WITH a final investment decision imminent, Kalium Lakes Ltd (KLL) has revealed it believes it can produce bulk Sulphate of Potash (SoP) fertiliser in Western Australia for less than half the price quoted by overseas suppliers.
A company presentation to a Queensland mining and exploration investor conference last week showed KLL estimated its "all-in sustaining costs" of production for stage one of its Beyondie project to be $290.80 a tonne, excluding royalties and taxes.
At the current exchange rate, that is equivalent to about US$208/t delivered bulk to Kwinana or in container to Fremantle for export, according to the KLL presentation.
It compares with bulk SoP export prices out of China currently quoted at between US $450 and US $600/t.
KLL's proposed stage one annual production of granular and premium SoP fertilisers is 90,000 tonnes.
Its investor presentation showed the estimated cost per tonne was based on a cash price of production at Beyondie, 160 kilometres south east of Newman in the Little Sandy Desert, of $171.40, plus $67.60 haulage and ports costs, $30.80 corporate costs and $21 sustainable capital expenditure costs.
Stage two production of 180,000t a year is estimated to drop the all in sustainable costs of production of Beyondie SoP to about $249/t - at the current exchange rate, about US$187/t.
But the estimated production costs for export SoP shown in the investor presentation may not represent likely point-of-sale SoP costs locally.
As previously reported, KLL has signed a 10-year agreement with German-based fertiliser producer and distributor K+S for all of its initial production volume.
K+S, which currently supplies more than half of the SoP sold in Australia and New Zealand, will be responsible for marketing and selling Beyondie SoP in Australia and to the rest of the world.
This off-take agreement with K+S is expected to generate more than $650m for KLL.
KLL is one of a two Perth-based companies looking to begin producing SoP by processing remote salt lake brine next year and there are several other companies looking at beginning production using similar methods in the following or subsequent years.
So far, KLL's estimated $171.40/t cash production cost is about $30/t lower than any other production cost estimates released by potential local competitors, some of which have hinted at eventual local prices of between $700-790/t for WA SoP.
KLL and Australian Potash - listed as APC on the Australian Securities Exchange - also last week announced financial boosts for their efforts to begin local SoP production next year.
German government export credit agency, Euler Hermes, has agreed to provide a project finance export credit guarantee covering about $50 million of KLL's approved $176m loan package.
The Euler Hermes agreement is effectively a German government guarantee to international financier KfW IPEX-Bank for almost half of its exposure to risk through an offer of $102m senior debt financing to KLL for the Beyondie project.
The debt financing package matures 10 years after construction of the Beyondie project is completed.
KLL is expected to make a final investment decision on the project within weeks now that the Euler Hermes guarantee it sought has been approved.
"The completion of this significant funding requirement brings us closer to a final investment decision, which remains on track for this quarter and progresses our goal of becoming Australia's first SoP producer," said KLL managing director Brett Hazelden.
Subject to that decision being taken, KLL has signed contracts with a number of companies to supply the brine processing equipment and gas pipeline and gas and for the process, to supply and install liners for solar evaporation ponds as well as transport of bulk SoP to port.
APC last week announced it has received a $1.3m research and development tax incentive from the Australian Taxation Office.
The company said the incentive, effectively a deduction approval, applies to costs incurred in the previous financial year related to preparing a bankable feasibility study.
The study is expected to be completed and released by APC before the end of this calendar year.
APC has said it is proposing to produce 150,000t a year of "premium-priced" SoP during stage one of its project based at Lake Wells, a salt lake 200 kilometres north east of Laverton.
Stage two is proposed to double annual production after five years.
Field and greenhouse trials of Lake Wells SoP, provided by APC from its production process tests, are being conducted by WA No-Tillage Farmers Association members on farm and the University of WA's Institute of Agriculture.
The trials are comparing wheat and canola responses to SoP and much cheaper and more readily available Muriate of Potash (MoP).
The potential advantage of SoP over MoP is that SoP has the lowest salt index of any potassium fertiliser, making it theoretically more suited for broadacre use in salt-affected areas of the Wheatbelt provided it can be produced in sufficient quantity and at a low enough price.
