Australian Potash Ltd’s (ASX:APC) application for funding under the Northern Australia Infrastructure Facility (NAIF) for Lake Wells Sulphate of Potash Project (LSOP) in WA has advanced to the due diligence phase.
This follows the company completing the Strategic Assessment Phase of NAIF’s application and approval process for the LSOP.
The due diligence is initiated with the allocation of resources to conduct a detailed assessment of the company’s request for funding.
Managing director and CEO Matt Shackleton said: “The NAIF and APC have engaged on a very proactive basis to date on the LSOP funding application, and it is pleasing that the NAIF has committed to the formal due diligence process.
“APC’s Board looks forward to further updating shareholders on its progress on the various funding and offtake initiatives, and permitting status, for the LSOP in the near future.”
All other aspects of discussions between APC and NAIF are required to remain confidential at this time and there has been no commitment of funding or agreement of terms by the NAIF.
LSOP definitive feasibility study
In late August 2019, the company received an AACE Class 3 definitive feasibility study (+15%/-5%) on developing the LSOP into a 150,000 tonnes per annum (tpa) sulphate of potash operation.
This DFS was prepared by Lycopodium in conjunction with leading consultants including Novopro, AQ2, Knight Piésold, and MBS Environmental.
The LSOP will use a bore field to abstract brine, mitigating geotechnical challenges and a decline in grade and production over time evident in trenching systems.
APC said this provided “extremely competitive” capital intensity, forecast first quartile operating costs and “exceptional” financial returns.
The DFS showed compelling economics:
- Pre-tax NPV8 of A$665 million;
- Annual pre-tax free cash flows of A$100 million and LOM pre-tax free cash flows of A$3.1 billion;
- Pre-tax IRR of 25% on robust operational and capital efficiencies; and
- 150,000 tpa SOP production rate.
It also outlined a long-life project with lowest quartile production costs as well as sector-leading capex:
- 30-year mine life with LOM production of 4.5 million tonnes of premium high-grade SOP;
- LOM cash cost of US$262/tonne placing the LSOP in the first quartile of the SOP cost curve;
- Development CAPEX of A$208 million; and
- Competitive capital intensity of A$1,387/tonne SOP.
The DFS and resulting outcomes are based on a 3.6 million tonnes probable reserve and draw on a measured resource of 18.1 million tonnes of drainable SOP.