Compass Minerals, Overland Park, Kan., announced on Sept. 14 that Koch Minerals & Trading LLC (KM&T) has agreed to make a $252 million investment, through the purchase of common stock, to support the phase-one development of Compass’s previously announced 2.4 million mt lithium carbonate equivalent (LCE) resource on the Great Sale Lake in Utah.
“We are pleased to welcome KM&T as our investment partner and look forward to leveraging their deep expertise and proven track record of building value,” said Kevin S. Crutchfield, Compass President and CEO. “Securing funding to aggressively pursue phase one of our lithium growth opportunity has been an important focus for our management team. This strategic investment will help drive our lithium project forward, strengthen our balance sheet, and enhance execution capabilities across our entire platform.”
Compass said approximately $200 million of the proceeds from the investment are expected to be used to advance the first phase of the company’s sustainable lithium development project, and the remaining $52 million will be used to reduce debt.
Compass said the $200 million investment represents approximately 75% of the total phase-one funding needs, including the full funding required through calendar year 2024 toward the construction of a commercial scale, direct lithium extraction (DLE) and lithium conversion plant at the company’s Ogden, Utah, solar evaporation facility.
Under terms of the agreement, KM&T – which is a subsidiary of Wichita-based Koch Industries – has agreed to purchase 6,830,700 shares of Compass common stock at a price of $36.87 per share. The issuance price represents a 6.2% discount to the closing price and an 8.0% discount to the five-day volume weighted average price as of Sept. 13, 2022.
After the transaction closes, KM&T will own approximately 17% of Compass’ outstanding shares of common stock and will have the ability to appoint two additional members to the Compass board of directors. As part of the agreement, the companies will also explore value creation opportunities across Compass’ broader operational platform by leveraging the capabilities of Koch’s operating subsidiaries in the areas of supply and procurement of fuel and raw materials, freight and logistics synergies, and project engineering and development support.
“KM&T seeks partners like Compass Minerals to apply its bulk commodity capabilities to create greater value for customers, communities, and shareholders,” said Jon Chisholm, KM&T Vice President. “KM&T will also be working closely with Compass Minerals and other Koch companies to unlock a significant lithium resource at Compass Minerals’ Great Salt Lake facility and become one of the first major US-based lithium producers.”
Compass estimates phase-one development capital of $262 million, and reported on Sept. 14 that phase-one is expected to yield approximately $626-$985 million in after-tax net present value (NPV) and an after-tax internal rate of return (IRR) of 28-36%. Compass on Sept. 14 also announced the selection of EnergySource Minerals, San Diego, Calif., as the project’s direct lithium extraction (DLE) technology provider.