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Australian Potash lands take-or-pay contract for Lake Wells

Australian Potash has secured its first “take-or-pay” term sheet for the supply of 20,000 tonnes of “K-Brite” premium Sulphate of Potash fertilizer product per annum from its Lake Wells project to massive Sydney-based chemicals and ingredients distributor, Redox, who boasts sales of over A$700 million per annum.  The binding term sheet runs for ten years and gives Redox exclusive distribution rights through Australia and New Zealand.

The binding 10-year term sheet includes a pricing model based on a ‘net realised price’ that management said incentivises Redox to maximise the sale price in the market.  Redox’s exclusive arrangement covers distribution and sales within Australia and New Zealand and is the subject of a long-form agreement, according to Australian Potash.

The binding term sheet is the first step in the company’s plans to have a large portion of its targeted 150,000 tonne per annum output from Lake Wells under offtake.  The company said it was advancing discussions with other offtake partners for fertilizer from the project that is located around 500kms northeast of Kalgoorlie in Western Australia.

Redox is a Sydney-based chemicals and ingredients distributor that has built itself into one of the world’s leading chemical and raw materials suppliers to a vast array of industries, including the mining, oil and gas, construction, food and beverage, agricultural, water treatment, surface coatings and lubricants industries. 

The initial 10-year take-or-pay offtake agreement with such a large counter-party will no doubt assist Australian Potash to secure finance for Lake Wells that already has a DFS on the street.  The DFS envisages a minimum 30-year mine life producing 150,000 tonnes of SOP per year and it shows a pre-tax NPV of A$665m with an IRR of 25% and capex of A$208m.

Australian Potash Managing Director and CEO, Matthew Shackleton said: “We are pleased to announce the first binding term sheet for offtake supply, covering sales and distribution rights to K-BriteTM in Australia and New Zealand.  Our new partnership with long-established Australian company Redox, who from its Sydney base has built broad trade relationships and an extensive global distribution network, delivers APC’s first step in the larger offtake program. Ultimately APC will have a large proportion of the planned 150,000 tpa output from the LSOP under offtake agreements…”

This is a major step forward for Australian Potash as it closes in on the start-up of its premium LSOP project at Lake Wells in WA’s Eastern Goldfields.

The “take or pay” nature of the contract is exquisite and effectively means that it can be taken to the bank.

 

Is your ASX listed company doing something interesting ? Contact : matt.birney@businessnews.com.au

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