Salt Lake Potash (ASX: SO4) has signed a memorandum of understanding with Chinese fertiliser distributor Sinofert Holdings Limited, setting out the basis for the second offtake agreement for its Goldfields salt lakes project in central Western Australia.
With an initial term of eight years starting January 2020, the agreement will provide Sinofert with sales and offtake rights for up to 50% of all sulphate-of-potash (SOP) production from the project for distribution into China.
As well as quantities and target markets, the non-binding memorandum includes terms relating to market pricing and commission mechanisms, specifications and delivery parameters, and marketing arrangements within China to be managed by Sinofert’s parent company Sinochem Corporation.
Salt Lake Potash plans to commence initial construction of a demonstration plant at the
Goldfield project site, producing up to 50,000 tonnes per annum of high-quality SOP to test the viability of its resource which covers 3312 square kilometres of playa surface.
The plant is expected to become a template for a large-scale, long life, economic development across the nine salt lakes which make up the project’s acreage.
Salt Lake Potash will distribute production from the demonstration plant through offtake agreements with a small number of global partners including Sinofert and Mitsubishi Corporation, which agreed in April to take up to 50% of the product.
Subsequent to the demonstration plant, Salt Lake Potash plans to progressively expand production across a number of lakes within its project acreage.
Sustainable fertiliser project
The Goldfields salt lakes project is being developed with a view to becoming the world’s “most sustainable and rewarding” fertiliser operation, delivering premium, organic nutrients to domestic and international farming communities.
The project is based on the extraction of hypersaline brine from salt lakes and transportation of the brine via a series of solar evaporation ponds to produce potassium-rich harvest salts for conversion into SOP.
SOP is the premium source of potassium (macro-nutrient) favoured by high value, chloride-intolerant crops.
Over the long term, Salt Lake Potash plans to develop an integrated SOP operation, producing from some or all of its lakes.
Details of those plans will only be considered after confirming the technical and commercial elements of the project from the demonstration plant stage.
Salt Lake Potash chief executive officer Matthew Syme said the Sinofert offtake agreement is an important step in establishing distribution channels for the Goldfields project.
“Our model of distribution partnerships is vital for what is essentially an export project,” he said.
“Sinofert is a leading participant in the world’s largest fertiliser market, where more than half of the world’s sulphate-of-potash is produced and consumed.”
News of the Sinofert offtake agreement saw the company’s AIM shares close 13.64% higher overnight.
Its ASX listing was suspended yesterday pending the offtake announcement, however trading resumed today and by mid-morning, the company’s shares were 6.67% higher at $0.480.