Salt Lake Potash #SO4 – December 2017 Quarterly Report

The Board of Salt Lake Potash Limited (the Company or SLP) is pleased to present its Quarterly Report for the period ending 31 December 2017.

Highlights for the quarter and subsequently include:

LAKE WELLS

Evaporation Pond Testwork

Ø  The Company successfully completed field testing of its on-lake, unlined evaporation pond model, which will result in significant capital cost advantages for the Goldfields Salt Lakes Project (GSLP).

Ø  Comprehensive geological and geotechnical investigation confirms the widespread availability of ideal in-situ clay materials ideal for use in evaporation pond construction. Modelling based on geotechnical properties of the clays confirms the potential to build unlined, on-lake ponds with negligible seepage inefficiency.

Ø  Amec Foster Wheeler estimate that comparative costs for 400ha of on-lake ponds are $1.6m (unlined) and $42.2m (HDPE lined), highlighting a significant capex advantage for the Project.

Process Testwork

Ø  The Site Evaporation Trial (SET) at Lake Wells has now processed approximately 357 tonnes of brine and produced over 8 tonnes of harvest salts.

Ø  The Company continued process development testwork at globally recognised potash process consultants, Saskatchewan Research Council (SRC). SRC began a continuous locked cycle testing of the proposed Lake Wells process to demonstrate the Sulphate of Potash (SOP) production process from salt harvested from the SET.

Ø  The SRC locked cycle tests will also produce significant quantities of flotation product and SOP for further testing and marketing.

Surface Aquifer Characterisation and Deep Aquifer Exploration

Ø The Company continued sustained pump tests on test trenches across Lake Wells, providing reliable data for the surface aquifer hydrogeological model.

Ø The Company completed an on-lake drill program to test deep aquifer characteristics and identify potential high yield portions of the basal aquifer.

Demonstration Plant

Ø  The Company and its consultants have substantially advanced the Demonstration Plant study for the GSLP.

LAKE IRWIN

Ø  An initial surface aquifer exploration program was completed at Lake Irwin, comprising a total of 27 shallow test pits and 2 test trenches. This work provides preliminary data for the geological and hydrological models of the surface aquifer of the Lake, as well as brine, geological and geotechnical samples.

LAKE WAY

Ø  The Company conducted an initial reconnaissance surface sampling program at Lake Way in November 2017, with brine samples averaging 15kg/m³ of SOP equivalent. In conjunction with extensive historical exploration data, these results indicate excellent potential for Lake Way to host a large high-grade SOP brine resource.

REGIONAL LAKES

Ø  The Company undertook initial surface brine sampling of the near surface aquifer and reconnaissance of access and infrastructure at all remaining Lakes held under the GSLP.

The Company’s primary focus is to construct a Demonstration Plant at the GSLP, intended to be the first salt-lake brine SOP production operation in Australia. While proceeding with the analysis of options to construct a SOP Demonstration Plant at Lake Wells, the Company is also exploring the other lakes in the GSLP.

GOLDFIELDS SALT LAKES PROJECT

The Company’s primary focus is to construct a Demonstration Plant at the GSLP, intended to be the first salt-lake brine SOP production operation in Australia. While proceeding with the analysis of options to construct a SOP Demonstration Plant at Lake Wells, the Company is also exploring the other lakes in the GSLP.

The Company achieved a very important milestone of completing successful validation of the final major technical foundations for production of Sulphate of Potash (SOP) from the GSLP.

While proceeding with a Pre-Feasibility Study (PFS) for Lake Wells, the Company has also completed initial surface sampling and reconnaissance work across all of the other regional Lakes in the GSLP.

The GSLP’s lakes have been selected for:

·     scale and potential brine volume;

·     known hypersaline brine characteristics;

·     potential for both shallow trench extraction and from deeper paleochannel aquifer bores;

·     large playa surface for cost-effective evaporation pond construction; and

·     proximity to the important transport and energy infrastructure and engineering expertise available in the Western Australian Goldfields.

