Level 1, 675 Murray Street, West Perth WA 6005 PO Box 1088 - West Perth WA 6872 CONTACT DETAILS W: davenportresources.com.au E: [email protected]P: +61 (08) 9481 0389 ABN: 64 153 414 852 ASX Code: DAV ASX Code (Options): DAVO Frankfurt Code: A2DWXX 197.1 M Ordinary Shares 14.2 M Unlisted Options 46.2 M Listed Options 5.9M Performance Rights ASX ANNOUNCEMENT 23 rd September 2020 DAVENPORT ANNOUNCES MAJOR SULPHATE DISCOVERY AT GERMAN LICENCE AREA • Davenport announces JORC (2012) compliant inferred resource at Nohra-Elende, comprising 768Mt at an average grade of 8.1% magnesium sulphate, with intersections up to 20%. • Magnesium sulphate is contained within the mineral kieserite (MgSO4.H2O) of which 72Mt has been identified. • The kieserite resource was estimated from the database of over 300 drillholes acquired from the German government at time of purchasing the perpetual mining licences. Ninety-two drillholes have been sunk in and around the Nohra-Elende licence area. • Natural kieserite is mined in Germany, however ore reserves are depleting and a replacement source is required. The only other significant source is China, where magnesium sulphate is manufactured synthetically in a process using hot acids. • Magnesium sulphate can be sold in a pure form, blended with potash (MOP) to produce value-added fertilizers or reacted with MOP to manufacture potassium sulphate (SOP). • Nohra-Elende offers a diversified basket of pure and value-added fertiliser products well-suited to the European market and favourably located. • Micon International Co. Limited (“Micon”), Davenport’s independent competent person (“CP”) for mineral resource estimation, calculated the Nohra-Elende inferred resource. Davenport Resources Ltd (ASX: DAV, “Davenport”, “The Company”) is pleased to announce a maiden JORC-compliant inferred kieserite resource for the northern part of its Nohra-Elende project totalling 768 million tonnes grading an average of 8.1% magnesium sulphate (predominantly in the form of the mineral “kieserite”), but increasing to 20% in places. The resource was confirmed by renowned consultancy group Micon International Co Limited based on available historic exploration data. The resource area contains approximately 72 million tonnes of kieserite (MgSO4.H2O), which is a valuable fertiliser nutrient. It provides a source of both readily water-soluble magnesium and sulphur, which are commonly depleted from soils in Europe and around the world. The kieserite resource is present within the carnallitite and sylvinite potash seams that were evaluated by Micon in late 2018 (ASX announcement 13 th November 2018). In addition to the 72Mt kieserite resource, the entire Nohra-Elende potash deposit comprises sylvinite and carnallitite, containing more than 165 million tonnes of potentially exploitable K2O resources. Kieserite is marketed globally and produced in three major forms, depending on the water content. The most common form, used predominantly in agriculture, is magnesium heptahydrate (Epsom Salt). The European market for magnesium sulphate products derived from kieserite is approximately 300,000 tonnes per annum,
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DAVENPORT ANNOUNCES MAJOR SULPHATE DISCOVERY AT GERMAN LICENCE AREA
• Davenport announces JORC (2012) compliant inferred resource at Nohra-Elende, comprising 768Mt at an average grade of 8.1% magnesium sulphate, with intersections up to 20%.
• Magnesium sulphate is contained within the mineral kieserite (MgSO4.H2O) of which 72Mt has been identified.
• The kieserite resource was estimated from the database of over 300 drillholes acquired from the German government at time of purchasing the perpetual mining licences. Ninety-two drillholes have been sunk in and around the Nohra-Elende licence area.
• Natural kieserite is mined in Germany, however ore reserves are depleting and a replacement source is required. The only other significant source is China, where magnesium sulphate is manufactured synthetically in a process using hot acids.
• Magnesium sulphate can be sold in a pure form, blended with potash (MOP) to produce value-added fertilizers or reacted with MOP to manufacture potassium sulphate (SOP).
• Nohra-Elende offers a diversified basket of pure and value-added fertiliser products well-suited to the European market and favourably located.
• Micon International Co. Limited (“Micon”), Davenport’s independent competent person (“CP”) for mineral resource estimation, calculated the Nohra-Elende inferred resource.
