13/10/2021 - 10:00

Kalium seeks $50m amid debt restructure

13/10/2021 - 10:00

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Potash player Kalium Lakes has deferred its debt repayments as part of a financial restructure that includes the company launching a heavily discounted share placement.

Kalium is planning to increase production at its Beyondie sulphate of potash (SOP) project in the Pilbara. Photo: Kalium Lakes

Potash player Kalium Lakes has deferred its debt repayments as part of a financial restructure that includes the company launching a heavily discounted share placement.

Kalium, which became Australia’s first sulphate of producer (SOP) last week, said it had entered into agreements with two senior lenders including the state government to restructure the company's existing debt arrangements.

That's subject to Kalium raising at least $47.1 million before January 3.

Kalium, which is one of a handful of SOP companies in Western Australia, launched a $50 million share placement this morning, having said it would use the proceeds to ramp up production at its Beyondie operation, from 90,000 tonnes per annum to 120,000tpa.

Offtake partner K+S Group has committed to all of the new production target on a take or pay basis, Kalium said, and will increase payment for the first three years of its offtake arrangement to reduce working capital requirements.

The expansion is estimated to cost $45.3 million.

Kalium chief executive Rudolph van Niekerk said it was well-timed, noting SOP prices were rising and the impacts of COVID-19 were normalising.

“The expansion further strengthens the company on a number of fronts, including the ability to take advantage of economies of scale, provision of working capital facilities, more robust earnings and operating leverage, and improves the company’s balance sheet,” he said.

“With the additional production to [120,000tpa], Beyondie remains a long-life, low-cost operation with the potential to further expand production.”

Kalium expects to complete first SOP sales before the end of this year.

The company had faced a number of setbacks in developing its project, including an overrun in capital costs from $216 million to $248 million, which Kalium said was due to design changes on the processing plant and product storage treatment facilities.

The overall capital cost for Beyondie, including commissioning of the project, is $280 million.

Kalium's debt restructure, announced this morning, includes a deferral of all senior principal repayments for the first two years of production at Beyondie and a two-year extension to the maturity of senior loans owed by the company’s subsidiary, Kalium Lakes Potash Pty Ltd.

The move also involves replacing a $15 million loan from Westpac with a new $20 million facility from Kalium’s senior lenders, being Frankfurt-based KfW IPEX-Bank and the state government.

Kalium also said its royalty holders, which it labelled “related parties” of the company, have agreed to lower and defer their receipts over certain project tenements until Kalium repays its senior lenders (due March 2024).

The existing holders will be granted with another royalty in consideration.

Meanwhile, Kalium will issue 278 million shares through the placement at 18 cents each, which is about an 18 per cent discount to its last closing price of 22 cents.

Macquarie Capital and Morgans Financial are acting as joint lead managers and bookrunners to the raising, while Thomson Geer is acting as legal counsel to Kalium.

The company requested a trading halt yesterday, which is expected to lift tomorrow.

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