BCI bci minerals limited

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    Industrial salt the next hot commodity? Kerry Stokes is hoping so

    BCI Minerals’ Mardie project in the Pilbara is backed by the billionaire and AustralianSuper and will be country’s first major new salt operation in decades.

    The mineral sprinkled on food without a second thought is also used in the manufacture of just about every household item, from ceramic cereal bowls to shirt buttons. Its versatility means industrial salt is in high demand among manufacturers across the globe. And Australia is about to join the top table of producers with its first major new salt operation in three decades, backed by big hitters including Kerry Stokes, AustralianSuper and the federal government.
    BCI Minerals is in the final stages of building the Mardie salt production hub on the Pilbara coast of Western Australia, and managing director David Boshoff’s enthusiasm for the white crystalline mineral is almost as boundless as its uses. “Anything that’s got a ‘poly’ in its description, such as polyester, will have salt in its production process. The elastic part of your clothes, the plastic buttons on your shirt,” Boshoff says. The South African-born businessman points to the table in BCI’s offices. “If it’s a laminate product, they use salt in the glue. Your glass has got salt in it. Because we as consumers are at the end of that line, we don’t actually see where it starts,” he says. “If it’s not metal or rubber tyres, everything plastic in your car will have salt in it: the rearview mirror, dashboard, steering wheel, seat covers, paint, headlights, tail lights, spoiler. Come to think of it, there is salt in the glue that holds your tyres together,” he says.
    Boshoff’s evangelism is winning him an audience among governments and the investment community. And while salt doesn’t fall under the official definition of a critical mineral, states and corporations have been eager to secure reliable supplies of a commodity the world cannot do without.Stokes, AustralianSuper, and federal taxpayers are all big backers of the BCI project, about 100 kilometres south-west of Karratha on the WA coast.Stokes is not the only wealthy investor getting into salt. A into industrial production is being supported by the South Sydney Rabbitohs’ billionaire chairman Nick Pappas and other families. Liveris’ Leichhardt Industrials bought Rio Tinto’s Lake MacLeod salt asset in WA last December.
    Mardie puts Australia on the salt map\ The $1.4 billion Mardie salt and potash project will be the country’s largest salt project and the third largest globally, producing 5.3 million tonnes of industrial salt a year from seawater through solar and wind evaporation. BCI is targeting its first shipment from Mardie at the end of next year.Using gravity and renewable energy-powered pumps, salt water moves between a series of enormous saltwater drying ponds – the project covers 115 square kilometres – gradually increasing in salinity due to evaporation.The final pond is as salty as the Dead Sea, says Boshoff, who is new to the industry after leading Adani’s development of the Carmichael coal mine in Queensland. The highly salinated water is eventually left to evaporate in crystallising pans several kilometres long, where the crust of dried salt is scraped using heavy machinery similar to a combine harvester. From there, it will be washed and shipped to industrial customers in Asia.With an operating life of 60 years, BCI says Mardie will create 750 jobs during construction and 140 permanent full-time jobs during operations.Declan Bonnick, analyst at Euroz Hartleys, describes Mardie as “globally significant”, noting that strong demand for salt, and the relatively low cost of mining it, make it attractive to risk-sensitive investors.G iven the unlimited reserves of seawater and uniqueness as a resources project without orebody risk, once operational, we view Mardie as a low-risk, annuity-like cash generator; with strong market dynamics that are driven by south-east Asian industrialisation, supporting long-term salt prices,” he says. prime salt location There are only a few places on earth with the ideal weather and geographic conditions to produce salt reliably and in vast quantities. Too much rain, and the saltwater takes too long to evaporate in drying ponds. The area needs to be flat, coastal, non-urbanised and close to the markets where industrial salt is in demand. Areas with high evaporation are ideal.The Pilbara, which is hot, windy, and receives average annual rainfall of just 300 millimetres, ticks all the boxes, and already plays host to a number of salt-making operations. In fact, salt has become a tourist attraction, with visitors to facilities like BCI’s rival Dampier Salt seeing the process up close and marvelling at the towering piles of salt being prepared for export.The Pilbara’s salt suitability is rivalled only by parts of Mexico and India, and given salt’s importance in the global manufacturing hubs of China and South-East Asia, the region’s proximity to both offers BCI and its Australian rivals a geographic advantage over those other locations.