Salt Lake Potash (ASX: SO4) has added another partner to its armour after multinational Mitsubishi Corporation agreed to take up to half of the sulphate of potash the West Australian junior plans to produce at a demonstration plant in the Goldfields, for sale into Asian and Oceanic markets.

Perth-based Salt Lake is planning to produce 50,000 tonnes a year of high-quality SOP at its Goldfields Salt Lakes project at the yet-to-be-constructed plant to demonstrate the viability of its resource which covers 3312 square kilometres of playa surface.

The company says the surface, found in 290sq km of tenements near Wiluna, is amenable to low-cost on-lake construction.

Salt Lake has set a conceptual resource target of 290-458 million tonnes of contained SOP grading between 4.4 kilograms a cubic metre and 7.1kg/m³.

So far only one of its nine lakes has a JORC-compliant-resource – Lake Wells – which sits at between 80mt and 85mt of contained SOP.

Salt Lake’s deal with parent company Mitsubishi Corporation and its wholly owned Australian arm Mitsubishi Australia is a non-binding memorandum of understanding which sets out key terms.

Among them are a commitment from Mitsubishi to continue to hold discussions regarding the future funding requirements for the project and market pricing, commission, specifications and delivery mechanisms.

The multi-industry Japanese group will also provide strategic advice on marketing in the region and potentially distribute Salt Lakes SOP in other geographic regions.

Salt Lake Potash chief executive Matt Syme said the offtake deal was an important step for the effort he described as an export project.

“We are very pleased to have taken this important first step in establishing offtake and distribution channels for the Goldfields Salt Lakes project,” he said.

“Our model of distribution partnerships is vital for what is essentially an export project.

“Mitsubishi’s global pre-eminence in commodities trading and finance, and longstanding involvement in Australian industry, give us great confidence that we can build a very cohesive and beneficial partnership over time. Their interest is a strong endorsement of the market outlook for SOP and also of our plans to supply these markets.”

Salt Lake’s chief Mr Syme also tipped more offtake agreements for the West Australian company.

“We anticipate one or two more potential distribution agreements and we believe our patience in aiming for the very best channels and markets is the right approach,” he said.

The company’s market capitalisation hit $110.6 million this morning on today’s news. The Salt Lake’s December half-year accounts, released on March 16, revealed the company had $10.5 million cash on December 31 after making a $5.35 million loss during the half-year.

Unlikely pairing

Salt Lake Potash is no stranger to forming partnerships that will help it reach its goal of demonstrating the viability of its resource targets so it can then move to commercial-scale production.

The company last month also signed a deal with its neighbour Blackham Resources (ASX: BLK) to pair up on the salt lakes project.

Blackham’s 64sq km gold landholding lies over the northern end of the Lake Way Paleochannel which stretches over Salt Lakes’ tenements.

The agreement between the parties allows Salt Lake to acquire brine rights to Blackham’s project area, while Blackham will receive the gold rights to Salt Lake’s tenements. The Goldfields neighbours’ deal also includes data-sharing and access, and should an operation be developed on each other’s land, the landholder will receive a royalty.

Salt Lake chief Mr Syme said at the time Blackham’s land was an “ideal site” for its demonstration plant and expansions.

“We expect it would result in material time and cost savings for us and bring significant benefits to the Wiluna community,” Mr Syme said last month. “It appears to have the best combination in Australia of scale, brine chemistry, permitting and infrastructure access and justifies the effort to prove its potential.”

Blackham’s gold tenements also surround a historical potash mine that produced 25kg per m³ SOP.

The historic operation’s Williamson pit was filled with brine and Salt Lake’s plans to dewater the pit and use the brine as a starter feed for its evaporation ponds.

A scoping study on the viability of installing the demonstration plant on Blackham’s tenements is now under way, with preliminary sampling complete.

Salt Lake is also progressing a mining lease application as it finalises the scoping study tipped for completion by mid-year.

Salt Lake’s securities were up 3.6% to 58c by late morning.