Davenport Resources Ltd (ASX: DAV, “Davenport”, “The Company”) is pleased to announce a maiden JORC-compliant inferred kieserite resource for the northern part of its Nohra-Elende project totalling 768 million tonnes grading an average of 8.1% magnesium sulphate (predominantly in the form of the mineral “kieserite”), but increasing to 20% in places. The resource was confirmed by renowned consultancy group Micon International Co Limited based on available historic exploration data. The resource area contains approximately 72 million tonnes of kieserite (MgSO4.H2O), which is a valuable fertiliser nutrient. It provides a source of both readily water-soluble magnesium and sulphur, which are commonly depleted from soils in Europe and around the world.
The kieserite resource is present within the carnallitite and sylvinite potash seams that were evaluated by Micon in late 2018 (ASX announcement 13th November 2018). In addition to the 72Mt kieserite resource, the entire Nohra-Elende potash deposit comprises sylvinite and carnallitite, containing more than 165 million tonnes of potentially exploitable K2O resources.
Kieserite is marketed globally and produced in three major forms, depending on the water content. The most common form, used predominantly in agriculture, is magnesium heptahydrate (Epsom Salt). The European market for magnesium sulphate products derived from kieserite is approximately 300,000 tonnes per annum,
however, kieserite is also used in combination with MOP to produce higher value K+Mg fertilisers and is also used to convert MOP to the premium SOP fertiliser, the latter having a 6 Mt global market
Natural kieserite is already mined in Germany, however ore reserves are depleting and a replacement source will be required. Palm oil producers in SE Asia use large volumes of magnesium sulphate sourced from product manufactured synthetically through a chemical process using hot acids.
Davenport Managing Director Dr Chris Gilchrist said:
“This newly identified kieserite resource establishes the potential to produce significant amounts of attractively priced magnesium sulphate salts in addition to muriate of potash (MOP) from the Nohra-Elende deposit. The global magnesium sulphate market is increasing rapidly as farmers are recognising the importance of these nutrients. We believe the Nohra-Elende project may have potential to support a large, long-life mine which together with our other growth options, will contribute to Davenport developing into a world-class producer of both conventional and specialty fertiliser products and in particular, become a major supplier in Europe.”
Nohra-Elende is one of at least four standalone projects in Davenport’s portfolio, which comprises western Europe’s largest potash inventory of more than 5.3 billion tonnes of potash. Davenport is working to develop its project portfolio.
In accordance with ASX listing rule 5.23, the Company is not aware of any new information or data that materially affects the information included in the previous market announcement (ASX announcement 13th November 2018) and that all material assumptions and technical parameters underpinning the estimate in the previous market announcement continue to apply and have not materially changed.
Next Steps
Davenport intends to continue with its strategy to sink two twin, confirmatory drillholes at its Ohmgebirge (MOP) project in order to upgrade the current inferred resources to the indicated category, following which the existing scoping study will be upgraded to a feasibility study during next year. In parallel with this, as a consequence of the kieserite discovery, Davenport will conduct further studies on the production cost and market potential for SOP, magnesium sulphate and specialty K+Mg fertiliser blends.
The Nohra-Elende project is located near Nordhausen in the state of Thüringia in Germany. The project area comprises the northern part of the Mühlhausen-Nohra mining licence, approximately 30km northwest of the state’s capital city Erfurt, and at the south-western boundary of the South Harz Potash District.
Mühlhausen-Nohra is one of three perpetual mining licences in the South Harz Basin that Davenport acquired from the German Federal Government agency Bodenverwertungs-und-verwaltungs GmbH (“BVVG”), (Figure 1). The remaining two perpetual mining licences are Ebeleben and Ohmgebirge. Küllstedt and Gräfentonna are exploration licence areas held by the Company.
Figure 1: Location of Davenport’s South Hartz Potash Projects.
All exploration drilling conducted on the Mühlhausen-Nohra mining licence is historical. The first evidence of exploration is from drillhole Kal Möhrbach 1/1890 which dates back to 1889. The majority of the historical exploration drilling on the Mühlhausen-Nohra mining licence was conducted by the former German Democratic Republic (GDR) during two major campaigns, one in the 1960s and one in the 1970/80s. Various state institutions were involved during these campaigns, which were later merged after reunification to form the VEB Kombinant.
