Vanguard One Project: Building a better mousetrap
It’s said that if you build a better mousetrap, the world will beat a path to your door. So what if one builds a better potash mine, with the doors of markets around the world already open?
Its proponents believe that a new potash mine in the works for Saskatchewan will access underserviced world markets while laying out a new model for the industry, all while being environmentally friendly at the same time. Mike Ferguson, the President and CEO of Gensource Potash Corporation, says the mine north of Moose Jaw will set the new standard for the potash industry. Literally from the bottom to the top — from the actual mining all the way through to distribution — Ferguson says Gensource has found a better way. “We’re building the better mousetrap,” he said.
“We really want to see a change in the industry: We want to see a structural change and we think by starting this process, we become the thin edge of the wedge that starts to change it,” Ferguson said.
That change in approach includes a vertically-integrated marketing structure built on projects that are deliberately small. “Our goal has been to make it small and that is because we’re targeting specific markets. We can’t go after little markets with big tonnes,” he said.
He points out the top potash producers in the world control the bulk of the production, which he says has led to “pockets of markets all over the world that are not well served.” In response, Gensource has gone small and aims to market directly to end users, who become partners with the company to create a source of supply that matches their needs.
Working toward that end in the United States, Gensource recently announced an agreement for market assessment and joint venture project financing. In a news release, the company says it has signed an engagement letter with Industrial Alliance Securities Inc. and its syndication partner, Heritage Capital Group, which is the agriculture practice leader within the Oaklins Group, an association of industry professionals. The team will act as the company’s agent to lead an initiative to engage a U.S.-based market partner for one of Gensource’s small scale potash facilities and assemble the full financing package for the project.
Earlier this year, Gensource Potash Corporation and Essel Group ME Ltd. (EGME) formed a joint venture, Vanguard Potash Corporation, to build a 250,000-tonnes-per-year mine on the company’s properties near Tugaske and Eyebrow. Ferguson says the feasibility study has been completed on the Vanguard One Potash Project and with financing pulling together this fall, production is expected to get underway in 2019.
Ferguson said the Vanguard One project is the first “module” of what he hopes will become the basic building block for future endeavours. Like Vanguard, they will produce 250,000 tonnes per year, which is about the tenth of a typical potash operation. “Each module will be constructed and operated under a joint venture and the other joint venture partner will be the group on the market side; the group that wants the product. That’s the vertical integration,” he explained. The modules will be grouped in the same geographical area to allow for the sharing of infrastructure.
In addition to allowing for that direct link to potash users, the Vanguard One project and those that follow will also be more environmentally-friendly than current mines, Ferguson said. The modules will use selective dissolution mining technology, a form of solution mining similar to that already in use elsewhere in Saskatchewan. The difference is that, instead of using clean, fresh water, a highly concentrated brine of sodium chloride (NaCl) is injected into deep wells. The approach doesn’t require any workers or equipment underground and, since the NaCl solution can’t dissolve any more salt, it only dissolves potassium chloride (KCl). The potash-laden solution is then pumped to the surface, eliminating the need for tailings ponds. “Happily, it has a lot of benefits,” Ferguson said. “It’s got tremendous benefits in terms of cost and efficiency. It doesn’t use any fresh water, which is really a precious resource.”
The Vanguard One project and the others that may follow all benefit from being smaller than traditional potash mines. “All of a sudden, all these other benefits attach themselves to the method. All the stars have lined up in terms of efficiency and economy and potential environmental benefits,” he said.
In an ideal world, Ferguson would like to shake up the industry even more and see potash become a public-traded commodity. (Gensource Potash Corporation is publicly-traded on the TSX-V). “Right now almost all sales are private contracts between one party and another, there’s no open market for potash,” he said. That leads to prices that change every year. “It would be much better if it was an open market, because Saskatchewan has the best potash resources in the world by a long shot. We have an amazing resource. We have great technology and expertise in how to access it, so we think it would be better for Saskatchewan if the market was truly open and transparent, as the business guys say,” he said.
As Gensource and its partners continue work to build a better potash mine, Ferguson is confident their example will help lead to a bright future for the industry as a whole. “We’re of the view that, once we get this first one in operation and get it rolling, lights will start to go on all over the potash industry and this will become the way that potash is mined.”