Aus Potash cuts Lake Wells capex by $120m

Australian Potash has slashed the capex for the development of its Lake Wells project from $338 million to $208 million, after it removed the second stage of the project amid an increasingly competitive sulphate of potash (SOP) market.

The Lake Wells definitive feasibility study outlined an anticipated annual production rate of 150,000 tonnes per annum of SOP, and annual pre-tax free cash flows of $100 million.

A scoping study undertaken in March 2017 for Lake Wells highlighted expected pre-tax free cash flows of $118 million.

Additionally, the scoping study estimated a $175 million capital expenditure for a stage one production rate of 150,000tpa of SOP and a $163 million capex for a stage two production rate of 300,000tpa of SOP.

Anticipated operating costs have risen since the scoping study from $343 per tonne to $388/t.

However, Australian Potash said it operating costs would remain within the lowest quartile of producers.  

The life-of-mine has increased from 20 years to 30 years, compared with the scoping study.

Lake Wells is located near Laverton in the north-east part of the Yilgarn Craton.

Chief financial officer Scott Nicholas told Business News a final investment decision on the project was expected by the end of the year.

“First production will be 24 months from FID, and FID will be subject to usual hurdles such as front end engineering design, offtake, committed project funding (amongst other factors) but is likely to take place in the 2020 calendar year,” Mr Nicholas said.

First production was previously slated for the second half of 2021, but will now be from at least 2022.

Shares in Australian Potash were up 4.6 per cent to 12 cents each at 3.55pm AEST.

Managing director Matt Shackleton said the project has extremely competitive capital intensity, forecast first quartile operating and exceptional returns.

“The completion of the DFS enhances Australian Potash’s ability to finalise binding off-take agreements, optimise and secure the finance debt package, finalise the approvals process and commence FEED activities," he said.

Australian Potash is still likely to be the second SOP producer in Australia, after Kalium Lakes aims to get its fully funded Beyondie project into commercial production next year.

Beyondie is located 160 kilometres south-east of Newman.

The scaling down of the Lake Wells project comes as Western Australia has become increasingly crowded with SOP hopefuls in recent years.

Agrimin, Reward Minerals, Salt Lake Potash, and BCI Minerals are all vying to become producers within the next four years.

Potash-focused Trigg Mining is also scheduled to IPO this year.