commission a 1.2 million tonne/year potash plant to produce agricultural-grade potash fertilizers. The facility is scheduled to start production in 2015 and is expected to be among the world’s lowest-cost producers due to its highly efficient solution mining technologies, access to local natural gas and its proximity to planned new port facilities and its principal markets.

In late 2008 the company’s local subsidiary signed a twenty-five year Potash Investment Agreement with the government of the Republic of Congo granting exclusive rights to MPC for the development of the Mengo project and all fiscal aspects of its operations.

In June 2009, a NI 43-101 compliant technical report estimated proven and probable reserves of 33.2 million tonnes of potash which can support a reserve life of more than fifty-four years at a projected production rate of 600,000 tonnes per year. The 2009 Technical Report estimated proven reserves of 151.2 million tonnes of carnallitite, at a carnallite grade of 64.4% of ore and a KCl grade of 17.3% of ore, concluding with proven reserves of 26.1 million tonnes of KCl. The 2009 Technical Report further estimates probable reserves of 40.3 million tonnes of carnallitite, at a carnallite grade of 65.7% of ore and a KCl grade of 17.6% of ore, concluding with probable reserves of 7.1 million tonnes of KCl.

Probably second in line is Elemental Minerals – ASX and TSX quoted (ELM) and currently subject to a significant all-cash take-over offer from Bermuda registered, but Hong Kong quoted and Chinese run, Dingyi Group Investment, at A$0.66 a share – a substantial premium on the company’s prior share price.  While there are a number of conditions attached to the offer it is felt likely to go through failing a better offer being received.  Elemental says the majority of its directors are recommending acceptance, although it is thought the company’s CEO, Iain Macpherson, voted against on the grounds that he feels the offer undervalues the company, despite its big premium (126%) to the share price pertaining over the 20 days prior to the offer being made back in April.

Elemental has been working on bringing its big Sintoukola potash project through feasibility to production.  It has a reported sylvinite (Sylvinite is usually the most important ore for the production of potash in North America and Russia. It is a mechanical mixture of sylvite and haliteMost Canadian  operations for example mine sylvinite with proportions of about 31% KCl and 66% NaCl with the balance being insoluble clays anhydrite and in some locations carnallite.) resource of a Measured and Indicated 573 million tonnes grading 20.92% K20 (33.14% KCl).  Within this is a Proven and Probable Reserve of 151.7 million tonnes grading 20.02% K20 (31.69% KCl) and its prefeasibility study suggested a 23 year mine life with production in the lowest quartile of global potash output.  However the prospect for extending this considerably would seem high.

Next door to Elemental is perhaps the most speculative player in the sector, LSE AIM-quoted African Potash, which controls a huge area it calls its Lake Dinga project.  Company CEO, Ed Marlow (an ex banker with HSBC) told Mineweb that the company’s consulting geologist who also worked on the Sintoukola project reckons that there is a high probability of similar grades and tonnages on the African Potash ground given the consistency of the deposits.  It would be slightly deeper than at Sintoukola down to about 500m in places  and assuming similar separation of the sylvinite and carnallite layers would be even more readily suitable for a cheaper solution mining option, whereas Elemental is probably looking at conventional mining for its deposit.

Lake Dinga is adjacent to the Sintoukola licence held by Elemental and the Makola licence of Evergreen Resources (MagIndustries). Exploration work is planned to delineate a JORC compliant resource and maximise the value potential of the project. The company is planning a two-stage exploration programme.  Phase 1 will comprise four holes to be completed by the end of the current year and Phase 2 a further 12 holes to be completed by end of Q3 2014.  While this may not seem to be many drillholes in comparison with the number necessary say for proving up a gold or base metal project, the consistency of the potash horizons means a decent resource estimate would be forthcoming from a much more limited drilling programme.  The drilling results, in tandem with historical drill data and seismic data, will be evaluated to prove up the resource potential.

African Potash has also just signed a data sharing deal with Elemental which will be very helpful in its resource assessment and which also could be significant financially in that if the two deposits are, in effect, proven to be fully contiguous then there would be a logic in Elemental (and/or its likely new owner) perhaps taking over at least part of the Lake Dinga concession.  It is also perhaps significant that African Potash has also signed up CSA Global as consultants on the project.  CSA is already working with Elemental on the Sintoukola project.

African Potash has over $3 million in the bank, but its current market capitalisation is not a lot higher than this.  Given the Elemental deal with Dingyi values the former at some $190 million and the Lake Dinga project has the potential to host just as big a resource – if not bigger – then Marlow sees considerable potential upside for his company.  But it is early stages yet.

There are also other companies and individuals looking at the potash horizons there, thus the ROC looks like being on the road to becoming a really significant source of potash by the end of the decade.  The potash resource there is simply enormous in terms of tonnage and grade and it has the benefit of being located close to to the coast which would facilitate shipping to some very big potential markets in Africa, Latin America and Europe.  However the strong Chinese interest suggests that Asia may also be a significant potential market for ROC potash.

 
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