Potash West will begin a definitive feasibility study for its Dandaragan trough project north of Perth after a scoping study confirmed its technical and financial viability.
The company's project envisages mining potassium-rich glauconite deposits in the Perth Basin and producing potassium sulfate and other products using its own K-Max processing technology.
Potash West said its scoping study demonstrated that glauconite resources at Dinner Hill could support a 2.4 million tonne per annum operation over a minelife of 60-plus years.
Based on the 2.4mtpa scenario, the company has estimated the capital cost of the project at $650 million.
Average annual revenue was estimated at $365 million with annual cash costs of $137 million.
The study calculated an internal rate of return of 21 per cent and a net present value of $808 million.
The study also estimated figures for a 4mtpa operation.
Managing director Patrick McManus said the study showed the Dandaragan Trough had capacity to be a technically and financially viable project with strong operating margins and had the potential to be expanded significantly as markets were developed.
"The project benefits from its location in Western Australia, with high quality infrastructure and a ready market for fertiliser products," he said.
"We believe we are in a position to capitalise on the long-term dynamic of increasing demand for high quality materials feeding the food supply and agricultural industries."
Potash West has established a resource of 241 million tonnes at 3 per cent potassium oxide, including 120 million tonnes at 4.6 per cent potassium oxide.
Shares in the company were up half a cent, or 1.89 per cent, to 27 cents at 9.40am after hitting 30 cents in earlier trade.