ASX-listed Australian Potash Ltd.’s (APC) Lake Wells solar sulfate of potash (SOP) project this week became the latest casualty amid growing negative investment sentiment in the developing Western Australia (WA) potash sector.
The junior SOP producer announced on Aug. 15 that it was surrendering the project’s mining leases after it had not been able to secure further funding. The news came just weeks after another aspiring WA SOP producer, ASX-listed Kalium Lakes Ltd., went into receivership. In addition, Salt Lake Potash earlier bit the dust in its rush to produce SOP, entering administration in October 2021.
APC said in its Aug. 15 ASX statement that it had ceased “an exhaustive funding process” for its Lake Wells SOP project (LSOP), some 500 km northeast of Kalgoorlie, in WA’s northeastern Goldfields, and had taken the decision to surrender the LSOP mining leases, which it said have a high holding cost.
The company put the Lake Wells SOP project on ice in June to preserve its inherent value as it weighed the next steps for the project (GM June 16, p. 29). APC previously reported that it was undertaking a strategic review of the LSOP, which included providing several parties with access to due diligence material to enable potential investments in the development.
In this week’s ASX filing, however, the company said the strategic review process had not resulted in a transaction that was considered suitable for the company or its shareholders. “As such, considering that this process has been adequately exhausted, the directors have made the difficult decision to cease this process,” APC said in the statement.
“There is no doubt that recent company failures in the developing WA potash industry have created a negative perception of solar SOP projects in WA,” the company said. “The directors and management of APC are confident that work done on the LSOP to date demonstrates it to be a high value, well-engineered project.”
The company was targeting a potential production of 150,000 mt/y of SOP at the LSOP (GM May 25, 2021) and had binding offtake agreements in place for 100% of the project’s output. The offtakers included Germany’s Helm AG (GM Nov. 25, 2020), Australia’s Redox Pty Ltd. (GM March 20, 2020), Migao International (Singapore) Pte. Ltd. (GM April 17, 2020), and Mitsui & Co. (GM July 24, p. 28).
By the time the strategic process started more than 12 months ago, APC had completed detailed design and engineering and earlier had secured a A$140 million (approximately $90 million at current exchange rates) debt financing facility from the Northern Australia Infrastructure Facility (NAIF), subject to raising appropriate equity.
According to APC, the SOP project was effectively ready to go into construction once the equity was secured. APC retains its interest in the exploration license tenure it holds for Lake Wells.
The company’s directors are “extremely disappointed that the demise of local high profile potash projects has largely contributed to the lack of investment support for the sector and the Lake Wells project,” said APC Chairperson Natalia Stretsova. She said the company remains committed to all opportunities to restart the LSOP, “but pragmatically will also pursue the Lake Wells Gold Project, Nexus REE and lithium project, and other opportunities.”
The company said its directors have received consideration of A$950,000 for the components of their Lake Wells camp accommodation units, wet and dry mess and water treatment equipment, and are holding discussions around the sale of bore-field inventory and other site assets. It said the consideration from the sale will be used to fund working capital and the company’s ongoing investigations and exploration on its other projects.
Restructuring firm McGrathNicol took control of Kalium Lakes on Aug. 4 after the aspiring SOP producer failed to find further financial support for its lower-than-expected Beyondie SOP project in WA, located some 160 km southeast of Newman.
Kalium Lakes reported in June that it would need additional long-term funding for the project due to a material increase in operational costs during the ramp-up to achieve targeted production of 90,000-100,000 mt/y of SOP (GM June 16, p. 29).Trading of its shares on the ASX were suspended in June as the troubled company sought “a clear pathway forward for shareholders, lenders, and other stakeholders.”
Like APC, Kalium has secured funding from NAIF to the tune of around A$83 million, as well as A$121.5 million in loans from the German export finance agency KFW IPEX Bank. A NAIF spokesperson cited in an Australian Financial Review report confirmed that Kalium had drawn down more than A$80 million of loans from the agency.
Kalium produced its first batch of SOP at Beyondie in October 2021, making it Australia’s first SOP producer (GM Oct. 8, 2021). Since then it had been producing SOP in small batches, reporting in June that it had achieved its best production to date, producing a combined total of some 2,079 mt of SOP in April and May. Despite last year’s high SOP prices, however, the company remained cash-flow negative.
The receivers said in an Aug. 4 ASX statement that they will continue on a business-as-usual basis at Kalium while an assessment is completed of the options for the sale and/or recapitalization of the company.
Another Australian SOP junior producer that had been jockeying for first-producer status, Salt Lake Potash Ltd., went into administration in October 2021 (GM Oct. 22, 2021). Salt Lake had been targeting production of up to 245,000 mt/y of SOP at its Lake Way potash project in WA.
Salt Lake was subsequently sold to Prague-based Sev.en Global Investments in October last year (GM Oct. 14, 2020) after Sev.en reached a deal with Salt Lake’s receivers and senior creditors on the purchase of its subsidiaries. At the time of the acquisition, Sev.en was targeting to start producing SOP at Lake Way in “around 12 months.” The company’s website could not be accessed this week for updates.
Another WA aspiring SOP producer, BCI Minerals Ltd., reported last summer that its Mardie salt and potash project on the Pilbara coast faced delays amid “significant” cost increases (GM July 15, 2022). The company is targeting production of about 5.35 million mt/y of high-purity salt and roughly 140,000 mt/y of SOP. BCI also at the time said the cost increases may result in asset sales to fund the Mardie project.
Nedlands-based Agrimin Ltd. is taking a slow and steady approach to its Mackay Potash Project in WA. The company was last heard to have secured three offtake agreements, including a binding offtake agreement with US-based Gavilon Fertilizer LLC for the supply of 50,000 mt/y of SOP (GM April. 8, 2022).
The three offtake deals are for a total of 315,000 mt/y of SOP, representing 70% of the Mackay Potash Project’s planned production capacity of 450,000 mt/y.
All of the SOP fertilizer currently used in Australia is imported.