28/08/2019 - 12:34

Australian Potash DFS highlights $100m annual cashflow

28/08/2019 - 12:34


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Australian Potash’s Lake Wells SOP project near Laverton, WA, could churn out annual pre-tax free cash flows of $100 million via the production of 150,000 tonnes of SOP per year according to its much-anticipated definitive feasibility study. Capex for the project has been estimated at $208 million including a $20 million contingency, while pre-tax net present value was estimated at $665 million.

Australian Potash DFS highlights $100m annual cashflow

Australian Potash’s Lake Wells sulphate of potash, or “SOP”, project near Laverton, WA, could churn out annual pre-tax free cash flows of $100 million through the production of 150,000 tonnes of SOP per year according to its much-anticipated definitive feasibility study.

The detailed study also estimated capital costs at a palatable $208 million that include a $20 million contingency, with a pre-tax net present value at $665 million and internal rate of return at 25%.

Additionally, the life of mine cash costs are estimated at USD$262 per tonne, which the company said places Lake Wells in the lowest quartile of the SOP fertiliser cost curve.

These estimates were calculated using an average life of mine SOP price of USD$614 per tonne.

Production could begin within 24 months of the company reaching a final investment decision on the project while pre-tax payback is expected within four years.

The company also defined its maiden ore reserve of 3.6 million tonnes of SOP for Lake Wells this week.

This initial reserve will feed a 30-year life of mine production of 4.5 million tonnes of SOP with the remaining output to be sourced from the high-certainty measured resource of 18.1 million tonnes of SOP.

Managing Director Matt Shackleton said: “Our premium high-grade sulphate of potash project will be a hallmark operation in commencing a new export industry for the Eastern Goldfields region of Western Australia. We also plan to reserve a significant portion of output for the Australian market.”

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

Lake Wells will be developed using a bore-field network to abstract the potassium-rich, sulphate bearing brine contained within a section of the estimated 125km palaeochannel at the project.

Management said the use of a bore-field network is expected to mitigate the reduction in grade intrinsic in trench abstraction systems.

Brine will then be pumped into on-playa, unlined pre-concentration ponds that will be constructed on the lake to take advantage of the natural clay layer and topography for initial evaporation before the resulting supersaturated brine is transferred to lined salt harvesting ponds.

Potassium and sulphate bearing salts will crystallise in the harvest ponds and be collected for processing to produce a purified SOP product.

The company’s pilot processing work has already proved that a high-grade SOP with a purity of 98% can be produced from the Lake Wells brines.

While multiple options are available for the delivery of SOP to local and overseas markets, the study has been modelled on the assumption of a 100% road freight solution to Geraldton port.

SOP has historically traded at a premium over the more commonly used muriate of potash fertiliser due to its ability to be used on higher-value chloride intolerant crops and its sulphur content, which is an essential nutrient for most crops.

Additionally, SOP has a far lower natural salt content compared to other potassium fertilisers, making it preferable for saline environments and depleted soils.

This feature could make SOP especially valuable given that the Department of Primary Industries and Regional Development has estimated that more than 1 million hectares of agricultural land in the southwest of Western Australia is severely affected by natural salt contamination, which reduces plant growth and water quality.


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