The drill hole database for the Nohra-Elende sub-area consists of 92 drill holes, 28 within the licence and 64 adjacent to the licence. Of these 92 drill holes, four were hydrocarbon exploration drill holes and 88 potash exploration drill holes, with 32 drill holes providing mineralogical information and 25 intersecting kieserite. All drill holes were drilled vertically with minor deviations in some drill holes at depth. Drilling from surface used tricone bits through the overburden and upper stratigraphy, switching to core through the potash-bearing horizons to the end of hole (EOH). Clay mud was used as the drilling fluid through the overburden sections in potash drill holes and a NaCl-saturated drilling fluid was used through the salt horizons. Casing was used through the overburden.
The database compiled in 2018 was used as the basis for the kieserite modelling. When originally creating the database, Micon manually entered the chemical and mineralogical information recorded on historical assay logs. The data that featured on the logs comprised a breakdown of the chemical analysis for each sample that was subsequently used to calculate the mineral content of each sample. In order to model the kieserite and other sulphate minerals on the Nohra-Elende sub-area, Micon revisited the database compiled in 2018 and added any additional chemistry and mineralogical data to ensure as much information on the varying mineralogy was available for modelling.
The chemical database used for the kieserite model includes data for 43 drillholes, of which 12 (including four hydrocarbon drill holes) are missing mineralogical information as only the K2O content can be located in the historical records. To quantify the amount of chemical and mineralogical data available for each sample, the sum of the chemical results and the sum of the mineralogical allocations was calculated. Each of these respective checks should have a total sum of 100% if the data is complete. As expected because of the historical nature of the data, not all the samples contained 100% chemical and/or mineralogical data. Instead of inserting dummy values to account for these gaps, Micon elected to apply a filter to the data when modelling to exclude any samples with less than 90% total chemical data.
All drill holes with verified downhole chemistry data were relied upon for geological modelling and estimation purposes. In instances where full drill hole logs were available, these typically included a detailed lithological description of the entire drill hole, a summarised stratigraphic log, graphically-displayed downhole geophysical log and the chemistry and mineralogy results.
All drill hole sampling was conducted according to the procedures and protocols as specified in Kali-Instruktion (1956 and 1960)1. Drill core samples were collected from all the potash drill holes. Where possible, the K2O grade of the potash-bearing horizons was historically determined on an empirical base using the correlation with the downhole natural gamma log. Samples were collected across all potash-bearing horizons and the total sampled length represents the total thickness of the potash-bearing horizon of the z2KSt. In the potash drill holes, core sample thicknesses ranged from 0.07m to 25m. Over inhomogeneous potash horizons where interlayers of potential waste were included, the minimum sample thickness was 0.5m and the maximum 5m. Samples were crushed to 2mm in a jaw crusher and a representative sample was milled and crushed further to 50μm. A sub-sample was assayed by ICP-OES for all elements except NaCl, which was analysed using potentiometric titration. XRD was used for mineralogical analysis and thin section microscopy was carried out at a local university.
Figure 2: Nohra-Elende sub-area showing historic drillhole locations, extent of kieserite resource area
(hatched red), former potash mines and location of historic shafts.
Geology and Modelling
The Südharz (South Harz) Potash District, located in the north-western extent of the Thüringian sedimentary basin, forms part of the South Permian Basin of the ancient Zechstein Sea. This covers an area extending from England to eastern Poland with flanking areas within Denmark and the South Baltic Sea in the north and the upland regions of Belgium and Germany to the south.
The regional stratigraphy of the South Permian Basin is well understood with a pre-Variscan basement (Upper Carboniferous and older rocks) and a transition horizon of Upper Carboniferous to Lower Permian lying beneath an expansive sequence of evaporite rocks of the Upper Permian succession. These evaporite deposits are assigned to the Zechstein Group, and host the target potash mineralisation of the South Harz Potash District, along with other potash deposits in Germany, France and the United Kingdom, including the Woodsmith and Boulby Polyhalite mines.