“India, Mexico and Australia are the largest suppliers of salt. The challenge, though, is India is growing at a rapid rate, and they are starting to import salt,” Boshoff says. That means that China, once a big importer of Indian salt, is looking for new suppliers, and Australia is in the box seat.“All China’s chemical plants are built on the coast to receive imports. Australia is perfectly positioned to compete. If you think about Mexico as the alternative, we can beat them on prices,” Boshoff says. “It only takes a couple of days to sail to Asia [from WA], whereas Mexico is far away.” BCI estimates it will produce a tonne of salt for $25, excluding shipping, positioning it to earn healthy margins given the current price is about $US55, based on benchmarks set annually by traders in China and Japan. Boshoff says BCI has already lined up three major customers across Asia to buy its salt, but will not be taking business away from established rivals such as Rio-backed Dampier Salt, and Australian Saltworks.“The customers that we’re dealing with are new customers. We are supplying new factories,” says Boshoff, adding he hopes to do deals with customers in Taiwan and South Korea. “The market, and the forecast in terms of demand, is more than big enough for all player" The Mardie project will also produce a commodity that is crucial to the farming industry – the fertiliser potash. BCI will create sulphate of potash by recycling the salty water remaining after salt extraction. Potash is removed from the soil when crops are harvested, and must be replaced because it’s critical for maintaining soil consistency. BCI expects to find demand from agricultural regions, such as Western Australia’s Wheatbelt. Australia is a net importer of potash, so the introduction of a local supplier will be welcomed, Boshoff says, adding that he’s held discussions with the WA Farmers Association about the looming new supply. However, the 140,000 tonnes of potash that BCI hopes to produce annually is a drop in the ocean. The world uses about 65 million tonnes of potash annually, according to figures from Canada, the world’s biggest producer.Approvals and timing. The process to secure approval for Mardie has been arduous, but that hasn’t deterred Boshoff, who is battle-hardened after his time spent navigating the through layers of assessment. In April, BCI got a tick from the federal officials for the group’s groundwater monitoring and management plan to fill its seawater ponds, after an approvals process that took several years. “People doubted whether we would be able to get our approvals across the line,” Boshoff says. Others have not been so fortunate. German chemical giant K+S pulled the plug on its $805 million Ashburton Salt development in WA after struggling to secure environmental approvals. The project was first proposed in 2016, but environmental groups objected to the development due to its proximity to Ningaloo Reef, a UNESCO World Heritage Site. A big part of Boshoff’s job has been securing funding to cover the enormous upfront costs needed to build Mardie. Last year, BCI agreed to a $981 million debt facility that involved a mix of government and private money. Lenders included the Northern Australia Infrastructure Facility and Export Finance Australia, as well as Westpac and Industrial and Commercial Bank of China. BCI has set a goal of paying off the debt facility by 2035. Euroz’s Bonnick forecasts BCI to generate $250 million of annual earnings and $190 million of cash once Mardie is fully operational. “We view it likely the company integrates a shareholder return dividend payout policy once operational, providing a foundation for strong long-term returns,” he says. Over the past year, as the project nears production, BCI shares have jumped about one-third. Its market capitalisation is nudging $900 million. While the environmental approval is a step forward for BCI, salt cannot be harvested until Mother Nature plays her part over the next two years. A 30-centimetre salt crust must form over two years across the surface of the crystallising pan. This will form the pad on which heavy machinery will operate for the next 60 years, so its construction must be solid. Boshoff likens the salt pavement to the challenges faced in the American television series Ice Road Truckers, where drivers must make sure the frozen lake they are traversing is thick enough to carry a big truck.“Ice and salt have similar properties in terms of their breaking strength,” he says. “The heaviest piece of equipment we use is about four tonnes of payload per wheel. That pavement stays there forever because that’s your working surface that you have to stay on, and that takes a while to form.”
 
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