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Australian Potash ‘green’ Lake Way K-Brite product will be at premium end of global sulphate of potash market

Published: 15:33 20 Apr 2021 AEST

Australian Potash Ltd - Australian Potash ‘green’ Lake Way K-Brite product will be at premium end of global sulphate of potash market
APC is set to produce organically certified, environmentally sustainable green Sulphate of Potash.

Australian Potash Ltd (ASX:APC) has completed a front-end engineering design (FEED) study for Lake Way Sulphate of Potash (LSOP) Project that positions the K-Brite product at the premium end of the global SOP market.

SOP is a premium potassium fertiliser required for healthy plant growth, plant metabolism, optimisation of crop yields and quality of produce.

It is a necessary fertiliser for high-value, chloride-sensitive crops such as avocados, cocoa, coffee beans, grapes, berries and tree nuts, and helps transform arid and acidic soils.

Through optimised sustainable SOP development at LSOP, APC will produce 170,000 tonnes per annum of premium-priced K-Brite SOP products for distribution across the world’s most lucrative markets.

Produced through sustainable means

Australian Potash managing director and CEO Matt Shackleton pointed to the Lake Wells’ project’s significant environmental upside compared with competitors as a key reason for investors to be excited for the company’s future.

“The LSOP has always been somewhat unique across the peer space for being the only project to be developed with 100% bore-field abstraction of brine, with no re-charge or rainfall factors included in the largest Australian JORC-compliant measured SOP resource of 18.1 million tonnes.

“And the mine plan uses a mere 24% of this resource over the projected 30-year mine life,” he said.

“We are immensely proud to be developing an operation using an industry high 44% renewable energy penetration rate, and we will produce Australia’s lowest carbon footprint SOP and will generate approximately one-third of the emissions attributable to a comparable sized Mannheim SOP process.

“As well as being certified for use in organic agriculture in many countries into which it will be distributed, the LSOP has received Green Loan verification, so K-Brite SOP can rightly be regarded as a truly green fertiliser.”

FEED study results

Shackleton’s comments are backed up by economic results from the FEED study.

The LSOP has a net present value of $614 million at an internal rate of return of 21%, which is estimated to deliver annual EBITDA to the company of $124 million.

Pre-production costs are expected to hit $292 million, including granulation and bragging circuits, with the operating cost set at US$251 per tonne.

Annual production is estimated at 170,000 tonnes SOP per year, with an estimated mine life of 30 years.

The company already has in place five binding take-or-pay offtake agreements covering 90% of optimised forecast output executed with Tier 1 global fertiliser distribution partners, providing downside price protection and uncapped upside premium.

Australian Potash has an approved $140 million, 17-year loan facility from the Northern Australian Infrastructure Facility, conditional approval for a $45 million, 10-year loan facility from Export Finance Australia, and several commercial banks undergoing due diligence on the project.

LSOP is positioned as the lowest CO2 emitting SOP project development in Australia, enhancing global decarbonising of the fertiliser supply chain with APC’s K-Brite SOP set to replace the traditional, energy-intensive Mannheim SOP process currently used in key markets.

As reported by Proactive, K-Brite products have been reviewed by European organic certification agency ECOCERT and classified as suitable for use in international organic farming in compliance with European regulations.

Next step: final investment decision

Shackleton told investors the board would now focus on a final investment decision.

“We have significantly de-risked the construction of the LSOP with more than 75% by value of project contracts being arranged on a lump sum EPC basis,” he said.

“These arrangements provide our stakeholders with protection against time and cost overruns, and in operations, guarantees for performance.

“In addition, approximately 20% of all construction contracts will be awarded to Aboriginal businesses or joint ventures that are majority controlled by Aboriginal corporations.

“We now look forward to progressing to a final investment decision to develop the Lake Wells SOP Project.”

- Daniel Paproth

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