As Australian Potash clears the last hurdles on the pathway to production at its Lake Wells sulphate of potash project, the company has inked a third binding offtake deal with Tier 1 Mitsui & Co for 30,000 tonnes per annum of its “K-Brite” premium fertiliser. The third deal now brings the company’s total committed offtake to a remarkable 100,000tpa of the project’s 150,000 tonnes of sulphate of potash, expected to be produced annually from the West Australian mine.
Mitsui is one of the largest trading and investment companies worldwide, and Australian Potash’s agreement provides it with exclusive sales and distribution rights throughout Asia - excluding China, which is already secured by a 50,000tpa offtake with Migao International.
Mitsui is listed on the Tokyo, Nagoya, Sapporo and Fukuoka stock exchanges and the titan pulled in a staggering 839 billion Japanese Yen in gross profit in the last year - about AUD$11 billion.
Australian Potash’s third off-take deal will see it supply at least 30,000 tonnes of K-Brite per annum to Mitsui under a five-year term, which comes with a three year extension option.
The Perth-based company will receive a price for its product is based on the market price minus traditional ‘net back’ costs including a marketing fee, flow through shipping, storage and handling costs.
This pricing platform incentivises Mitsui to maximise K-Brite’s sale price in the market.
Mitsui is a shipping and logistics expert and its presence in Asia looks to open a very lucrative network for Australian Potash.
Australian Potash’s Lake Wells fertiliser project is about 500km northeast of Kalgoorlie in WA’s Eastern Goldfields.
The Lake Wells definitive feasibility study estimates a minimum mine life of 30-years, bolstered by a 3.6 million tonne ore reserve and an 18.1m tonne resource. The financials from the study show a healthy pre-tax NPV of $665m, with an IRR of 25% against a CAPEX of $208m.
Australian Potash Managing Director and CEO, Matthew Shackleton said: “We are now working to finalise the last part of the offtake program, which we expect to update shareholders on shortly.”
“In addition to that, we continue to progress along the approvals pathway, with firm dates now agreed with the EPA, and the financing program.”
With an offtake book that is almost full, now it should not take long for the company to lock down a buyer for the rest of the product and it is currently in negotiations to do just that.
There is nothing quite like forward selling your product when it comes to locking down CAPEX financing for projects like this, and Australian Potash is looking more and more likely now to take this project all the way.
Is your ASX listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
