BCI is poised for take-off with $740m for salt & potash project locked in

The game is truly afoot for BCI’s giant Mardie Salt & Potash Project in WA with conditional approvals secured for the $740m worth of project finance debt it was seeking.

This is a strong show of confidence for the project and comes as potash prices are forecast to keep climbing thanks to high demand.

BCI Minerals’ (ASX:BCI) project finance package consists of a $490m, 15-year facility from the North Australian Infrastructure Facility (NAIF), a $110m, 10-year facility from Export Finance Australia (EFA), and $140m in credit approvals from two leading commercial banks.

This package and about $460m in equity from a combination of existing BCI cash, ongoing Iron Valley royalty earnings, potential corporate debt and new equity will meet the $1.2 billion required to develop the project to a production capacity of 5.35 million tonnes per annum of salt and 140,000tpa of sulphate of potash.

Additionally, the approvals from the commercial banks include a further $170m of support facilities that do not contribute to the capex cost.

“Securing this landmark $740M project finance debt package represents a key milestone for the Mardie Salt & Potash Project and will underpin the pending consideration of the BCI Board to progress Mardie to a final investment decision,” managing director Alwyn Vorster.

“The participation of government funders such as NAIF and EFA, together with the confidence demonstrated by the lead commercial banks in the technical, economic and green credentials of the project is a strong validation of Mardie’s potential.

“BCI is now well positioned to achieve FID, raise the required new equity and subject to final approvals, commence main construction.”

Project finance package

The facility from NAIF was endorsed by Federal Minister for Northern Australia David Littleproud and represents a $40m increase to the $450m loan that was previously approved in December 2020.

This increase recognises the increased size of the project delivered under the company’s optimised feasibility study.

BCI noted that the NAIF and EFA financing represents an acknowledgement of the long-term benefits that Mardie will bring to the Pilbara region over its 60+ year life such as an estimated $8bn in corporate taxes, $800m in state royalties, $200m of native title payments, multi-user export infrastructure, local jobs and contracts and indigenous engagement.

The credit approvals from the two Australian and international commercial banks for the green commercial facilities include a $140m, 7.5 year construction facility, a $120m cost overrun facility and a $50m bank guarantee facility for any performance bonds required under construction or operating contracts.

All facilities are conditional on formal documentation, securing required tenure and approvals, equity funding, offtake arrangements, and other customary conditions precedent are associated with the loans.

The company intends to commit the funds over a five-year period to complete construction of project assets, start operations and progress ramp-up of production and sales.

Its equity contributions will be spent first, followed by the NAIF facility drawn to 50% and thereafter, the bank facility, EFA facility and remaining balance of the NAIF facility will be drawn on a pro-rata basis.

Mardie Salt & Potash project

Mardie is a proposed multi-generational project that could generate annual earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $260m over an initial 60-year mine life from the production of salt and potash.

Operating costs are estimated to be about $21.50/t of salt and $337/t of potash versus a 60-year average price of US$40/t for salt and US$578/t for potash.

The project location is considered to be ideal for establishing a large-scale solar evaporation operation with optimum climate conditions, large expanses of impermeable mudflats suitable for evaporation ponds, minimal environmental and heritage sensitivities, and a coastal location for low cost shipping to Asian markets.

Highlighting this is the presence of five existing solar evaporation salt projects that have been operating in the region for up to 50 years, though Mardie’s differentiating factor is its production of SOP as a by-product.

This article was developed in collaboration with BCI Minerals, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.