While all of the lakes comprising the GSLP share the advantage of their location in the WA Goldfields, it is worth noting that several of the lakes are even closer to rail transport and the gas pipeline than Lake Wells. For example, Lake Ballard and Lake Marmion are located either side of the Goldfields Highway, gas pipeline and rail line, only 140km from the major mining service centre of Kalgoorlie.

There is substantial potential for integration, economies of scale, operating synergies and overhead sharing in the GSLP due to the number of highly prospective lakes. The flexibility of multi-lake production is also appealing for a natural production process which is subject to climate variability.

The Company will study these advantages more closely as it progresses the Goldfields Salt Lakes Project.

LAKE WELLS

Evaporation Ponds Construction Trial

The Company completed an evaporation pond construction trial at Lake Wells. The field trial involved construction and testing of four test ponds on the Lake Wells Playa, built solely from in-situ clay materials, using a standard 30t excavator, which operated efficiently and effectively on the lake playa. The trial achieved levels of brine seepage from the evaporation ponds well below the threshold for successful operation of halite evaporation ponds, and potentially also for the smaller potassium salt harvest ponds. (for complete details see Stock Exchange announcement dated 16 October 2017)

The capex savings from this construction method are substantial, compared to the alternative of plastic lined ponds. SLP’s engineering consultant, Amec Foster Wheeler, estimates the cost of lined ponds to be approximately $10.50 per m², up to 25 times higher than construction costs for unlined ponds.

The 25m x 25m test ponds were designed by SLP’s geotechnical consultant, MHA Geotechnical (MHA), to test the constructability and operating performance of a number of pond wall designs and to provide reliable seepage data under site conditions. The observed brine loss in the test ponds was well within the parameters of the hydrodynamic model, indicating losses for a 400ha pond will be below 0.125mm/day.

The Company has identified several opportunities to improve the construction of commercial scale ponds using excavators, along with ancillary equipment to optimize drying and compaction of the clays utilized in pond wall construction. This should result in further improvements in the already very low seepage observed in the trial sized ponds.

SLP plans to now construct a Pilot scale pond system to further improve the pond design and construction model.

Test Pond Results

Test Pond 3 (TP3) represents the as-modelled embankment construction and is the most likely design for commercial scale embankments. A total of 32 piezometric standpipes and 12 water data loggers were installed in and around all four walls of TP3, along with water level measuring devices on the floor of the pond and in the surrounding trenches, to accurately measure the water levels both in the pond and within the embankments.

The embankment and key are constructed from clay which was air-dried prior to compaction to ensure target compaction and permeability are achieved.  After the embankment and key material is saturated, the seepage from the pond, net of brine evaporation (data from the control pond) represents seepage losses through and below the pond walls. Net seepage losses of less than 3mm per day at test pond scale would substantially validate the shallow lake lithology, geotechnical characteristics and pond construction model for production scale, clay lined, on-lake halite evaporation ponds.

TP3 was initially filled with lake brine to approximately 500mm on 29 August 2017. The small, plastic lined, control pond was also filled to provide an accurate measure of evaporation rates.

Water level and piezometer readings were taken twice daily since and on 18 September 2017 the ponds were topped up, TP3 to approximately 1,000mm in this case, to accelerate wall saturation.

From the initial brine fill, the average net seepage at TP3 equated to approximately 2.4mm per day. This figure includes “losses” to wall saturation as well as to seepage, indicating that steady state seepage losses were comfortably below the 3mm per day threshold modelled for this scale of pond.

Capital Cost Comparison

The Company’s engineering consultants, Amec Foster Wheeler, generated scoping level cost estimates comparing two pond construction options for a 400ha halite pond. For ponds built on-lake on a relatively flat playa, with no provision for salt harvesting, and a 2.0m high wall, Amec Foster Wheeler estimate direct capital costs (accuracy of -10%/+30%) of:

·        Unlined –  A$1.6m

·        Lined – A$42.2m

The main costs of the lined ponds are the supply and installation of HDPE lining and placement and compaction of a sand bedding layer. If similar ponds were constructed off lake then clearing and levelling costs would be additional.

