WA’s dwindling pool of contenders face wary investors and technical challenges in pursuit of a new industry.
IT has been almost two years since Business News took stock of the potash landscape in Western Australia, then represented by a budding cohort of seven ASX-listed companies.
Buttressed by plentiful resources, a mandate to diversify and a supply of federal funding to hand, the field seemed well set for WA to herald a new industry producing and exporting the fertiliser ingredient.
But the pathway to that goal has proven far from straightforward.
Since then, the two fastest movers in the cohort have been put into receivership, another pair have pivoted away from potash and those that remain face delayed timelines, ballooning project costs and increasingly wary investors as they seek to plan and build projects.
Salt Lake Potash and its Lake Way project were the first to fall in October 2021 while Kalium Lakes, Australia’s first sulphate of potash producer, found a similar fate in August this year after it was unable to fine-tune output from its flagship, Beyondie.
Another, Australian Potash, broke the news to the ASX just weeks later that it would be surrendering the mining leases for its Lake Wells flagship.
A strategic review failed to yield an investment partner, with its announcement concluding what the company said had been an exhaustive funding process, including opening a data room in February.
In a statement issued to the ASX, Australian Potash said there was “no doubt that recent company failures in the developing WA potash industry” had created a “negative perception” of solar SOP (sulphate of potash) projects in the state.
“Notwithstanding the nearly 10-year commitment to the LSOP [Lake Wells sulphate of potash project] by APC’s management team, the current investment sentiment has for obvious reasons turned away from solar SOP development,” chief executive Matt Shackleton said at the time.
In going over the state of WA’s potash industry in an interview with Business News, Mr Shackleton said investment cycles mixed with tough capital markets, high upfront costs as well as the state’s booming lithium industry had contributed to a perfect storm for potash.
“The thing about these potash projects is that they are multigenerational projects … our project would have gone for three or four generations of people,” Mr Shackleton said.
“But [there] are fairly high upfront costs.
“When they’re going, and they go, they’re great, they go forever, but you need lots of capital getting going and having a market where capital is constrained, because it’s all flowing towards the lithium guys … it’s really tough.
“We competed in a really crowded field for capital against a much stronger competitor.”
While ballooning project price tags are not unique to these projects, being the state’s first potash ‘cabs off the rank’ means construction is largely uncharted territory from an engineering and investor perspective.
Mr Shackleton maintained it was in Australia’s interest for potash projects to be developed.
“We should have a potash supply coming out of Australia,” he said.
“They create enormous amounts of wealth, create a lot of employment.
“And there aren’t many, in fact, that are effectively no solar evaporation, potassium sulfate operations, that we would compete with in the southern hemisphere.
“So, it would be a very good thing for us to do as a nation.”
Despite the challenges facing potash, Mr Shackleton was confident there was still opportunity at Lake Wells, when asked whether he would consider having another go at getting a project running.
“The resources aren’t going anywhere,” he said.
“The minerals are still there. And they’ll always be there … [until] somebody extracts them,” he said.
“It’s just a question of when the investment community forgets the pain that they’ve just been through and is prepared to stump up and get them going again.”
“Certainly, in the back of my mind is to never forget that the opportunity at Lake Wells is still there.
“If this investment cycle turns, and often it can turn quickly, … it could come around during my tenure … it most likely will come around for the next person running the show but it may well come around.
“For me, if it does, for sure we’ll pin the ears back and get back into it.”
Still in the game
Debbie Morrow landed what she said was her dream role at OZ Minerals earlier this year after nearly 25 years with Woodside Energy.
No sooner had she started, the company was snapped up by BHP, paving the way for a new role for her as chief executive of Agrimin, proponent of the Lake Mackay project, 600 kilometres west of Alice Springs.
The company’s largest shareholder is the Kerry Stokes-backed BCI Minerals, its chair is Richard Seville, whose previous role was leading South American lithium success story Orocobre.
Ms Morrow said the headwinds facing WA’s nascent potash industry were clear but she was also resolute in her evaluation of the demand profile for SOP and said that there were ‘true believers’ in its story, even among the cohort that had been burned.
“It’s countercyclical at the moment, which actually attracts some investors at the right time,” she said.
“I think people are sort of eyeing this industry off as sort of where lithium was a few years ago.”
“The first few flopped severely and then people were burnt and now look where the industry is.”
Agrimin had thrown its hat in the ring for the potential acquisition of Kalium Lakes’ Beyondie project from receivers McGrathNicol but has since pulled the pin on the proposed plan.
"Agrimin has given a notice of termination of the Share Sale Agreement to Kalium and the Receivers, thereby terminating the contract in accordance with its terms," its statement read.
"Disappointingly, the Company therefore will not be proceeding with the proposed acquisition of Kalium’s subsidiaries which control the Beyondie Potash Project."
