Ann: Institutional Placement to enable final Debt Drawdown, page-76

A new dawn for Australia’s potash pioneersAustralia’s first sulphate of potash mine will start production this week and five local mines could be producing the specialty fertiliser inside four years.Peter KerResources reporterJun 7, 2021 – 5.00amSaveShareHis biggest customers are in Russia, Mexico, Peru and Belgium, but Tony Swiericzuk hopes local farmers knock on the door when Australia’s nascent potash industry comes to life this week.“We are happy for farmer Joe to turn up to the mine gate with his truck or trailer and take a load,” he says of the crop nutrients he is now extracting from Western Australia’s outback salt lakes.A new Australian export industry will be born this week when Tony Swiericzuk’s Salt Lake Potash produces its first fertilisers. A new export industry will be born on Monday when Swiericzuk’s company Salt Lake Potash declares first production and claims pioneer status ahead of the flock of rivals building sulphate of potash (SOP) mines on Australia’s ephemeral lakes.If all of them deliver to schedule, Australia will go from zero to five SOP mines in the next four years.They hope to snatch a piece of a small but growing industry that is now worth just over $US4 billion ($5.2 billion) a year globally and is distinct from the $US20 billion plus muriate of potash (MOP) industry that BHP is likely to enter this year when it is expected to build a new $US5.7 billion Canadian mine.RELATED QUOTESSO4Salt Lake Potash$0.375 2.74%1 year1 dayJun 20Dec 20Jun 210.3600.4800.600Updated: Jun 7, 2021 – 9.15am. Data is 20 mins delayed.View SO4 related articles AMNAgrimin Limited$0.5100.00Jun 20Jan 21Jun 210.4200.5600.700KLLKalium Lakes Limited$0.220 -2.22%Jun 20Dec 20Jun 210.1200.1800.240APCAustralian Potash$0.128 -1.92%Jun 20Dec 20Jun 210.0400.1200.200BHPBHP Group$48.750 -1.69%Jun 20Dec 20Jun 2133.00044.00055.000AdvertisementThough SOP is the small end of the potash industry, it is also the premium end with farmers typically paying 50 per cent to 100 per cent more for SOP, which is ideal for fertilising crops such as berries, nuts and citrus.Salt Lake Potash enters production after a six-month period of rising prices for many agricultural commodities and Swiericzuk is convinced that from a small industry today, big things will grow.‘Ready to throw on your tomatoes’“If you look at the [prices for] wheat, soy and corn it is through the roof and with that farmers make a bit more money, and they show a bit more love to their land,” he says.“That is why the fertiliser prices are running as well, which is great. It is a great time to come into an industry with a tailwind.”SOP is produced at WA’s remote Lake Way when briny water is extracted from 85 metres below the salt pan and is allowed to interact with the potassium-rich surface of the lake.Stored in giant evaporation ponds for weeks at a time, the sun does much of the work and a final processing stage spits out a product that Swiericzuk says is ready to “throw on your tomatoes”.Close to 90 per cent of the SOP that Swiericzuk’s team produces will be shipped to foreign customers via Fremantle or Geraldton ports, but the company will hold back about 21,000 tonnes a year in a bid to forge direct relationships with local farmers.Salt Lake Potash’s new mine in WA. “We have purposefully retained the [marketing] rights to Australia,“he says. “All around the world we have given [distribution] exclusivity to different offtake partners, but Australia we have kept for ourselves so we can look after the domestic farmers in a way that we see fit.”Being first to market is always a good thing in the commodities game, but Swiericzuk hopes other ASX-listed aspirants such as Kalium Lakes, Agrimin, Australian Potash and BCI Minerals can also enter the SOP market and build a strong local industry in the decade ahead.“I think it is terrible to be an orphan,” he says. “You want to have multiple companies that analysts can follow and investors can compare against each other.“This is a new industry that is going to put WA on the fertiliser map.”If the wave of new, local SOP mines do make it into production, Swiericzuk is confident they won’t trigger the sort of supply surge that crushed lithium prices after six new WA mines started exporting the battery mineral in 2017 and 2018.He says new SOP supply from WA will arrive more gradually than was the case in lithium and that the demand for food, which is the ultimate driver of fertiliser demand, is far less discretionary than the digital devices and electric cars that consume lithium.RELATEDBHP is in talks with Nutrien on giant Canadian potash mineRELATEDBHP’s big potash neighbour just got friendlierJanus Henderson investors said earlier this year that they expected global demand for SOP will grow faster than the global economy, creating room for new entrants.Advisory firm BDO reported in March that only the ASX-listed gold sector attracted more financial support in 2020 than ASX-listed SOP aspirants, with local investors pumping more than $528 million into the unproven industry.“Australia currently has no potash production, with most SOP being sourced from Russia, Canada and Germany,” said BDO’s Sherif Andrawes in March. “However, we have observed that ASX-listed SOP explorers with projects nearing development have had access to capital, especially in 2020.“The data also suggests that both debt and equity capital markets are bullish towards the sector and recognise the industry’s potential for growth.”‘A new industry for this country’Swiericzuk admits that Salt Lake Potash tapped shareholders for funds more frequently than he had hoped as the company set about building the Lake Way project.Having been a key member of the Fortescue Metals team that borrowed heavily a decade ago to build the world’s fourth biggest iron ore business, he had been keen to adopt a similar, debt-fuelled model that would avoid diluting shareholders.But with SOP a largely unknown commodity in Australian lending circles, debt tended to come with requests for matching equity contributions.“It is a new industry for this country and that brings with it an element of caution –, that is what has caught us going forward and for us to access the debt we have had to balance that risk,” Swiericzuk says.The Australian government’s Clean Energy Finance Corporation lent $US39 million to the project, and the silver lining of the equity raisings is that Salt Lake Potash’s first few years of production should have fewer debt concerns than Fortescue’s hair-raising early years.Peter Ker covers resource companies, based in Melbourne.

FROM AFR