Kalium Lakes seeks $61m for potash project

Kalium Lakes has formally launched a heavily discounted share placement and rights issue to raise up to $61 million, with the funds to cover an overrun in capital costs at its Beyondie potash project in Western Australia.

Kalium said its Beyondie Sulphate of Potash (BSOP) project, located 160 kilometres south-east of Newman, was now expected to cost $248 million, up from an earlier estimate of $216 million.

The Balcatta-based company said the overrun in capital costs was driven by design changes on the processing plant and final product storage and treatment facility, among other factors.

Kalium said the project had also incurred other costs associated with delays and COVID-19.

The company will raise $19 million via the placement of 126.8 million shares, and is seeking a further $42 million under a five-for-seven rights issue, with the new shares priced at 15 cents each.

The offer represents a 69 per cent discount to the company’s closing price of 49 cents on February 21.

It's also well below the pricing of a $72 million capital raising completed by Kalium last July. Led by Macquarie Capital, that raising was pitched at 50 cents per share.

Kalium’s 20 per cent shareholder, London-listed Greenstone Resources, has committed approximately $12 million towards the capital raising and has agreed to sub-underwrite up to $2 million of any shortfall.

The Kalium board and senior management have also committed to take up around $5.8 million of the offer.

Managing director Brett Hazelden said the BSOP project was financially attractive, had a long life, low operating costs and high margins, despite the capital cost overrun.

“Commencing a new Australian industry and being a first mover in sulphate of potash has presented some development challenges resulting in a capital cost increase for the BSOP project,” he said.

“The overall project is now 40 per cent complete, with an offtake agreement in place, comprehensive suite of construction approvals, highly attractive debt funding tenor and interest rates, and in a commodity that currently requires Australia to import 100 per cent of its requirements.

“Importantly our revised capital budget has been verified by independent engineering specialists who have reviewed the project, and we are confident that the offer will fund us through to completion of construction of the BSOP project and through to first production.”

Mr Hazelden thanked company lenders, contractors and shareholders for their support in the capital raising.

Morgans Financial is acting as lead manager to the offer and Foster Stockbroking as co-manager.

Sternship Advisers is acting as corporate adviser and DLA Piper as legal adviser.