Adelaide-based Leigh Creek Energy Ltd. (LCK) said it has inked a Heads of Agreement (HOA) with South Korea’s Daelim Ltd. for an offtake of a minimum of 500,000 mt of granular urea to be produced at its Leigh Creek Energy Project (LCEP) under development in South Australia for a minimum of five years.
Under the agreement, the parties will exclusively work through and finalize the detailed terms of the offtake agreement, LCK said in a Nov. 30 statement announcing the deal. The exclusivity period for the HOA expires in June 2022 if no agreement has been reached prior to that date.
Pricing under the offtake deal will be according to formula based pricing, i.e., index linked, LCK said.
The Australian company plans to establish a 1 million mt/y urea facility utilizing in-situ gasification (ISG) at LCEP, located some 550 kilometres north of Adelaide and overlaying the Leigh Creek coalfield (GM Jan. 22, p. 1).
LCK highlighted the agreement with Daelim is for all urea to be produced that is surplus to requirements for the domestic market. This provides the company greater opportunity to maximize revenue and the capability to develop its domestic distribution network, LCK said.
The company plans to announce early next year its marketing plan for total production from LCEP. It said in addition to the plan including the agreement with Daelim, the plan is also expected to include new low-cost urea distribution to the Australian market.
Daelim is the flagship company of the South Korean DL Group, another subsidiary of which (DL E&C Co., Ltd.) was awarded the engineering, procurement, construction, and commissioning (EPCC) contract for LCEP in late June (GM July 2, p. 31).
The contract with DL E&C Co. encompasses the bankable feasibility study, front end engineering design, final investment decision, and the EPCC. It also includes the sourcing of A$1.5 billion of finance (approximately US$1.07 billion at current exchange rates).
LCK and DL E&C Co. had inked a binding HOA for the feasibility study, front end engineering and design (FEED) stages, and EPCC in early May (GM May 7, p. 43).