Encanto has today released some excellent initial assay results on its Muskowekan and Ochapowace projects, located near Regina, Saskatchewan, Canada. There are 3 potash bearing members that define the Prairie Evaporite Formation in Saskatchewan, namely the Patience Lake Member, the Belle Plain Member and the Esterhazy Member. Results indicate that the Muskowekan has two of these Members that carry potentially economic grades of potash mineralization in this location.
Average weighted grades from the Muskowekan 02-09 hole ran 3.6 m of 39.9% KCI for the Patience Lake Member, 2.4 m of 40.4% for the Belle Plaine Member and 5.3 m of 19.6% for the Esterhazy Member. The Esterhazy Member interval and grade is lower than what is generally regarded as necessary for a commercial operation.
At Encanto's Ochapowace property, the first drill hole 16-23-17-04 results ran 6.0 m of 14.1% KCI for the Belle Plaine Member and 4 m of 19.2% for the Esterhazy. These are also less than what is generally regarded as necessary for a commercial operation. However, detailed interpretation of the 2D seismic acquired in the Ochapowace area may justify further evaluation of this area.
On January 15 Encanto released some news from completed logging of some old historical oil wells proximal to its project area. This logging exercise picked up on these same 3 potash-bearing members. Logs clearly outlined the thickness of these zones. These old oil wells are situated several kilometres distant from the Encanto project area, but the logging data is quite valid given the uniformity of the potash beds in Saskatchewan.
Based on the claims map included with the logging report, the 36,000 acre Muskowekan project area is calculated to be about 145.7 sq kms. The old oil wells logged showed the Patience Lake Member to be on average 4.2 m thick, the Belle Plaine Member to be 3.6 m thick and the Esterhazy Member to be 2.4 m thick. Today's released results were 86%, 67% and 121% of these thicknesses respectively, but grades were very good.
To give some potential scope and scale to Encanto's potential going forward, we can apply some basic back-of-the-envelope math to the Muskowekan project's promising results. Ignoring the narrow and lower grade Esterhazy Member completely at this time, and using the old historical oil well logs as the upper limit, and today's initial drill results as the base case, we can create some comparables.
First, using the old historical oil well logs as the bullish case, and using Muskowekan's 36,000 acres, we get 145.7 sq kms x (4.2 + 3.6 =) 10.2 metres of mineralization = 1.486 billion cubic metres. 1.486 billion cubic metres x 1.9 tonnes per cubic metre = 2.82 billion tonnes of potash mineralization. Industry standards call for the application of a 25% reduction factor on inferred resources to account for underground anomalies, leaving 2.12 billion tonnes of resource. And when solution mining (meaning they inject fluids down into the potash beds, dissolve it, bring it up in solution, and precipitate it out at surface), only about 34% of the material can be removed. Applying this figure leaves 720 million tonnes of resource. Industry standards call for the application of an 80% efficiency factor, leaving 576 million tonnes. Applying a 5% further efficiency reduction leaves 547 million tonnes. So, in total, these rough calculations would give Encanto a potential recoverable resource of 547 million tonnes of potash mineralization.
Now we use the same procedure with today's actual 3.6 m interval for the Patience Lake Member and 2.4 m for the Belle Plaine Member, again ignoring the Esterhazy completely at this time. Plugging in a total of 6.0 m versus the 10.2 m used above results in a potential recoverable resource of 59%, (6.0/10.2), of the earlier derived values, which works out to about 322 million tonnes of KCI. Not a bad start - especially if the 40% KCI grades carry. At an assumed production level of 2 million tonnes per year, that represents a century and a half of production.
For comparison purposes, Potash One is the acknowledged leader among the junior potash companies. They are on track to bring on the first potash mine built in Saskatchewan in 40 years using solution mining. This process has the advantage of being a less expensive alternative to going underground (lower Capex), and is scalable. Potash One has a NI 43-101 compliant Measured and Indicated Mineral Resource of 251 million tonnes of KCl grading 26% and an Inferred Mineral Resource of 852 million tonnes of KCl grading 23.8%.
Conclusion
We have to keep in mind that these are only Encanto's initial results, and that these potash bearing members, while generally very uniform and reliable in nature, do swell and pinch, so more drilling results are needed. But importantly, Encanto's grades of 39.9% and 40.4% KCI are very good (just look at Potash One's grades in the mid-20% area).
Encanto's primary focus is to fast-track exploration of these prospective potash properties and to develop an economic deposit. A 43-101 Technical Report will eventually give analysts something to rely on which will likely confirm a higher valuation for the share price, but president Jim Walchuck and his team are doing a great job of bringing to light a potentially new commercial potash resource.
Potash as a commodity has a great future, and the first nations control key sections of highly prospective land, hitherto unavailable for potash exploration and exploitation. A key factor in the success of any potash venture is the ability to finance through to production. With the assistance of Endeavour Financial, a proven value-builder within the resource sector as many of my subscribers can attest, Encanto is well-positioned to build acreage and assets accretive for its shareholders.
