American Pacific Borates (ASX: ABR) is revising the mine plan at its flagship Fort Cady borate project in the US to double its production of sulphate of potash (SOP).
The company, which wholly owns the southern Californian project, today announced a phase three SOP production target of 240,000 tonnes per annum – twice the mine’s current planned output of 120,000tpa.
SOP is a low chlorine specialty potassium-based fertiliser used for crops that are chlorine-intolerant or crops that grow in dry environments.
In these particular environments, the build-up of chlorine contained in other products, such as muriate of potash or potassium chloride, is considered undesirable.
Projected earnings boost
Based on the economic model in Fort Cady’s existing definitive feasibility study, American Pacific is now targeting earnings before interest, tax, depreciation and amortisation of more than US$400 million in the first year of full production.
This is a US$55 million increase on the company’s initial EBITDA target of US$345 million.
American Pacific said the decision to double SOP production at Fort Cady arose from the continued strength of the SOP market and strong fertiliser market fundamentals that point to long-term demand growth.
The company noted phase 1A of the mine plan, targeting 36,287t of SOP production, remains unchanged to ensure the engineering and construction program is not delayed.
This means the revised mine plan will not change the current timeline to first production and no amendments are required for the detailed engineering already completed.
The sulphate of potash market
According to the company, the US market is currently a net importer of SOP with the only producer being Kansas-based Compass Minerals (NYSE: CMP).
In addition, Fort Cady’s phase 1A cost of production has been estimated at US$143 per tonne, which American Pacific claims is “substantially lower” than existing producers supplying to the US.
“In phases after this, boric acid is a by-product of production,” the company said.
American Pacific also highlighted the fact that the Fort Cady mine is located on the US west coast, where the agricultural market is the largest consumer of SOP.
In addition, the project is near to rail, interstate highways and SOP end users.