Four months after KordaMentha took the keys at Salt Lake Potash, it has finally kicked off a buyer search with Macquarie Capital’s bankers in tow.
Salt Lake Potash’s Lake Way project (pictured) is up for sale.
The investment bank started sending teasers for the mooted sale earlier this month, casting a wide net aimed at chemical and agriculture companies, miners and explorers.
Potential new owners were told Salt Lake Potash would restart production at its flagship Lake Way project in Western Australia between October and April. The asset had a 20-year life (with room for extensions) and planned to hit 245ktpa salt of potash production.
The flyer said the company had spent more than $500 million on the project, and more than 90 per cent of planned output was promised to credible offtakers like Mitsui. Under the receivers’ watch, an engineering firm is prepping an independent restart and ramp-up strategy.
Tyrekickers were also reminded potash prices had nearly doubled since Salt Lake went under.
Salt Lake Potash had ambitions to be Australia’s first producer of potash (that title’s since been co-opted by listed counterpart Kalium Lakes), a key ingredient in fertilisers for higher-value fruits and vegetables. However, its working capital needs ballooned out of control when potassium grades extracted from the lake were lower than expected.
It had a $250 million-odd market cap, counting Ellerston Capital and Swiss Lombard Odier Asset Management among investors. It also owed about $170 million to lenders including Commonwealth Bank of Australia, Taurus Funds Management and the Clean Energy Finance Corporation.
Street Talk understands Salt Lake Potash tried to raise $90 million in equity but couldn’t woo fund managers. Negotiations with lenders to relax some covenants including repayment terms were also unsuccessful. Selling the business for parts was not an option.
And so Macquarie’s bankers are now pitching it as a “clean control acquisition”. It’s too early to talk about valuations, but Salt Lake Potash’s former $250 million equity market value now counts for little. The receivers will be hoping bidders take heed of potash’s price surge.
The buyer is likely to be someone with long-term conviction on potash and a balance sheet big enough to fund Salt Lake Potash’s working capital needs until it can get Lake Way into production.
The sale was expected to stretch out over the next three to four months.
9.33pm — Feb 23, 2022
