Verde potash process ‘seeing is believing' - analyst Mackie Research's Jaret Anderson describes a novel solution to make conventional potash after visiting the Verde Potash's demonstration plant in Allentown, Pennsylvania.

Author: Kip Keen
Posted: Friday , 03 Feb 2012


HALIFAX, NS -

Mackie Research analyst Jaret Anderson gives a firsthand account of how Verde Potash (TSX-V) transforms an unorthodox source of potassium into a conventional fertilizer, potassium chloride, in a Friday note to clients.

Anderson, who indicates he or a member of his household own Verde stock, based his overview of the process on an analyst tour of the demonstration plant on Wednesday of this week.

In a nutshell Anderson likened the overall process, which Verde and some analysts believe can compete with foreign potash producers in Brazil's domestic fertilizer market, to the making of cement, but at lower temperatures.

"Verde's process has been built on existing technologies that have served the cement industry for decades," Anderson writes, noting the "equipment employed is of the off-the-shelf variety." The allure here is that Verde, in setting up its flow sheet to churn out potassium chloride (KCl), is not re-inventing the wheel.

"SRK's work indicates that Verde's verdete slate to KCl process will yield a large, scalable KCl business with a delivered cost to Brazil (the largest potash importing country in the world) lower than all offshore peers," Anderson states, referring to the consultants Verde has hired to perform initial engineering studies of the Cerrado Verde project. He adds, "Vale's Taquari-Vassouras operation is the only operation we are aware of that will offer a lower delivered cost to the Cerrado region."

The process as described by Anderson starts with feed rock from Verde's Cerrado Verde deposit in Minas Gerais state, Brazil, where it holds about 2.9 billion tonnes @ 8.9 percent K2O in slate rock suitable for open-pit mining.

The rock is brittle, Anderson writes, lending readily first to crushing and then to intensive grinding that yields a fine powder with particles in the half-millimetre range. Verde next mixes NaCl - common salt - and limestone into the powder, which then goes through three cyclones before ending up in a rotary kiln, "virtually identical to that used to produce cement," Anderson writes.

One major difference between the similar cement making process and the path from K2O-mineralized slate to KCl is temperature. Verde heats its powdery feed to 900 degrees C versus the higher 1,450 degrees C that Anderson states is used in cement making.

The KCl-powder gets 25 minutes at 900 degrees C in the kiln, after which a brown calcine powder emerges. "Calcine refers to a rock that has been burned," Anderson explains in his note to clients. "In this case, the calcine contains potassium chloride and a number of silicates (which are ultimately waste and will be treated as tailings after the leaching and evaporation/crystallization steps are complete)."

In leaching, Verde combines the calcine powder with water. Then, taking a page from conventional solution mines, Verde allows the calcine slurry to evaporate and crystallize, garnering it a standard KCl powder. In turn, Anderson explains, Verde converts the powder to pellets, a form more familiar to Brazilian farmers.

"This material is chemically identical to the product that is produced in Saskatchewan, Russia, Belarus and Israel, with a K2O content of at least 60 percent," Anderson writes.

In the process both thermal requirements and raw material inputs each account for a third of costs. In a scoping study this week Verde said estimated operating costs would be in the $274 per tonne range in the first five years of proposed operations in Brazil at Cerrado Verde.

One major overhang dogging any junior aiming to use a novel circuit based on pilot testing is the question of scaling up. In Verde's case the demonstration plant runs at about 500 kilograms per day - small-fry in comparison to the 600,000 tonne per year mine that Verde envisions ramping up to 3 million tonnes per year. Major unforeseen bugs - often costly ones - can crop up in translating the experimental to the commercial.

But Anderson writes that the team running the demonstration plant for Verde, consultants FLSmidth, see the reverse as true in this junior's case. "FLSmidth's team stated that with a kiln process such as this, they typically see fewer issues with a commercial scale kiln than they do at a demonstration plant."

Anderson titled his note to clients "Seeing is Believing" and re-iterated a C$19 speculative buy target on Verde Potash stock.