News FLASH LCK BFS now due out in late December / January NOT March 2022.
Urea Offtake negotiations are now under way. Not that LCK management have been in a rush to close of negotiations due to rising urea prices. A urea price at $900/tonne gives a much better outcome for a higher Offtake price. Covid has slowed things down but now with borders opening LCK are now looking at closing JV partners, funding and Offtakes at these levels.
LCK chairman Justyn Peter's stated at the AGM he could have done a gas offtake at $6.00 a gigajoule previously but with gas prices now reaching over $22 this would have put the company at a massive disadvantage. However, with urea prices at all time highs they think it is now time to take action.
As you may have noticed management has been very busy since it announced in July that it had awarded DL E&C Co. Ltd the contract to construct and $1.5Billion AUD to partly finance a 1mtpa zero carbon neutral urea production facility in South Australia.
LCK have recently announced the following to the market, and whilst not company making are significant especially with the way that the investment community is going with carbon polluting companies.
- 19/10 Leigh Creek Energy Ltd (“LCK”) expresses its support for and intention to register the Leigh Creek Urea Project (“LCUP”) with the Federal Government’s Emissions Reduction Fund.
- 14/10 EMM Consulting Pty Ltd has been appointed to assist LCK with the downstream development approval process of the LCUP
- 08/09 Leading industry engineering group inGauge recently completed an independent feasibility study into all the technical aspects of LCK’s proposed CCS at the LCUP.
- 03/09 LCK 100% subsidiary, Leigh Creek Oil and Gas Pty Ltd has been awarded Petroleum Exploration Licence 676 in key South Australian Cooper Basin oil and gas acreage.
- 11/08 LCK announces that the LCUP will be at the forefront of CCS and will likely be the first large-scale fertiliser project in the world to be carbon neutral
- 03/08 LCK announces that DL E&C has formally achieved the first milestone on the LCK Fertiliser Contract for Engineering, Procurement, Construction and Commissioning
LCK is certainly in front of the pack with what management have been planning since 2018. It is refreshing to see that their forward thinking has enabled LCK to be at the forefront of CCS and not greenwashing. It also means that the planning of the FEED will include the CCS which will mean Carbon Neutral ASAP.
Also as LCK won't need to retrofit the Carbon Neutral aspect of the facility they will secure operational efficiencies and cost savings.
Bankable Feasibility Study to come soon OFFTAKE AGREEMENTS CAN BE EXPECTED TO FOLLOW.
With a BFS due out in the next two months or so Pulse Markets are confident that Offtakes and further debt funding could potentially follow in the short term.
A “bankable” feasibility study is a study that can be used – and therefore should be written with the intent – to raise either debt capital from a bank or equity capital from investors (or a combination of both from either one).
Why would LCK wait to do an Offtake and arrange finance until after a BFS is completed.
- LCK will potentially get a price closer to the urea spot price which adds value to share holders with the Offtake.
- LCK will potentially get cheaper funding arrangements which adds long term value to share holders
- LCK will potentially get a higher calibre of Offtake partner which reduces credit risk to LCK share holders
This multi-billion-dollar construction project will also be of significance to South Australia and the Australian farming community.
We now look forward to receiving details regarding Offtakes and Funding in the short term as per Chairman Justyn Peter's comments at the AGM today.
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