* Considering 3-4 mln tonne per year mine at Burr site
* To complete study on larger mine in 7-8 weeks (Figures in U.S. dollars unless noted)
By Euan Rocha
TORONTO, Oct 15 (Reuters) - Athabasca Potash API.TO is studying the economics and feasibility of increasing the size of its proposed Burr project in Western Canada, a top official for the miner said on Thursday.
In its resource report filed with regulatory authorities a year ago, the Canadian potash explorer had outlined capital expenditure costs of slightly over C$2 billion to build a 2 million tonne per year potash mine.
However, the company is now exploring the feasibility of producing 3 million to 4 million tonnes of potash annually from the project, Chief Operating Officer Terry Walbaum, said in an interview with Reuters.
Walbaum said the study on the revised mine size will likely be completed and submitted to the company's board in the next seven to eight weeks. The results will likely be a part of Athabasca's pre-feasibility study, which was originally expected to be completed in the third-quarter of 2009.
Based on Athabasca's most recent resource estimates, analysts believe that the Burr project in the province of Saskatchewan could result in a potash mine producing 2 million tonnes annually for 50 to 70 years.
Although increased annual production would lower the anticipated mine life, it could improve the economics of the project by lowering the capital expenditure costs per tonne, associated with the mine build.
Bank of Montreal analyst Joel Jackson estimates the Burr project could cost about $2.5 billion for a 2 million-tonne mine, which works out to capital expenditure costs of $1,250 per tonne.
By comparison, Jackson expects Potash One's KCL.TO Legacy project to cost $1.9 billion for a 2.5 million-tonne mine, giving capital expenditure costs of $752 per tonne.
The Legacy and Burr projects are two of the most well-advanced new projects in Saskatchewan, a major producer of global potash supply.
The Burr project is amenable to conventional shaft mining, while Legacy is better suited to solution mining, which uses water to dissolve the mineral from ore.
Building a conventional shaft mine involves higher up-front capital expenditures than a solution mine, but over the long run, operating costs for a solution mine tend to be higher than those of conventional shaft mines.
A larger mine at Burr, while raising overall mine-build costs, is likely to reduce capital expenditure costs per tonne of annual production and allow projected costs per tonne to compare more favorably with other proposed potash expansions in the resource-rich province.
Moreover, lower capital expenditure costs per tonne and higher output are likely to make Burr more attractive to potential partners from emerging economies like India and China, which are keen to secure long-term potash supplies. [ID:nN0987897] [ID:nN07471037]
Athabasca and most other junior potash explorers are looking for partners to develop their projects, given the high capital costs involved in building a potash mine.
Walbaum indicated that one of the primary motivating factors for considering a larger mine was that emerging market players are seeking projects that have large production capacity.
$1=$1.03 Canadian Reporting by Euan Rocha; editing by Rob Wilson