Australian Potash has supply deals to cover all of its SOP output
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Australian Potash (ASX:APC) now has 100 per cent of sulphate of potash (SOP) production from its Lake Wells project in WA under off-take agreements with customers following its latest supply deal.
The sulphate of potash producer has signed a supply deal for 20,000 tonnes per year of its premium K-Brite product from Lake Wells with its off-take partner Helm Ag.
“APC now has 100 per cent of its DFS output under offtake,” managing director and chief executive, Matt Shackleton, said.
The deal with Helm is the fifth supply deal for Australian Potash whose Lake Wells project is at the defined feasibility study (DFS) phase, and it is awaiting environmental approvals.
“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,” he said.
A final investment decision for the Lake Wells project is expected by March 2021.
Australian Potash has to date signed four off-take agreements for its Lake Wells project that is located 500km northeast of Kalgoorlie in WA’s Eastern Goldfields region.
They include distribution deals with Helm for 30,000 tonnes per year through Europe; 50,000 tonnes per annum for China; 30,000 tonnes per year for south Asia with Mitsui; and 20,000 tonnes per annum for Australia and New Zealand with Redox.
The five off-take agreements add up to 150,000 tonnes per year, the same volume as the Lake Well’s production capacity.
The latest off-take deal with Helm is for an initial period of 10 years and is on an exclusive basis for the US market.
SOP economics are driven by demand for high quality horticultural crops which are grown in large volumes for the North American market, said Shackleton.
SOP is a premium form of plant fertiliser in a 7 million-tonne market worth $4.8 billion.
A front-end engineering design study is underway for the Lake Wells project which has a planned 30-year mine life for 150,000 tonnes per year of premium-grade SOP.
The project has a pre-tax net present value of $665m and a capital cost of $208m.
The Lake Wells SOP plant is due to begin production in 2023 following its construction in 2022.
Helm is a Germany-based chemicals marketing company that has offices in 30 countries.
Helm has continued to pursue its strategy of expanding its value in brand across the world’s major fertiliser markets, including the under-supplied and lucrative North American market.
Pricing for the SOP product is on a net realised price basis which incentivises Helm to achieve the highest sales price in the US market covered by the sales agreement.
Australian Potash in early November completed an oversubscribed $7m share placement to institutional and private investors.
K-Brite is a registered trademark brand of Australian Potash, and represents premium SOP produced at its Lake Wells project.
Several other ASX companies are involved in producing sulphate of potash including Danakali (ASX:DNK), Kalium Lakes (ASX:KLL), Salt Lake Potash (ASX:SO4), and BCI Minerals (ASX:BCI).