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Australian Potash secures fifth SOP offtake and reaches 100% of Lake Wells DFS output

Published: 10:39 23 Nov 2020 AEDT

Australian Potash Ltd - Australian Potash secures fifth SOP offtake and reaches 100% of Lake Wells DFS output
The projected annual output of 150,000 tonnes has been assigned under offtake deals.

Australian Potash Ltd (ASX:APC) has signed a fifth offtake agreement which takes total offtake secured from the Lake Wells Sulphate of Potash Project (LSOP) in Western Australia to 100% of the 150,000 tonnes annual output outlined in the definitive feasibility study (DFS).

The agreement with Tier-1 partner HELM AG is for the annual supply of 20,000 tonnes of premium K-BriteTM sulphate of potash for exclusive distribution through the United States of America.

A binding 10-year take-or-pay term sheet has been signed with pricing on a Net Realised Price basis incentivising HELM to achieve the highest sales price in market jurisdictions covered by the agreement.

“Significant milestone”

Managing director and CEO Matt Shackleton said: “APC now has 100% of its DFS output under offtake. This is a significant milestone for the company and bears testament to the open and cooperative relationship we have developed with our major offtake partner, HELM AG.

“HELM continues to pursue their clear strategic direction of expanding their value in brand across the world’s major fertiliser markets, and importantly this includes the lucrative and under-supplied North American continental market.

“SOP economics are driven by demand for high-quality horticultural crops, which are grown in large volumes in this market.”

The parties’ obligations under the agreement are subject to and conditional on long-form documentation being executed by November 30, 2020, and APC reaching a final investment decision to develop the LSOP by March 31, 2021.

Offtake arrangements

As well as HELM, total offtake under binding agreements includes Redox, Migao and Mitsui.

HELM, which is based in Hamburg, Germany, is a family-owned company established in 1900.

It is one of the world’s largest chemicals marketing companies and secures access to the world’s key markets through its specific regional knowledge as well as its subsidiaries, sales offices and participations in over 30 countries.

As a multifunctional marketing organisation, HELM is active in the chemicals industry, in the crop protection industry, in pharmaceuticals and in the fertiliser industry.

“In approvals pathway”

Shackleton said: “With the recent oversubscribed placement to institutional and private investors, the achievement of this 100% DFS offtake position, where we are in the approvals pathway with the EPA report being considered by the Minister’s department, and the syndicated debt facility negotiations drawing to a close, APC is positioned well for significant progress through Q1 2021.

“We look forward to providing updates presently on the development of the Lake Wells SOP project.”

K-BriteTM is a registered trademark brand of Australian Potash representing the premium sulphate of potash to be produced from the flagship LSOP, about 500 kilometres northeast of Kalgoorlie.

Following the release of the DFS in August 2019, APC is focused on the Front-end Engineering Design (FEED) Study, finalising offtake discussions and securing financing to develop the LSOP.

Robust DFS

The DFS, which was underpinned by extensive and rigorous test-work, data and modelling, confirmed that the LSOP will be a long life, low capital and high margin SOP producer.

Key outcomes include:

  • 30-year mine life producing 150,000 tonnes per annum of premium grade SOP utilising approximately 21% of the total measured resource estimate;
  • Long mine life underpinned by 3.6 million tonnes reserve and 18.1 million tonnes measured resource estimate;
  • Pre-tax NPV8 of A$665 million and an IRR of 25%;
  • Development capex of A$208 million with sector-leading capital intensity of A$1,387/tonne; and
  • First quartile industry opex of US$262/tonne providing high cash operating margins.

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