FAIR MARKET VALUATION OF STOCKPILED SYLVINITE AT SILVER PEAK, NEVADA

North America’s only active lithium mine is located near Silver Peak, Nevada, which began operations in 1966. Lithium-rich brines under the Clayton Valley basin are pumped to the surface and then through evaporation pools to enrich the lithium. Large quantities of sylvinite, a mixture of halite and potash salts, are produced as waste products from the evaporation process, gradually filling in the pools. The salt must be periodically excavated and stockpiled on site as they are leasable minerals reserved to the United States. After more than 50 years of operations, over 6 million short tons of sylvinite are now stockpiled at the site as of 2020.

In 1991, the Bureau of Land Management (BLM) and the mine operator reached a legal settlement agreement regarding the mineral patents and rights. The U.S. Government agreed not to grant any rights (e.g., leases) to the waste salt as long as the mine operator is conducting lithium operations. While salt resources on federal lands are managed under the regulations at 43 CFR § 3500 and the Mineral Leasing Act of 1920 as amended, leasing is legally precluded here due to the terms and conditions of the settlement agreement. Under BLM direction, the agency proposed to sell and dispose of the stockpiled salts to the mine operator under the 43 CFR § 3600 Mineral Materials Program (Amme, 2020), which requires the BLM to sell such materials at Fair Market Value (FMV).

This evaluation utilized the Percentage of Sales Price valuation method as outlined in the BLM’s “Mineral Materials Fair Market Value Evaluations” Handbook H‑3630‑1, as both the Comparable Sales and Income Approach methods were not feasible given the complex legal and regulatory status of the sylvinite, ongoing lithium operations, and the geologic and economic conditions of the site. Available geologic, economic, and market pricing data on salt and potash commodities were analyzed in early 2021 to calculate a baseline or “floor” FMV sales price for the waste sylvinite. Applying a base royalty rate of two percent (2%), with the ratio (0.358) of the sylvinite potassium content and standard grade muriate of potash (MOP), and using the six-month (September 2020 to February 2021) average gross sales price for potash ($294 per ton) on the open market, resulted in a FMV sales price calculation of $2.10 per ton of sylvinite.