For either lined or unlined ponds, if salt harvesting is required a layer of halite must first be deposited and compacted, to provide a support base for harvesting equipment. As the Company does not plan to harvest halite from its ponds, these costs are not included in the Amec Foster Wheeler analysis.

Process Testwork

The Company continues a range of process development testwork to enhance the Lake Wells process model.

Site Evaporation Trial

A large scale, continuous Site Evaporation Trial (SET) at Lake Wells successfully completed 15 months of operation under site conditions and through all seasons, confirming the solar evaporation pathway for production of potassium rich harvest salts for processing into SOP. The objective of the SET was to refine process design criteria for the halite evaporation ponds and subsequent harvest salt ponds.

The SET has processed approximately 357 tonnes of Lake Wells brine and produced 8.1 tonnes of harvest salts.

The results of the SET are Australian first and have provided significant knowledge to the Company on the salt crystallisation pathway under site conditions in Australia.

During the quarter, approximately 122t of Lake Wells brine was processed through both trains of the SET, producing approximately 2,600kg of harvest salt at average potassium grades within target parameters. Production levels increased as the temperature (evaporation rates) increased with daily evaporation reaching levels of above 16mm/day.

The large quantity of salt produced via the SET is available for larger scale production of commercial samples for potential customers and partners around the world. 

Process Testwork –  Saskatchewan Research Council (SRC)

SRC has been engaged to carry out further optimisation tests to validate and duplicate the results achieved to date, followed by a locked-cycle continuous production test to quantify brine handling requirements and obtain product purity information on a continuous basis.

The locked-cycle test will also provide a significant quantity of flotation product to allow crystalliser vendor testing, design work, and product for testing and commercial purposes.

The locked-cycle testwork was completed in late December and final results will be available shortly.

Surface Aquifer Characterisation Program

The Company has completed a substantial program of work investigating the geological and hydrogeological attributes of the Shallow Lake Bed Sediment hosted brine resource at Lake Wells. The information and data generated will be utilised in the design of the brine extraction system for the GSLP Pilot Plant.

The total program includes 250 test pits and 10 trenches over the lake playa. The test pits are generally 1m wide x 1.5m long and 4.5m deep and confirm lithology and permeability of upper lake bed sediments and demonstrate spatial continuity of the surface aquifer.

Long Term Test Pumping

The Company continued sustained pump tests on test trenches across Lake Wells. This work provides reliable data for the preparation of a surface aquifer hydrogeological model for Lake Wells. 

The testing was conducted as a “constant head test” whereby flow rate was adjusted to maintain a constant trench water level. Drawdown was observed at nearby observation bores placed at distances of 10m, 20m and 50m from the trench.

Trench dimensions and pumping test results are presented in Table 1. Trench length varied from 25m to 125m length. Trench depth was constrained by the capacity of the excavator and the stability of the ground conditions and ranged from 2m to 6m below ground surface. Aquifer properties were estimated from the trench test data by calibration of a flow model for each trench.

Flow rates toward the end of testing ranged from 13 to 517m³/day. Higher flow rates are associated with evaporite deposits in the Playa Sediments.

These results are very encouraging and continue to support the design of the SOP operation at Lake Wells.

Table 1: Summary of Trench Test Pumping

Brine chemistry was consistent throughout the duration of the tests.

The Company is continuing extended pump tests on test trenches across Lake Wells with two long-term tests currently underway. These pumping tests will run for over 60 days to continue to validate the hydrology model and provide additional data on the draw down, recharge and brine concentration during extended pumping.

Deep Aquifer Exploration Program

During the quarter, an on-lake deep aquifer exploration diamond core drill program was undertaken, investigating paleochannel aquifer targets identified by geophysical survey. The results will provide further understanding of the characteristics of the paleochannel aquifer and identified locations for further test pumping bores to advance and refine the Lake Wells hydrogeological model.

