Kalium Lakes (ASX: KLL) is closer to becoming what it claims is Australia’s first sulphate of potash producer after it announced it has attained an offtake agreement with one of the world’s largest sulphate of potash distributors for 100% of its planned stage one production from its Beyondie project in Western Australia’s east Pilbara.
The offtake terms sheet was inked with German-headquartered potash manufacture and distributor K+S, which has a US$5.1 billion market cap and a global reach. K+S is also the world’s biggest salt producers.
“We are delighted to have reached an agreement with K+S, [which] is one of the world’s pre-eminent sulphate of potash producers and distributors,” Kalium Lakes managing director Brett Hazelden said.
Speaking to Small Caps, Mr Hazelden said the announcement represented a “major milestone” for the entire sulphate of potash sector, as well as Kalium Lakes.
“This term sheet brings the Beyondie sulphate of potash project a step closer to becoming Australia’s first sulphate of potash producer, with the aim of supplying Australian and overseas farmers with a locally produced product,” Mr Hazelden added.
Under the proposed arrangement, K+S will purchase 75,000 tonnes per annum of sulphate of potash from Kalium Lakes’ Beyondie project for 10 years.
The agreement is subject to K+S carrying out due diligence, regulatory approvals and the parties inking a binding contract.
Additionally, Kalium Lakes must a complete a bankable feasibility study at Beyondie that yields positive results.
Once proceeding to development, K+S will provide Kalium Lakes with its expertise and technical support.
“The knowledge that we are commencing a long term relationship with K+S, which has proven international expertise in design, construction and operation of sulphate of potash facilities, allows Kalium Lakes to concentrate on completing the bankable feasibility study before moving to the construction phase of the Beyondie sulphate of potash project,” Mr Hazelden said.
Mr Hazelden added the company would also focus on executing a binding offtake agreement with K+S in the “coming months”.
Beyondie sulphate of potash project
Earlier this month, Kalium secured the mining lease for Beyondie, with the company planning to begin construction during the September quarter. Brine extraction and evaporation are scheduled to begin before the end of the calendar year.
Once operational, Kalium Lakes hopes to produce 75,000tpa of sulphate of potash under stage one production, with a phased ramp up to expand this to at least 150,000tpa.
In the prefeasibility study released late last year, a post tax free cash flow of A$62 million per annum is forecast, with a post tax life of mine cash flow of AA$1.02 billion.
The study assumes a 21-year mine life and the project hosts reserves of 2.66 million tonnes at 14,210 milligrams per litre of sulphate of potash.
Sulphate of potash market
According to Kalium Lakes, demand outstrips supply in the sulphate of potash market, with the global sector estimated to be worth up to US$4 billion per annum.
Sulphate of potash is used as a fertiliser to promote growth in plants.
The material is primarily used in agriculture to assist with growing fruits, nuts, vegetables, tobacco and cocoa.
Investors reacted favourably to Kalium Lakes’ news this morning, with the company’s share price up more than 3% to A$0.48 at midday.