Australian Potash pens second take-or-pay fertilizer off-take
Australian Potash has remarkably penned its second offtake deal during turbulent times, securing another “take-or-pay” partner for nearly half of all its “K-Brite” premium Sulphate of Potash fertilizer to be produced annually from its WA Lake Wells project. The exceptional and binding ten-year term sheet has been agreed with Singaporean tier one global fertilizer player, Migao International, who produced over one million tonnes of specialty fertiliser during 2019 from seven facilities across China.
Australian Potash’s Lake Wells fertilizer project is located about 500 kilometres northeast of Kalgoorlie, in WAs Eastern Goldfields.
The new agreement offers Miago the exclusive rights to distribute and sell K-Brite throughout China with the “net realised price” to be based on a market price minus traditional ‘net back’ costs including a marketing fee, flow through shipping, storage and handling costs, which will incentivise Migao to maximise the sale price in the market.
Australian Potash’s second take-or-pay term sheet will see it supply at least 50,000 tonnes of K-Brite per annum to the privately owned Hong Kong-based specialty fertiliser manufacturer and distributor, Migao.
Australian Potash’s Lake Wells DFS boasts a minimum mine life of 30-years, over which the project is set to produce 150,000 tonnes of SOP per year.
The multi-generational mine is bolstered by a 3.6M tonne ore reserve and an 18.1M tonne resource. The financials from the DFS show a healthy pre-tax NPV of A$665M, with an IRR of 25% and CAPEX of A$208M.
In another forward move for Australian Potash, its latest offtake deal pushes it closer to the start-up of its premium SOP project.
Australian Potash Managing Director and CEO, Matthew Shackleton said: “From their position as one of China’s largest Mannheim SOP producers, Migao is ideally positioned to distribute the LSOP K-BriteTM into their long- term supply chain relationships in China.”
“Notwithstanding restrictions on movement due to the COVID pandemic, APC continues with its corporate activities, including progressing the offtake program. Our strategic intention remains to secure the majority of the LSOP output under offtake, with now 70,000 tonnes, or approximately 45% of the targeted output of 150,000 tpa, agreed to.”
Australian Potash now has some 70,000 tonnes per annum of product under binding off-take agreements providing a massive shot in the arm for the project when it comes to financing it.
Fertilizer “mining” is considered by some to be an agricultural play rather than a mining play but with a net present value of some $665m, Lake Wells is one “agricultural” project that would be the envy of most hard rock miners.
Is your ASX listed company doing something interesting ? Contact : email@example.com
Australian Potash (APC)
Closing price for the last 90 trading days
Powered by Morningstar ®