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Penrice Soda to form JV to sell imported soda ash; restructures capital

Last updated: 10:20 18 Jan 2013 AEDT, First published: 09:20 18 Jan 2013 AEDT

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Penrice Soda Holdings (ASX:PSH) will form a joint venture with SASS Victoria to import and market low cost soda ash in Australia, which would enable it close its existing soda ash production plant in Adelaide.

The start of the JV, likely by May 2013, is subject to satisfaction of conditions including due diligence and signing definitive transaction documents.

SASS is a subsidiary of Soda Ash Holding BV, a Dutch Holding company, that controls a number of soda ash distributors globally, making it the world's largest independent soda ash distributor per year.

Penrice proposes to transfer its soda ash sales to the JV, switching from supplying its customers with its own manufactured soda ash to the JV supplying those customers with imported soda ash sourced from American Natural Soda Ash Corporation, which is the global sales arm of three leading US soda ash producers.

This shift to supplying imported soda ash will considerably reduce its cost base and give it flexibility to respond to changes in the market place.

While soda ash production at its Osborne plant near Adelaide will cease, the plant will continue to operate as a sodium bicarbonate and quicklime manufacturing facility.

The JV will be owned by SASS as to 67% and Penrice as to 33% and the term of the JV will be valid for a minimum of 6 years.

SASS will provide a loan to Penrice of $8 million to fund the cost of transitioning existing Penrice operations along with the necessary modifications to Penrice's sodium bicarbonate plant.

The loan will be repayable over the term of the JV.

Penrice believes that following plant closure and formation of the JV in this fiscal year, forecast earnings in FY 2014 are likely to be materially improved, returning the soda ash business to profitability.


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