In the Mühlhausen-Nohra mining licence area, the potash-bearing horizon known as the z2KSt is present throughout the extent of the mining licence and has an average thickness of 18.2m across the northerly Nohra-Elende sub area. Generally, in the Nohra-Elende project area, the deposit bedding is assumed to be undulating with an even dip over large distances. Local differences may occur in areas influenced by tectonic structures and a potential west-east fault has been identified on Nohra-Elende with a ± 100m displacement. The minimum depth from surface to the roof of the Main Seam is ± 405m and the average depth is ± 560m.
The main minerals present are carnallite and sylvite with lesser amounts of halite, kieserite, polyhalite, anhydrite, langbeinite, kainite, aphthitalite and syngenite. The 2018 Nohra-Elende database and model has been updated by Micon to produce a block model containing data from the broader mineralogy of the potash seam, with a specific focus on the kieserite content.
The 2020 Micon chemical database, once validated, was composited down-hole into 5m widths so that the sampling data was evenly distributed for input into the block model. The Upper Sylvinite and Carnallitite wireframes from the 2018 modelling were combined to make one solid wireframe called the Main Seam. This was then clipped to the extents of the kieserite area using a polygon that was digitised based on kieserite intersections with a mineral content of > 2%.
The Main Seam kieserite wireframe and results of the geostatistical analysis were used to create a block model of the Nohra-Elende sub area. The whole of the potash resources on Nohra-Elende cover an area slightly larger than that included in the kieserite model (Figure 2). The total potash resources were reported in 2018, and the mineral resources reported resulting from the kieserite modelling are inclusive of the 2018 resources and should not be considered as additional tonnes.
A 3D block model estimate was carried out using Ordinary Kriging (OK). The kriging method was set to ordinary to ensure that the local mean was recalculated each time the search neighbourhood was positioned on a new block centroid. The 5m downhole composited database was used to estimate chemical grades and mineral contents into the block with sample data within the kieserite wireframe flagged and a filter applied to the sum of the chemical elements so that only those samples with results > 90% were used to estimate grade.
Search ellipse dimensions were based on the drill hole distribution and variography. All estimated elements and minerals had a primary search ellipse radius of 1,300m to ensure coverage between drill holes. The search ellipse was divided into eight sectors with a maximum number of three points per sector. A maximum count per reference of three was applied to limit the number of samples used in each drill hole.
Since the potash mineralisation is relatively horizontal, the rotation mode was used for the search ellipse where only the azimuth and plunge are required. The ellipsoid axes for both K2O and kieserite were set as follows: -
The two modelled variograms were used to model the elements and mineralogy where the most relevant variogram, either K2O or kieserite, was used. Grade was estimated into parent blocks and all sub-blocks received the same grade as their relevant parent block.
Mineral Resources
When Micon modelled the Nohra-Elende sub-area in 2018 the focus was on the carnallitite and sylvinite resources. (ASX announcement 13th November 2018). However, during modelling it became apparent that there were significant amounts of sulphate minerals present as well as carnallite and sylvite. The most prominent of the sulphate minerals is kieserite, which can be sold as magnesium sulphate in various hydration states. Therefore the 2018 Nohra-Elende model has been updated by Micon to produce a block model that contains data concerning the broader mineralogy of the potash seams, with a specific focus on the kieserite content.
With the exception of a zone of halite in the north-east of Nohra-Elende, the 2018 resource work confirmed that the economic potash deposit extends across the whole of the sub-area and is known from additional drill holes to extend beyond the Davenport mining licence boundary. However, kieserite mineralisation does not occur across the whole of Nohra-Elende and the extents of kieserite mineralisation were defined based on a > 2% mineral content (Figure 2).
The 2018 mineral resources (ASX announcement 13th November 2018) were restricted by a total seam thickness (>1 m), grade (>5% K2O) and the licence area boundary. The same parameters were used by Micon for the 2020 kieserite model with the addition of the model area being restricted to the kieserite polygon.
The average thicknesses of the wireframes, for the 2018 model are Upper Sylvinite seam 1.78 m, Carnallitite Seam 26.06 m and Lower Sylvinite seam 1.99 m. The average thickness for the 2020 kieserite Main Seam wireframe is 30.6 m.