Five observation bores ranging between 42m and 130m deep were completed across the Lake. The bores were constructed with 80mm PVC casing (internal diameter) through the paleochannel sediments to enable more investigations such as airlifting tests and possible downhole geophysical surveys.

The bores encountered the expected sequence of surficial alluvium to an average depth of 20m followed by up to 70m thick sequence of lacustrine clays before intersecting the paleochannel sediments. Some of the bores were targeted to drill through the paleochannel sediments into the Proterozoic Basement where it was fractured by geological faults.

The drilling results indicated that the modelled gravimetric and passive seismic interpretations were very accurate in locating the elevation of the basement as well as confirming the shape of the paleochannel. The addition of the airborne magnetic lineaments indicated zones where the basement underlying the paleochannel is weathered and fractured by faulting. This provided good targets to drill through the paleochannel sediments into the fractured basement.

Airlift testing of the observation bores is underway with the purpose of measuring aquifer properties.

Demonstration Plant

As previously announced, Amec Foster Wheeler have been engaged to prepare an analysis of the alternatives for the Company to construct a Demonstration Plant at the GSLP.

International brine and salt processing experts Carlos Perucca Processing Consulting Ltd (CPPC) and AD Infinitum Ltd (AD Infinitum) are also engaged for the Study.

Substantial progress continues on pond and trench design, mass balance modelling, process flowsheet design, major equipment quotations, costings and transportation studies.

LAKE IRWIN

Surface Aquifer Exploration Program

An initial surface aquifer exploration program was undertaken at Lake Irwin, comprising a total of 27 test pits and 2 test trenches. The test trenches were 100m long and constructed to a depth of 4-5 meters.

This work provides preliminary data for the hydrogeological model for the surface aquifer of the Lake, geological and geotechnical information for the upper strata of the Lake and deeper brine samples than previously available.

The 27 test pits completed across both the north and south of Lake Irwin. The geology and associated hydrology of the shallow (recent lacustrine) sediments is similar to that identified at Lake Wells.

A surface layer (up to 0.8m thick) of evaporitic (crystallised gypsum) sand typically overlies a red clay unit that is up to several meters thick. Thin beds and lenses of evaporitic sand also tended to exist at various depths within the red clay unit.  Rapid inflow of brine occurred into the test pits and trenches from the surface, evaporitic sand unit and from the beds and lenses within the lower clay unit.

Bedded silica sands were identified at depths greater than two meters in the Northern lobe of the lake. Rapid inflow of brine was observed from this underlying, inferred fluvial (riverine) unit. This unit is very encouraging for future exploration programs.

Brine was sampled during the excavation process. Potassium grades from 26 assays from the test pits ranged from 1,550 to 3,290mg/L. The data are presented as Appendix 4.

* Conversion factor of K to SOP (K₂SO₄ equivalent) is 2.23

Table 2: Lake Irwin Brine Chemistry split between the Northern and Southern Lobes

Four large geotechnical samples of 20kg each were taken from the main identified aquifer units. These samples will be processed to assess geotechnical and hydrogeological parameters for the different geological units in the profile, continuing the Company’s assessment of brine extraction potential via trenching, as well as assessing the suitability of the clay lithologies for pond construction. Initial visual interpretation during the excavation process indicated excellent stratigraphy and geotechnical potential similar to results at Lake Wells.

LAKE WAY

Reconnaissance and Pit Sampling Program

The Company conducted an initial reconnaissance surface sampling program at Lake Way in November 2017. A total of 8 pit samples were collected at Lake Way encountering brine at a standing water level from less than 1 metre from surface. The average brine chemistry of the samples was:

* Conversion factor of K to SOP (K₂SO₄ equivalent) is 2.23

Table 3: Lake Way Brine Chemistry from Surface Sampling

Exploration History

Significant historical exploration work has been completed in the Lake Way area focusing on nickel, gold and uranium. The Company has reviewed multiple publicly available documents including relevant information on the Lake Way’s hydrogeology and geology.

