"What we are proposing to do is to build Thailand's first potash mine," says Asia Pacific Potash's Engineering Manager Donald Hague. "In fact, it's the first significant potash mine in South-East Asia." And potash is essential to agriculture development as it is one of the basic nutrients for plants.
 
"In the western world consumption is stable. But in Thailand and Asia the consumption of fertilizer is rapidly increasing, and the consumption of potash is increasing even faster," says Mr Hague. "But none of the countries in South-East Asia have a domestic source of potash. At present, it is all imported from North America, the former Soviet Union and the Middle East.

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"We initiated this project by exploring for potash in the Udon Thai Potash Concession Area where we successfully identified a sylvinite deposit which is a high-grade potash ore sufficient to support at least one 2 million tonne/annum mine and possibly even a second and a third. Ultimately, this puts Thailand in the position to be the third largest potash producer in the world (Canada is first, the former Soviet Union second), as well as enabling it to be Asia's only significant source of potash."
 
The company hopes to start construction of the mine next year and that will put initial production in the year 2003. The mine is expected to last over twenty-five years and produce two million tons a year. Of that total, 400,000 tons will be used for domestic consumption, and 1.6 million tons will be exported to other countries in South-East Asia. The growth of the potash market in this region is so substantial that those two million tons can easily be absorbed into the market (11 million tons were delivered in 1998 with with a predicted growth of five million more tons expected over the next five years). 

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Asia Pacific Resources, of which the Asia Pacific Potash Corporation is a subsidiary, is a member of the Crew Group of Companies which is natural resource based and is into activities ranging from early stage exploration to operating mines with its focus being on the development of new mines and in some cases the optimization of existing mines. The potential for potash exploration in Thailand was well-known back in the 70s. The Thai Government set aside various concession areas and signed various deals with companies to do exploration in a number of areas. But in the 1980s, the potash industry went through some rough times, and because of the turmoil, however, nothing much happened. 

What turmoil? "You see," Hague explains, "in the 80s there was a tremendous oversupply of potash and a tremendous collapse in consumption, particularly in the former Soviet Union. What that led to was price wars, decreasing product prices, bankruptcies, and the traditional consolidation that accompanies such a downswing. Since then, the Canadian industry has consolidated from some twenty suppliers down to two or three major ones. And throughout the world, you've seen the same consolidation and same rationalization of production in various places. For example, in France, production dropped off considerably because of diminishing resources, the high cost of mining and processing. The industry has really rationalized its production. Potash is probably one of the only industrialized minerals to increase in price over the last few years."

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Most people are familiar with fertilizer and its benefits, as it provides the three major nutrients for plant life: nitrogen, potassium, phosphate. Nitrogen is widely available - a typical form is urea. Potassium is available out of potash. And phosphate is also a mining product and available in various forms. None of these products are substitutes for the other. In fact, you need a mixture of all three, depending on the soil conditions and the particular type of crop you are trying to grow. Experts can analyze your crop and soil conditions tell you the blend of three constituents you should use.
 
What has happened in Asia is that because nitrogen and phosphate have been readily available, countries have used them as base fertilizer and that has achieved good results in the short term, but in the long term you need to compensate for the lack of potassium. For example, in China where a lot of research has been done, the ratio of potassium is half what it should be, so in the long-term China has to look at doubling its potassium levels. Balanced fertilizer results in much more substantial plant growth.     

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In the early stages, APPC's focus has been on carrying out the exploration, drilling, and the identification of the potash horizon, collecting all of the technical information to build up resource models and providing the basic underground information in order that consultants could take it a step further and carry out the preliminary design and costing of the whole facility.
 
Back in 1993, within its first year of official exploration, APPC was very successful with its drilling, as it had very good indications of potash which allowed the company to raise additional capital to continue the exploration programs and feasibility studies through to the point where it spent close to US$30 million on exploration, feasibility studies and preliminary designs culminating in 1998 when it completed a bankable feasibility study which is essentially the pulling together of all the different capital cost elements including marketing studies and financial and transportation modeling.

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APPC started off with a concession area of 2,300 sq.km and within three years it was required to reduce that to 1750 sq. km and two years later it was required to reduce that even further to 850 sq. km. Within that area it has identified two underground fields: one is the Somboon; the other, the Udon. The Somboon, which is 15 km south-east of Udon Thani, has approximately 300 million tons of silvinite (potash ore). In addition, in the field called the Udon, which is 5 km to the north of Somboon, there is over 1 billion tons of sylvinite ore. In the Somboon field, APPC has carried out feasibility studies showing it can support a two million ton mine for over twenty-five years. And it is continuing its feasibility studies in the Udon field which could support a second mine and possibly even a third.  
 
"What is most striking about the project is first, its location: its distance from a deep-water port and then its distance to its major customers in South-East Asia. Then, as I mentioned, the amount of potash consumption in South-East Asia, and more importantly, the projected increase in consumption. It's a situation you don't have in North America and Europe where because fertilizer consumption is very stable if you want to sell more product you have steal someone else's market share. In Asia though there is plenty of room for this project and its location gives it a very good start in terms of economics delivered to the customer.

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"This is also one of the shallowest potash deposits in the world which makes it cheaper to mine because you don't have to go so far underground. We also have an ore grade which is every bit as good as other mines around the world, and the amount of insolubles are lower which makes it easier to process. The cost of construction is much lower in Thailand and ultimately the cost of operating will be similar to Canadian mines. They have low operating costs because of their size, they have economies-of-scale, and their high degree of automation.  
 
"In Thailand, we don't expect the same amount of automation and our mining conditions are slightly more difficult but we have a significant transportation advantage in that we don't have to ship by rail 2,500 km to a deep-water port and then ship across the Pacific Ocean to supply our customers."

Asia-Pacific has also signed an agreement with Norsk Hydro, a Norwegian company which is the world's largest finished fertilizer producer. Through its Asian office in Singapore, it has agreed to market seventy-five percent of APPC's product.

 
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