The total mineral resource area for the Kieserite Project within the Nohra-Elende sub-area is approximately 18.7 km2 and the total Inferred Mineral Resources tonnage is 768 Mt including 72 Mt of kieserite at a grade of 9.45% K2O and 8.1% MgSO4 (Table 1). This mineral resource estimate does not include the previously estimated Lower Sylvinite Seam, which adds an additional 14 Mt to the total resources on Nohra-Elende at an average grade of 10.67% K2O. Total mineral resources per licence area are shown in Figure 3.
Inferred Mineral Resource Estimate for the Kieserite Area of the Nohra-Elende Sub-Area
of the Mühlhausen-Nohra Mining Licence (Micon, 31st August 2020)
1. Main Seam is a combination of the Upper Sylvinite and Carnallitite Seams (predominantly made up of Carnallitite). 2. Minimum seam thickness considered for resources is 1 m. 3. Minimum cut-off grade ≥5% K2O. 4. 20% geological loss applied to account for potential unknown geological losses for Inferred Resources. 5. Data source: historical state records (BVVG) checked and verified. 6. Inferred Resources rounded down to nearest 100,000 t. 7. Errors may exist due to rounding.
Figure 3: All JORC resource areas under Davenport’s control in the South Harz Potash District. The kieserite resource is located in the northern part of the Nohra-Elende sub-area.
Ongoing & Future Work
Work is continuing in Germany to fully evaluate the projects under Davenport’s control. The next phase is to upgrade the existing JORC 2012 Inferred resources from Ohmgebirge to Indicated resources through the completion, subject to funding, of approximately two twin drillholes. Davenport has selected drill sites for the two drillholes and work will shortly commence to obtain the required drilling permissions.
Following an upgrade of the resources, Davenport will further de-risk the Ohmgebirge project and increase the level of definition through a feasibility study to fully evaluate its technical and economic potential.
In parallel with this, as a consequence of the significant kieserite discovery, Davenport will conduct further studies on the production cost and market potential for SOP, magnesium sulphate and specialty K+Mg fertiliser blends.
This announcement has been approved by the Board of Directors of Davenport Resources Limited.
Competent Person Statement
Elizabeth de Klerk M.Sc., Pr.Sci.Nat., SAIMM., Micon’s Senior Geologist and Competent Person visited the South Harz Potash project on three separate occasions, from the 12th to 16th February, the 6th to 8th March 2018 and again from 15th to 17th October 2019. During the initial site visit the South Harz Potash Project and laboratory facilities at K-UTECAG Salt Technologies (K-UTEC) in Sondershausen were visited. The original hard copy drill hole logs, reports, maps and cross-sections held by the Bodenverwertungs und verwaltungs GmbH (BVVG) archives in Berlin were inspected. In addition, Mrs. de Klerk had discussions with Ercosplan in Erfurt in order to understand how the data was captured and structured in an Excel database from which Ercosplan estimated Exploration Targets for the various Davenport licences of the South Harz Potash Project. The second site visit involved additional time being spent at K-UTEC inspecting additional historical records for the South Harz Potash Project held in the K-UTEC archives at its head office in Sondershausen. During the third visit, Mrs. de Klerk visited the Ohmgebirge mining licence area as well as the K-UTEC archives and the surrounding dormant mining areas.
References
1. ‘Kali-Instruktion - Instruktion zur Anwendung der Klassifikation der Lagerstättenvorräte fester mineralischer Rohstoffe vom. 28 August 1979 auf Kalisalz- und Steinsalzlagerstätten, Prof. Dr W Gotte, Akademie-Verlag Berlin, Zeitschrift für angewandte Geologie, Bd. 28 (1982), Heft 6, p287 - 293.
