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$7.28 kalium lakes limited

Ann: BSOPP Feasibility Study Complete - New 120ktpa Base Case, page-150

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sevo

7,080 Posts.

526

19/08/21

00:35

Post #: 55400015
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Originally posted by Freeman02: ↑

If think the 'current project' refers to the 90kpta plant which I believe they are still gunning for. It would be best for all holders if this 90 kpta plant is delievered by late September with a first SOP annoucement.

Note the annoucement today said inaugral production and rampup target of Sept/October but it also said later on that first SOP production is still 'imminent' for late September. Sent an email regarding further clarification as to whether first product is still cleared for September.

Rise in operating costs should not have been unexpected. That is why the the EBITDA for the project has not really changed that much. In the appendix, the three main reasons for the rise in operating costs was from haulage to port, haulage of feed salts and waste salts from the plant, and diesel consumption.
Not sure if applicable royalties have increased yet. A clear point here is whether this rise in OPEX was self induced or uncontrollable. Toll pulling out of its contract of course was not favourable but given the mass amounts of ores being shipped from mines, price of transport is naturally going to rise and delta is going to cause labour mobility issues. However, this is not the fault of the company. I do not see a sustained increase in transportation costs over the medium-term. The rise in diesel costs is strange as diesel has not really change that much in price (might be a different story for WA and the need to transport diesel so far inland).

As such, Kalium's position on the cost curve has risen considerably (about $80US/ton compared to the 2019 forecast numbers), and combined with the increase in MOP supply as BHP annouces the decision to proceed with Jansen, the difference in cost between Mannhiem and evaporation may have reduce. However, if Kalium sells domestically, it should still be favourable as international shipping costs are rapidly increasing.

The consideration/decision to expand to 120kpta is questionable. $45m for an additional 30kpta should not be done on the basis of explotiing short-term price increases in the SOP price. However, there may be reasoning with all equipment and staff still on site. Hopefully the company provides greater detail of its decision further down the track.

Meanwhile if you have a look at sensitivity analysis, macro factors a leaning towards favourable variance with SOP prices rising and the AUD easing. These just might persist long enough to offset the rise in OPEX.

All in all, a mixed annoucement but I think the company as still made effort to separate the 'current' project' from the expansion. Hopefully practical completion of the 90kpta plant and first SOP by September has not changed. The drop in SP is probably an overreaction but is not totally unjustified from some holders who have had enough of the continual suppression and tanking of the SP which seems to go nowhere.

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It’s worth noting they have changed what they include in the “operating cost”. They now include corporate office costs and sustaining costs.

The “AISC” still doesn’t include royalties. The small print lists the royalties and assumes the WA royalty to be “5% gross less shipping”.

I referenced the RWD PFS AISC earlier, they included all royalties. KLL has definitely moved up the cost curve.

The increase in brine supply infrastructure appears to be disproportionate to the overall increase in SOP output. Bores and trench are initially increasing by 50% and 100% respectively whilst output is increasing from 90-120Ktpa (33%).
I would be interested to hear Blue Foxes opinion on this.

Last edited by sevo: 19/08/21

KLL Price at posting: 18.5¢ Sentiment: None Disclosure: Not Held
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