Leigh Creek Energy raises cash for urea project in lead up to final investment decision

Emerging urea producer Leigh Creek Energy (ASX: LCK) has raised close to $3 million to progress development of its $2.6 billion South Australian urea project as it heads towards a final investment decision later this year.

The company on Friday announced it had closed a share purchase plan with valid applications from eligible shareholders totalling about $2.7 million.

It also received commitments to raise $230,000 through a share placement to professional investors at $0.15 per share (the same price as the share purchase plan’s offer price), bringing combined proceeds from the new share issues to $2.93 million.

Leigh Creek Energy intends to use the new funds to progress development of its flagship Leigh Creek Urea Project (LCUP) through the next phases of its commercial pathway, as well as to undertake business development activities, general corporate activities and for general working capital.

Operational highlights of the FY2022 first half

The capital raising follows the release of Leigh Creek Energy’s financial and operational report of the FY2022 first half-year, which managing director Phil Staveley describes as a “key period that set the company up for sustained growth over the next several years”.

During the period, the company signed an offtake heads of agreement with its engineering, procurement, construction and commissioning (EPCC) contractor Daelim, which continued to progress front-end engineering and design (FEED) for stage two of the project.

“Having secured the first of our offtake heads of agreements for a minimum of 500,000 metric tonnes of granular urea per year for at least five years, we are in strong position to continue to execute on key milestones towards developing stage one and two of the project,” Mr Staveley said.

Another highlight of the quarter was the LCUP becoming the world’s first large-scale fertiliser project to achieve ‘carbon neutral’ status, eight years earlier than previously planned.

“This enables the LCUP to lead the industry in ESG and will be a significant drawcard for potential partners throughout the life of the project,” Mr Staveley added.

“To further reinforce our competitive advantages as ESG issues increasingly govern supply chains, Leigh Creek Energy registered LCUP’s carbon capture and storage activities under the federal government’s Emissions Reduction Fund to generate Australian carbon credit units.”

“Doing so will allow Leigh Creek Energy units to be sold on the secondary market as an additional revenue stream,” he said.

The company recorded a net loss of $8.1 million for the first half year and net cash outflow of $14.5 million. As at 31 December, cash and cash equivalents at hand totalled $8.3 million.

Final investment decision expected later in 2022

Leigh Creek Energy is on track to make its final investment decision on the LCUP later this year, targeting first urea production in 2025.

Located 550km north of Adelaide in SA, the project aims to develop low-cost high-quality nitrogen-based fertiliser for local and export agriculture markets using its proprietary Syngas technology. It plans to initially produce 1 million tonnes per annum of urea with potential to increase to 2Mtpa.

The first stage of the project consists of the construction of gasification wells to provide energy (syngas) for the project and 5 megawatts of gas-fired power generation.

Stage two comprises an expansion of the gasification fields, 100MW gas-fired power generation, an ammonia facility, urea facility, and logistics, loading and transport.