Magnesium sulphate is commercially available as heptahydrate, monohydrate, anhydrous or dried form containing the equivalent of 2 - 3 waters of hydration. Magnesium sulphate occurs naturally in seawater, mineral springs and in minerals such as kieserite and epsomite. Magnesium sulphate heptahydrate is manufactured by dissolution of kieserite in water and subsequent crystallization of the heptahydrate. Magnesium sulphate is also prepared by sulphation of magnesium oxide. It is produced with one or seven molecules of water of hydration or in a dried form containing the equivalent of about 2 - 3 waters of hydration. Magnesium sulphate is available as brilliant colourless crystals, granular crystalline powder or white powder with a bitter salty, cooling taste. It is freely soluble in water, very soluble in boiling water, and sparingly soluble in alcohol. Magnesium sulphate is used as a fertiliser nutrient, firming agent and flavour enhancer. It is also used as a fermentation aid in the processing of beer and malt beverages. No food uses have been identified for the anhydrous form of magnesium sulphate. . There is an estimated 7.5m tpa capacity of MgSO4 globally with K+S the market leader with approx. 3m tpa reported capacity, however there is only an estimated 1.6m tpa consumption in the pure form. The Heptahydrate form currently represents about 65% market share to the more premium Anhydrous & Monohydrate grades available. More importantly, magnesium sulphate derived from kieserite is used to produce value-added K+Mg fertiliser blends and SOP. Europe is a relatively small but important market for MgSO4
(Magnesium Sulphate), with just over 300k tpa sold in the pure form, however fertilizer manufacturers are looking increasingly at magnesium and sulphur additives to correct soil deficiencies in certain areas, especially where the bedrock underlying the soil does not contain any soluble magnesium or sulphur.
Heptahydrate – low analysis, cheapest, big in agriculture
Anhydrous – Used for Pulp + Paper & many other industry
uses
Monohydrate - Ultra high purity or standard high purity,
submicron and nano-powder forms. Uses - Food,
Agricultural and Pharmaceutical Grade; Optical Grade, USP
and EP/BP (European Pharmacopoeia/British
Pharmacopoeia).
MgSO4 is sold in 3 main grades, Heptahydrate has the largest market share with 65% Agricultural sector accounting for 45-50% market share. Known in the agri market as Kieserite, K+S Germany dominate the market and have a well-structured pricing strategy, complementing their MOP and salt sales. In addition to K+S production in Germany, there is a significant amount of synthetic kieserite from China today at aggressive prices.
Prices have a wide range depending how water soluble the
product is, for example in China many 25% MgO grades only
have a water solubility of 20% MgO and sometimes lower.
Buyers have got wise to this and only pay for the water
soluble content. This has also held back Chinese
development as the products historically did not perform very
well compared to the K+S water soluble 25% MgO product.
Kieserite today is sold in the UK for around US$240-$250/mt
Bulk CFR. Monohydrate and Anhydrous forms currently
average $400 to $500 per tonne respectively.
Uses of Magnesium Sulphate
Agriculture Food & Feed Additives Pharmaceuticals & Personal care Chemicals (Including Water Treatment) Pulp & Paper manufacture Rubber processing Anhydrous magnesium sulphate cannot be prepared by crystallisation from aqueous solution, but only by dehydration of a hydrate. Aqueous solutions of salt may be prepared by dissolving the oxide, hydroxide or carbonate in sulphuric acid or by passing sulphur dioxide into a slurry of magnesium hydroxide to form the soluble bisulphide, followed by air oxidation. Magnesium sulphate can be obtained from brines,
in addition to ores such as Kieserite (MgSO4.H2O), epsomite, kainite and langbeinite. Technical grade Espom salt is made by reacting magnesium oxide, hydroxide or carbonate and sulphuric acid followed by crystallisation. USP grades are prepared similarly except for the use of higher purity magnesium compounds and the removal of iron, aluminium and other impurities by precipitation using excess MgO. Filtrate is then evaporated and the Epsom salt crystallised and washed free of mother liquor. Magnesium Sulphate’s use in the pharmaceutical industry is likely to create new prospects for the market growth. K+S not only produces magnesium in Germany, they also own 100% of K+S (Huludao) Magnesium Products Co. Ltd in China. Crop Requirement Magnesium is a key component of chlorophyll, the green colouring material in plants, and is vital for photosynthesis. Sulphur is a constituent of amino acids in plant proteins and is involved in energy-producing processes in plants. Less soluble minerals such as Polyhalite K2Ca2Mg(SO4)4·2H2O are marketed as sources of replacement sulphur and potassium, however the dissolution kinetics are slower and much of the sulphur remains bound to the sparingly insoluble calcium sulphate within the mineral, thus a high percentage of the mineral is relatively inactive.