(KPL) On November 28, in Vientiane, SINO-AGRI POTASH (Laos) and the Lao government held a signing ceremony for the exploration agreement on the 48.52 km² potassium ore project. The Prime Minister’s Office, and leaders of the Ministry of Planning and Investment and the Khammouane Province as well as Chinese representatives including General Manager Tong Yongheng attended this ceremony.

This marks that after many rounds of fierce competition, the 48.52 km² potassium ore project legally located in Nonglome village, Khammouane Province has been incorporated into the company’s resource map, and the potassium chloride resources controlled by its parent company Asia-Potash International are expected to exceed 1 billion tonnes.

Simultaneously, a grand opening ceremony of the 48.52 km² potassium ore exploration project was held in Nonglome village, Khammouane  Province, and more than 200 participants were present to witness this ceremony, including Governor of Khammouane  Province, Vice Chairman of the Khammouane  Provincial People’s Council, Director of the Provincial Department of Mineral Resources and Energy, Governor of Nongbok District and other provincial and district-level leaders, and representatives of SINO-AGRI POTASH CO., LTD. and the construction party.

Multiple Rounds of Competition Highlights the Company’s Strength and Asia-Potash Speed

Located in Nonglome village, Khammouane Province and adjacent to the company’s Dongbounenoy mine area, the 48.52 km² potassium ore is one of the two precious potassium ore resources owned by the Lao government in the Savannakhet Basin, Khammouane Province.

The other one is the 74.5 km² potassium ore which lies in Savannakhet Province. SINO-AGRI POTASH CO., LTD. began to apply for the ownership of 48.52 km² potassium ore in Nonglome village, Khammouane Province in April 2022, and became the ultimate winner after six-month fierce competition with 7 enterprises.

On October 27, the company received a notice from the Ministry of Planning and Investment on the preparation of the negotiation on the exploration agreement, and reached a consensus on this agreement with representatives of the ministries and commissions and Khammouane Province on November 4.

On November 25, the Prime Minister authorized the Ministry of Planning and Investment to sign an exploration agreement with the company.

On November 27, the company completed the related costs of USD 10 million in advance (of which USD 6 million was used to pay the government mineral rights fee, USD 4 million was the pre-paid resource tax, which could be deducted in the mining phase), and formally signed an exploration agreement with the Ministry of Planning and Investment on November 28. 

At the opening ceremony for exploration, the leaders of SINO-AGRI POTASH CO., LTD. said that the first 1 million tonnes of potash project was completed and put into operation in merely 17 months. Compared with the construction period of over 5-7 years of international counterparts, SINO-AGRI POTASH CO., LTD and the Lao government created side by side the “Asia-Potash Speed” and “Miracle of Laos”. At present, the second and third 1 million tonnes of potash fertilizer projects are under construction, whose construction progresses are in line with expectations. The fourth and fifth 1 million tonnes of potash fertilizer project construction procedures have also been started and accepted by the Lao government.

Before the Lao government awarded the company 48.52 km² potassium ore this time, the company started the exploration preparation work in advance, and increased 37 exploration drilling standards that met the exploration stage to more than 46 exploration drilling standards used for the first mining area in the mining stage.

At present, over 23 drilling rigs have been gathered. It is expected that each drilling rig can complete one drilling hole in 25 days and finish all field exploration work in about 50 days. On the one hand, the series of acceleration is to adjust the conventional construction period including 2-year exploration period and 1-year feasibility study and environmental impact assessment period to that including 1-year exploration period and 1-year feasibility study and environmental impact assessment period in order to strictly implement the exploration agreement signed between the company and the Lao government.

On the other hand, it is also to strive to achieve the practical operation period including half-year exploration period and half-year feasibility study and environmental impact assessment period to advance the exploration work one year. Essentially, it is the trust and expectation that enterprises have given back to all levels of government of Laos, and can promote the solution of the difficulties in the development of mining industry in Laos, set an example of the development of mining industry in Laos and help the current and future economic and social development in the country.

It is estimated that in addition to the benefits brought by the fixed asset investment during the construction period, the potash project per 1 million tonnes can also generate annual tax revenue of USD 30 million for Laos during the operation period and promote a large number of labour employment.

Mr. Vanxay Phongsavanh, Secretary of the Party Committee and Governor of Khammouane Province, attended the opening ceremony.

He warmly congratulated the official commencement of exploration and development of the 48.52 km² potash project, and gave an exciting speech.

