SoP producer signs a distribution deal

SoP producer signs a distribution deal

Agribusiness
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The deal involves exclusive distribution throughout Australia and New Zealand.

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Australian Potash Ltd managing director and chief executive officer Matt Shackleton.

Australian Potash Ltd managing director and chief executive officer Matt Shackleton.

ONE of three most likely producers of Western Australian Sulphate of Potash (SoP) fertiliser within the next two years has signed a 10-year off-take and national distribution deal that also covers New Zealand.

Australian Potash Ltd (APC on Australian Security Exchange listings) announced last Monday it has signed its first binding off-take agreement for its premium K-Brite trademarked SoP product to be produced at its Lake Wells project, 160 kilometres north east of Laverton.

The "take or pay" deal is with chemicals and ingredients distributor Redox Pty Ltd for 20,000 tonnes per annum of K-Brite SoP to be distributed exclusively throughout Australia and New Zealand.

Sydney-based Redox has offices in Perth, Melbourne, Brisbane and Adelaide and in New Zealand at Auckland, Christchurch and Hawke's Bay, as well as sales offices in Kuala Lumpur, Malaysia and Los Angeles and Oakland, California.

Established in 1965 as a family company, Redox distributes chemicals and ingredients used across a wide range of domestic and industries sectors, including crop protection and production products for broadacre farming, horticulture and hydroponics.

But its current fertiliser range, listed in its crop production and protection brochure, does not include a SoP product.

APC's net realised price for K-Brite from the initial 10-year deal with Redox is based on SoP market prices minus traditional "net back" costs, including a marketing fee and "flow through" shipping, storage and handling costs, APC said.

It said the deal aimed to incentivise Redox to achieve the highest sales price in each market.

Discussions with potential off-take partners covering China, South East Asia, Europe and North and South America are continuing, the company said.

APC has long-standing memorandums of understanding with two major Chinese fertiliser companies and managing director and chief executive officer Matt Shackleton has been a regular visitor to China for ongoing negotiations.

"We are pleased to announce the first binding term sheet for off-take supply, covering sales and distribution rights to K-Brite in Australia and New Zealand," Mr Shackleton said of the deal with Redox.

"Our new partnership with long-established Australian company Redox, who from its Sydney base has built broad trade relationships and an extensive global distribution network, delivers APC's first step in the larger off-take program.

"Ultimately APC will have a large proportion of the planned 150,000tpa output from the (Lake Wells SoP project) under off-take agreements and we look forward to updating shareholders on our progress in the near future.

"The emerging Australian SoP sector is gaining credibility on the international stage and it is pleasing to see APC's rigorous approach to both the technical and commercial aspects of its solar salt SoP project being recognised."

As previously reported in Farm Weekly, APC is one of the front runners among at least six WA companies looking to produce SoP fertilisers from potassium-rich brine found beneath some remote salt lakes by evaporating off water and processing the remaining concentrated harvest salts.

Production of local salt lake SoP is expected to create a new, potentially billion dollar earnings export industry for WA, as well as replace about 40,000tpa of SoP imported into Australia.

From harvest salts produced in trial evaporation ponds at Lake Wells, APC has produced commercial standard K-Brite samples at a Perth laboratory using the same method it intends to employ at Lake Wells.

Some of the K-Brite samples were distributed to WA farmers ahead of last season for monitored Australian-first cereals cropping field trials conducted over two years.

More of the K-Brite samples were provided to The University of WA's Institute of Agriculture for a two-year glasshouse comparative study of its performance.

APC released a definitive feasibility study on its Lake Wells project last August indicating at least a 30-year project life producing 150,000tpa of SoP.

It indicated a development capital cost of $208m to production and an initial operating cost equivalent to US$262 ($366 at the current exchange rate) a tonne.

The company is now finalising finance for the project which is expected to be in place next month.

Contracts and tenders for construction of the project are expected to be let by July to coincide with expected ministerial approval of an environmental review document lodged in November and with works approvals.

At this stage, APC is on target to begin commercial production of K-Brite SoP later next year.

Two other companies - Kalium Lakes Ltd (KLL) with its Beyondie SoP project 160 kilometres south east if Newman and Salt Lake Potash (SO4) with its fast-tracked SoP project at Lake Way 12 kilometres south of Wiluna - are projected to begin producing commercial SoP in December and in the first quarter next year respectively.

KLL has a binding 10-year agreement with German fertiliser producer and distributor K+S for all of its 90,000tpa start-up volume which will see K+S market KLL standard, premium granular and soluble SoP throughout Australia and internationally.

K+S is claimed to supply more than half of Australia's and New Zealand's SoP currently.

SO4 has signed five-year off-take agreements with four distributors and a 10-year deal with a fifth totalling 224,000tpa of SoP, or more than 90 per cent of its anticipated production.

The distribution agreements cover the Middle East and Africa, North America and Europe, South America, South East Asia and the Middle East and the Asia-Pacific region.

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