PROSPECTIVE WA fertiliser company Australian Potash Ltd expects to raise about $3 million this week from an over-subscribed new share placement.
With settlement accepted up to close of business on Friday, Australian Potash – APC on the Australian Securities Exchange (ASX) – expects to use funds generated by the placement to advance its Lake Wells Sulphate of Potash (SoP) fertiliser project located about 250 kilometres north east of Laverton.
APC is looking to produce a premium granular SoP fertiliser at Lake Wells from brine pumped from beneath the salt crust into solar evaporation ponds, then transport it by road train to Leonora and rail it from there to Esperance port for export, beginning 2020.
As recently reported by Fairfax Agricultural Publishing, APC hopes to take advantage of abundant spare freight capacity on the Esperance rail line and bulk storage and ship loading capacity at the port following a forecast shutdown at the end of next month of three iron ore mines at Koolyanobbing after 24 years.
American miner Cleveland-Cliffs railed 11.2 million tonnes of iron ore from Koolyanobbing to Esperance and exported it through the port last financial year.
It comprising 72 per cent of the port’s total combined import and export trade of 15.5mt, according to Southern Ports’ annual report.
APC is proposing to produce 150,000 tonnes of SoP fertiliser per annum in the first five years of an estimated 20-year life of its project, then ramping production up to 300,000tpa, mostly for export.
APC told the ASX last week it had placed about 43,200,000 fully-paid ordinary new shares at an issue price of seven cents each with “sophisticated and professional investors”.
An attaching options package – exercisable at 12c with an expiry date three years from issue – offered on a one option for every two new placement shares purchased, will need approval of shareholders at a company meeting next month or in July before it can proceed.
Shareholders will also be asked to approve the issue of 300,000 new shares under the placement to APC executive chairman Matt Shackleton.
Legendary Perth-based prospector and mining and start-up company investment specialist Mark Creasy, through his private investment vehicle Yandal Investments, is APC’s major shareholder, owning 11pc of the company.
APC said it intended to use funds raised by the share placement to produce the first SoP fertiliser trade samples from its Lake Wells pilot evaporation pond program during either the current quarter or the third quarter this year.
It then hopes to use the samples to leverage existing memorandums of understanding with China’s largest agricultural company SinoAgri and provincial State-owned enterprise Hubei-Agri into formal off-take contracts for up to 200,000tpa.
As well, the new funds will be used to install more test production bores on Lake Wells before the end of the year, taking the number to seven, or 20pc of the proposed stage one potash brine abstraction network.
Some of the funds will help complete a definitive feasibility study for the project, also before the end of the year and some will be diverted to its Yamarna gold project, 200 kilometres east of Laverton for an exploratory drilling program, APC told the ASX.
Mr Shackleton said the recent appointment of experienced fertiliser industry executive Jay Hussey as APC’s chief commercial officer would “add strength” to the company’s plans.
He said Mr Hussey had served as vice-president of China’s biggest non-State owned SoP producer, Migao Corporation, for 10 years, both in Toronto and Beijing.
Mr Hussey has extensive experience in the North American fertiliser industry, including project financing.
“APC has spent considerable time developing its potash industry networks over the past three years,” Mr Shackleton said.
“Necessarily this is a global effort and it is immensely gratifying that an executive of Jay’s calibre has joined the company.
“The timing of Jay’s appointment is perfect for APC as we are planning to return to China presently to continue our off-take discussions with our Chinese partners.”
As previously reported, APC believes it can produce high-value SoP fertiliser at Lake Wells for an operational cost of A$368/US$283 a tonne in the first five years and A$343/t over the life of mine.
It is aiming to produce a premium granular product with better than 52pc potassium oxide content.
Equivalent premium SoP sells for up to US$585/t on international markets.
In Australia SoP sells for about $950 a tonne bulk, but can sell for $5.28 a kilogram or more as domestic vegetable garden and fruit tree fertiliser.
Australia imports about 40,000t of SoP annually but local production of the fertiliser, which has no chloride making it suitable for use on salt-affected farm lands, could see local usage jump to about 70,000tpa.
China is both the biggest producer and user of SoP fertiliser, but only some of its supplies come from the relatively benign conversion of solar evaporated salts.
The rest is produced by chemical reaction creating a hydrochloric acid by-product.
But this production method is being stopped by China’s tightening environmental regulations.
APC expects to have State and Federal environmental approvals for its Lake Wells project later this year.
It is in a head-to-head race with Kalium Lakes Ltd to be first to produce SoP fertiliser from WA salt lake brine, with the winner expected to corner most of the domestic SoP market and potential export markets.
They are among five Perth-based companies at various stages of developing SoP projects at remote salt lakes scattered across the Little Sandy, Great Sandy and Gibson deserts and the eastern and northern Goldfields regions.
Another company is looking at exploiting salt lakes in South Australia to produce SoP.
