It has been a highly eventful 2018 for Davenport Resources (ASX: DAV) with the potash-play on the verge of declaring Europe’s largest potash resource. Now the Germany-focused explorer is gearing up for an even bigger 2019.
In a letter to shareholders, Davenport chairman Patrick MacManus outlined a number of milestones for 2018 including the purchase of three mining licences from the Bodenverwertungs-und-verwaltungs GmbH (BVVG), a German Government agency charged with divesting former German Democratic Republic (GDR) assets.
Importantly for Davenport, the purchase of the mining licences included a very large drill database from programs completed in the 1960s and 1980s.
“This has allowed a very rapid and cost-effective evaluation, which is revealing a very large resource on our land,” Mr MacManus said.
“These licences are both valuable and unique assets as they are not subject to expiry, rent, royalties or any reporting requirements which provides Davenport with a high degree of flexibility in terms of their utilisation.”
After acquiring the licences, Davenport quickly got to work defining resources across its suite of projects.
First up was the Ebeleben mining licence area with internationally-renowned consultancy Micon International advising – based on review and re-modelling of historic drill hole data – a JORC (2012) Inferred potash resource of 577 million tonnes at 12.1% potassium oxide (K2O) which included 324 million tonnes of high-grade Sylvinite at 15.6% K2O.
This was then quickly followed by an JORC (2012) inferred resource over its Mühlhausen-Keula-Nohra-Elende mining licence resources of 2.83 billion tonnes of mixed potash salts containing 289.4 million tonnes K2O.
Davenport now controls over 3.4 billion tonnes of JORC Inferred Resources grading at 10.5% K2O which almost gives it bragging rights to having the largest potash resource in Europe.
Looking ahead to 2019, Davenport is seeking to upgrade the current JORC Inferred Resources to the higher, indicated level by drilling one or possibly two holes in its licence areas.
“This is targeted for achievement by mid-year,” Mr McManus said.
“We have already secured landowner and local mayoral permission to drill in one selected area and work is currently ongoing to assess the possible need for a second hole.
“Once the data from these holes are analysed and the resources are upgraded, it is intended to conduct economic studies during the second half of the year,” he added.
During the year, Davenport raised around A$1.9 million following an oversubscribed placement to sophisticated, professional and institutional investors of 26.5 million fully-paid ordinary shares.
A second tranche of the placement comprising 3.8 million fully-paid shares with attaching options raised a further A$0.56 million.
The company also appointed a key strategic, financial and corporate advisory service London-based Bacchus Capital Advisers to assist in Davenport gaining European investor interest and further demonstrate the value of its assets in Germany.
Renowned potash market intelligence provider Integer Research were also appointed to advise on potash pricing and future market trends.
Mr MacManus said Integer’s current predictions indicate there will be little challenge to placing European-produced potash in the market due to the significant gap between European production and demand due to current and forecast mine closures.
World potash demands reached record highs in 2017 with large rebounds from both China and North America for Muriate of Potash (MOP),” he said.
MOP contract prices in 2018 have exceeded US$280 per tonne and spot prices of US$340 and US$290 per tonne are being achieved in Brazil and SE Asia respectively.
Demand for potash is growing at around 3% a year and is anticipated to exceed 67Mt in 2018 with Integer expecting further volume growth in 2019 and beyond.
Davenport is currently trading at 10c after hitting a 52-week high of 14.5c in late November.