He said, "After several rounds of discussion and analysis by the government of Laos, SINO-AGRI POTASH CO., LTD., relying on its outstanding comprehensive strength, has won the bid after defeating many other bidders, which is a recognition of achievements made by the company in various fields. I believe, in order to accelerate the development and construction phase of the project, SINO-AGRI POTASH CO., LTD will, in accordance with relevant provisions of exploration agreement, complete such works as exploration, feasibility study and environmental assessment within the time limit, thus making full use of the economic value of potash resources in Khammouane Province, promoting the economic development of the surrounding area, and improving the livelihood and well-being construction for the residents." At the same time, Mr. Vanxay Phongsavanh highly praised the pragmatic and efficient attitude of SINO-AGRI POTASH CO., LTD., with whom the Government of Khammouane Province is willing to join hands to realize mutual benefit and win-win progress. In order to establish favorable external conditions for the construction of the Project, Mr. Vanxay Phongsavanh has instructed the governments at all levels in Khammouane Province to actively improve the coordination and support work related to the Project and properly handle the practical challenges occurred during the project construction, so as to ensure the progress of the project as planned. 

Team Awarded after Obtaining Resources at Low Cost

Potassium ore resources of Laos are mainly distributed in Vientiane Basin and Khammouane Khorat Basin-Savannakhet Basin.

Because of the complicated geological conditions in Vientiane Basin and the difficulty in mining potash resources, so far there is no one company that has realized potash production.

On the contrary, potassium ore in Khammouane Khorat Basin-Savannakhet Basin has no mining obstacles for Tachyhydrite, and the company and Lao Kaiyuan Mining Sole Company Limited have realized the mass production of potash fertilizer. Therefore, the estimate of potassium ore deposits in the basin has risen sharply accordingly.

The estimate of the 35 km² potassium ore mine acquired by the company amounts to over RMB 2.9 billion, and the estimate of the 179.8 km potassium ore mine reaches nearly RMB 5 billion. As early as around 2010, the potassium ore resources of Khammouane Khorat Basin-Savannakhet Basin were divided by our shareholders: SINO-AGRI Group and other shareholders, Lao Kaiyuan Mining Sole Company Limited and Vietnam National Chemical Group (Vinachem).

In March this year, the executives of Asia-Potash International got to know that due to long-term non-exploitation (exploration), the 173 km potassium ore mine in the hands of Vinachem was taken back by the government of Laos, of which 50 km potassium ore mine had been acquired by one company, and there were two resources areas, namely, 48.5 km in Khammouane and 74.5 km in Savannakhet. Many investors from various countries began to apply for bidding.

Upon this the company management was instructed to get one or two blocks of potassium ore resources, so that the potassium ore resources controlled by the listed company could reach more than 1 billion tonnes, thus laying a solid foundation for the company's large-scale mining and production. Meanwhile, the resource acquisition cost can be reduced as much as possible.

Upon receiving the instruction, Tong Yongheng, General Manager of the company, took command personally, and led a team of twelve elites. He then submitted 48.52 km² and 74.5 km² potassium ore rights applications to Khammouane and Savannakhet provinces respectively, worked out the exploration and mining plans of two blocks of potassium ore mines in detail, reported to the relevant departments of the two provinces for many times, invited the leaders and relevant departments of the two provinces to visit the company on the spot, demonstrated the scale and strength of the company, and tried to give professional solutions to the problems raised. In addition, the team also offered suggestions to the leaders of the two provinces, pointing out that the local economic development of Laos should be based on the mining and development of rich mineral resource, that valuable mineral resources should be developed by investors with development technology and financial strength like the company, and that only in this way can deep processing of resources be carried out and the whole industrial chain be built. What they saw and heard was highly recognized by the leaders of the two provinces, so the application was quickly approved by the said provinces, and submitted to the relevant ministries in Laos.

At the explaining meeting attended by related ministries and commissions, the team leaders of the company talked about a lot vigorously, and argued that some competitors raised the bidding conditions, increased the uncertainty of future mining and affected the long-term interests of the government of Laos. Then, as a result, some competitors' strategy of raising bidding conditions came to a failure, and the bidding cost of the company was controlled at a quite low level. In this agreement, it is specified that the company will pay USD 10 million, of which USD 4 million is the prepaid resource tax, which can be deducted in the mining stage. In fact, the acquisition cost of the 48.52 km potassium ore mine is only USD 6 million, plus the detailed exploration cost of RMB 20 million, and the comprehensive cost is more than RMB 60 million, which is over 40% of the cost of the listed company to purchase the 35 km² potassium ore mine. On this basis, it can be concluded that this team saved the company nearly (RMB) 3 billion.

Therefore, Asia-Potash International decided to spend RMB 3 million to reward the meritorious team headed by General Manager Tong Yongheng, hoping that they would make further efforts to create more value for the company and enrich the company resources continuously. It is reported that the application for the mining right of 74.5 km² potassium ore mine in Savannakhet has been submitted to the relevant ministries and commissions of Laos, and it is currently in the process of examination and approval.

KPL