The Lake Way drainage is incised into the Archean basement and now in-filled with a mixed sedimentary sequence, the paleochannel sands occurring only in the deepest portion. The mixed sediments include sand, silts and clays of lacustrine, aeolin, fluvial and colluvial depositional origins. The surficial deposits also include chemical sediments comprising calcrete, silcrete and ferricrete. The infill sediments provide a potential reservoir for large quantities of groundwater.

Groundwater exploration was undertaken in the early 1990s by AGC Woodward Clyde^[1] to locate and secure a process water supply for WMC Resources Limited’s Mt Keith nickel operation.  There was a wide and extensive program of exploration over 40 km of palaeodrainage that focused on both the shallow alluvium and deeper palaeochannel aquifers.

The comprehensive drilling program comprised 64 air-core drillholes totalling 4,336m and five test production bores (two of which were within SLP’s exploration licences). The aquifers identified were a deep palaeochannel sand unit encountered along the length of the Lake Way investigation area and a shallow aquifer from surface to a depth of approximately 30m.

The shallow aquifer comprises a mixture of alluvium, colluvium and lake sediments extending beyond the lake playa and continuing downstream. Bore yields from Constant Rate Tests (CRT) in the shallow aquifer ranged from 60kL/day up to 590kL/day in permeable coarse-grained sand.

The deep palaeochannel sand aquifer is confined beneath plasticine clay up to 70m thick. The sand comprises medium to coarse grained quartz grains with little clay – it is approximately 30m thick and from 400m to 900m in width. Five test production bores were developed, of which two are within SLP’s tenements. CRT bore yields ranged from 520kL/day up to 840kL/day in permeable coarse-grained sand.

The groundwater is hypersaline and saturated near the lake surface with concentrations declining away from the lake. In the production bores within the SLP tenement, the reported potassium concentration was up to 4,000 mg/L K in the shallow aquifer and up to 6,300 mg/L K in the deep aquifer.

Competent Persons Statement

The information in this report that relates to Exploration Results, or Mineral Resources for Lake Wells and Lake Irwin is based on information compiled by Mr Ben Jeuken, who is a member Australian Institute of Mining and Metallurgy. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Jeuken has sufficient experience, which is relevant to the style of  mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Jeuken consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this Announcement that relates to Exploration Results for Lake Way is extracted from the report entitled ‘Emerging World Class SOP Potential Supported By Lake Way’ dated 12 December 2017.  The information in the original ASX Announcement that related to Exploration Results, for Lake Way is based on information compiled by Mr Ben Jeuken, who is a member Australian Institute of Mining and Metallurgy. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Jeuken has sufficient experience, which is relevant to the style of  mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Jeuken consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement

The information in this report that relates to Process Testwork Results is based on, and fairly represents, information compiled by Mr Bryn Jones, BAppSc (Chem), MEng (Mining) who is a Fellow of the AusIMM, a ‘Recognised Professional Organisation’ (RPO) included in a list promulgated by the ASX from time to time. Mr Jones is a Director of Salt Potash Limited. Mr Jones has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Jones consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Table 4 – Summary of Exploration and Mining Tenements

As at 31 December 2017, the Company holds interests in the following tenements:

Australian Projects:

APPENDIX 1 – LAKE WELLS DRILL LOCATION DATA

APPENDIX 2 – LAKE WELLS BRINE CHEMISTRY ANALYSIS

APPENDIX 3 – LAKE IRWIN TEST PIT LOCATION DATA

APPENDIX 4 – LAKE IRWIN BRINE CHEMISTRY ANALYSIS

APPENDIX 5 – JORC TABLE ONE

Section 1: Sampling Techniques and Data

Section 2: Reporting of Exploration Results

For further information please visit www.saltlakepotash.com.au or contact: