LTD (ASX:SO4) () (FRA:W1D) (OTCMKTS:WHELF) holds licenses over nine salt lakes in Western Australia, stretching out to the north of Kalgoorlie. The total area covered amounts to 3,300 square kilometres, and represents a considerable potash resource ripe for exploitation by tried and tested evaporation techniques. The first point of focus for the company was Lake Wells, which was been the subject of testwork for two years, and now has an established resource of 85mln tonnes of sulphate of potash (SOP). Lake Wells is actually the least accessible of all the projects in the portfolio, but it was the first granted to the company by the government and, according to corporate executive Jo Battershill, the work achieved to date has shown that “the economics are compelling.” Even so, after the granting of the rest of the other license, attention has shifted to one in particular, Lake Way, which lies a few kilometres south of the town of Wiluna. Here, has entered into a memorandum of understanding with Blackham Resources (). “We own 80% of the lake and they own 20%,” says Battershill. “We’ve signed an MoU for a co-operation agreement to investigate building a demonstration plant.” From Blackham’s perspective, the logic is compelling. Blackham already owns mining licenses over the northern end of the lake, and these have already secured native title agreement. What’s more, an old pit on Blackham’s ground, at the Williamson mine, is currently flooded with around 1.2 gigalitres of brine, grading an exceptional 25 kilogrammes per cubic metre of SOP. Allowing to dewater the mine makes sense for Blackham, since costs will be kept down, while on Salt Lake’s side, the brine from Williamson will provide between six and seven months of feed for the company’s demonstration plant. After that, says Battershill, and assuming the two companies consummate the MoU, the plan will be to build evaporation ponds and a conversion plant and start to produce significant quantities of SOP. A clearer indication of how much and at what margin will become clearer over the coming weeks when the results of the ongoing scoping study are revealed. But even at this stage, Battershill is confident enough to say: “it’s very fundable, it looks very doable.” To support that assertion, he cites the existence of an offtake agreement with Mitsubishi corporation, a deal that provides for the sale of full 50% of all SOP produced by the demonstration plant. What’s more, Salt Lake is in discussions for the other 50% too. SOP is an established product in the market, unlike the Polyhalite that Sirius Minerals is trying to sell, and it’s also worth remembering that Salt Lake has learned a huge amount from its earlier work up at Lake Wells. Lake Wells itself is likely to cost around US$200mln to develop, and as such will probably be a little bit down the queue when it comes to raising development funding, but it’s not so much the capex that investors will be paying attention to as the operating margin. Given that all the lakes the company has under license are broadly similar in their chemistries, the key metric to pay attention to is operating costs. At full production rates, Salt Lake Potash expects to be producing SOP at a cost of around US$200 per tonne. Compare that to the selling price of SOP over the past decade, which has fluctuated between the US450 and US$500 range, and it’s clear that the margin that’s on offer, as Battershill says, “is terrific.” At Lake Way, and with Blackham close by, there’s plenty of infrastructure in place to allow for easy development. And once Lake Way is up and running, and bringing in that chunky margin, a platform will be in place to get up and running with other projects.
Salt Lake Potash is expecting high margins from manufacturing sulphate of potash at its Lake Way project in Western Australia. Production costs will be as low as $200 per metric tonne and developing the project will cost $200m, the company said. The miner has a memorandum of understanding with Blackham Resources to build a demonstration plant, with Salt Lake Potash owning 80% of the lake while Blackham takes 20%. Additionally, an off-take agreement has been signed with Mitsubishi for 50% of all SOP produced at the demonstration plant, and it is in discussions for the remaining 50%.