Conditions tied to the deal included Agrimin completing a capital raising to fund the acquisition. Deeds of company arrangement also needed to be approved by creditors.
Agrimin’s plan was to have the plant, which was supplied by German firm Ebtech, back up and running in 2025.
Engineering design works for Agrimin’s flagship, Lake Mackay, continue.
Aspirant Trigg Minerals, formerly known as Trigg Mining, signalled a move recently to diversify away from the commodity.
Trigg had listed on the ASX in 2019 with plans to be producing sulphate of potash from its flagship Lake Throssell by 2024.
The group delivered a scoping study for the project in 2021 and had been getting to work on a pre-feasibility study in 2022, before earlier this year putting the brakes on and switching to research and development.
It came after what the group had identified a “key challenge” of its peers in establishing a reliable ramp-up or hitting “steady-state” potash production, made difficult by various elements typical of WA’s heat, dust and humidity.
Trigg tightened its belt financially but has ultimately been forced to look to other commodities.
Trigg non-executive chairman Mike Ralston told the market the company believed it was in the best interest of shareholders to have a more diversified portfolio but affirmed that Lake Throssell was still high on its priority list.
Its move on this front demonstrates the difficulty in being a junior in the space.
Identifying similar difficulties in the engineering phase of bringing a potash project into fruition, another WA hopeful, Reward Minerals, has set about pursuing a patent for new technologies it believes could support sustainable potash production.
Chief executive Lorry Hughes said Reward’s view was that one of the biggest challenges had been the use of flotation as a means of extracting sulphate of potash.
He said Reward had been developing two processing solutions that sought to avoid the flotation component of the process as well as the accompanying mechanical harvesting for salt, an exercise he said was expensive due to there being little demand for the type of salt in WA.
The company has applied for an international patent on the process and indicated that an engineering scoping study will be released to the market in the coming weeks.
“The next step for us is to be able to demonstrate in a pilot-scale scenario. We’re working on lining that up,” Mr Hughes told Business News.
The most advanced out of the remaining contenders, albeit salt focused, is BCI Minerals.
Construction kicked off at the Mardie project in March 2022 with a ceremonial ground-breaking by then premier Mark McGowan in what was painted a symbol of support for the nascent industry.
But it was less than six months into the build before cost escalations took hold and a sweeping review of the project’s budget, design and first shipment timelines was under way.
Mardie’s price tag now sits in the realm of up to $1.6 billion, some $700 million more than initially expected.
Responding to a request for general commentary from Business News, new chief executive David Boshoff said potash would be a valuable by-product for BCI, but that salt was its focus.
“We are constructing WA’s largest salt-producing operation, using established technology in a location which has shown itself to be viable over many decades of successful salt production and export,” he said.
“We’re taking the time to ensure we get our flowsheet and plant design right, based on designs which are working successfully overseas, and we don’t expect to encounter any of the problems experienced by sole product SOP projects in WA.
“We plan to announce more regarding SOP in 2024, but our focus at present is on completing the salt part of our project.”
WA billionaire Mr Stokes, through his private company Wroxby, owns a 39.5 per cent stake in BCI.
BCI has been one of the largest recipients – to the tune of $490 million – of debt funding from the federal government’s $7 billion Northern Australia Infrastructure Fund, a vehicle that also loaned $74 million to Kalium Lakes.
Asked by Business News about whether it would continue to direct funds towards the potash industry, a spokesperson said NAIF would continue to consider finance for all eligible projects that fit its mandate.
“Our team have acquired considerable knowledge of the potash industry which they will continue to employ throughout the entire investment proposal phase of the investment process,” the spokesperson said.
“All investment decisions are made by an independent board, which is supported by an experienced team of infrastructure financiers.
The spokesperson said any learnings from previous projects would be applied in its assessment of future projects.
“NAIF has a thorough due diligence phase which includes project, financial, and credit risk analyses, as well as technical, environmental and social risk analyses,” the spokesperson said.
Mines Minister Bill Johnston told Business News the state government believed WA still had an opportunity to build an industry but acknowledged the headwinds the sector had faced.
“Developing any resource is subject to prevailing market conditions, such as macroeconomic factors, geopolitical events and investor confidence,” he said.
“I hope potash project developers can manage their construction risks, and that the international market price supports the necessary investments.
“It is clear that there are technical challenges for the local industry but I am confident the skillset available in the West Australian resources sector can help overcome these challenges.”
He said the state government continued to engage with the local industry and referred to the potash royalty rebate scheme among other channels of support for developers but signalled the federal government would remain the industry’s key backer.
“While the state government may fund further research and provide grants to reduce investment risks in the local potash sector, the federal government will remain an important source of equity,” Mr Johnston said.