Australian Potash eyes Q1 for Lake Wells SOP investment call
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Australian Potash (ASX:APC) is progressing work to ensure that it is in position to make a final investment decision for its Lake Wells sulphate of potash (SOP) project in the first quarter of 2021.
The company is continuing its offtake program with positions already secured for 130,000 tonnes, or 86 per cent of its forecast SOP production while bids have been received for three of the five engineering, procurement, and construction packages that it has issued for tender.
Meanwhile, the Western Australian Environmental Protection Authority has made its report and recommendation to the state’s Minister for the Environment and project finance due diligence is underway with completion expected early in the fourth quarter.
Australian Potash has already secured minor and preliminary works approval with scheduled works to begin in the fourth quarter of 2020.
Lake Wells has an ore reserve of 3.6 million tonnes and a high confidence measured resource of 18.1Mt.
This is sufficient to underpin the project’s proposed 150,000 tonne per annum production rate over a 30-year mine life.
Pre-tax net present value (NPV) is estimated at $665m while internal rate of return (IRR) is expected to be 25 per cent.
NPV and IRR are measures of a project’s expected profitability.
SOP is a premium-grade fertiliser that provides both potassium and sulphur – key elements required for the healthy growth of plants – in a soluble form.
Importantly it contains no chloride, making it suitable for leafy, chloride-intolerant crops that are typically high-value (such as avocados), increases their yield and minimises the amount of water required.
It is also suitable for use in soils that have high salinity or where the irrigation water may have high chloride levels.
While about half of SOP is produced from the more common muriate of potash using the expensive and environmentally unfriendly Mannheim process, a number of ASX companies are keen to capitalise on the demand for ‘green’ SOP from primary sources where the fertiliser is extracted directly from ores.
Danakali (ASX:DNK) has already raised $250m of the $322m it requires for the Module 1 development at its flagship Colluli SOP development in Eritrea.
The project has a giant resource of 1.289 billion tonnes grading 11 per cent K2O, or about 260 million tonnes of sulphate of potash (SOP), enough to support production for more than 200 years.
Salt Lake Potash (ASX:SO4) has reached 60 per cent completion for its Lake Way project in Western Australia.
The company says the project is on schedule to deliver first SOP production in the March quarter of 2021.
Meanwhile, BCI Minerals (ASX:BCI) has raised about $48m through a successful institutional entitlement offer and retail entitlement offer.
Proceeds will be used to start early construction work and order long lead items for its Mardie salt and potash project in WA’s Pilbara region.
At Stockhead we tell it like it is. While Danakali is a Stockhead advertiser, it did not sponsor this article.