JUST over a month short of a projected start to commercial Sulphate of Potash (SoP) fertiliser production, Kalium Lakes Ltd (KLL) is planning to lift annual output by up to one third.
KLL already has a new offtake agreement with global distribution and marketing partner, Germany-based fertiliser giant K+S, for the new steady-rate production target of 120,000 tonnes of standard powder SoP per annum - which it expects to achieve by the fourth quarter next year.
The new offtake agreement includes "improved payment terms", KLL last week told the Australian Securities Exchange (ASX), which will help fund the projected $48 million additional cost of expanding production at its Beyondie project in the Little Sandy Desert, 160 kilometres south-east of Newman.
With the Beyondie project now worth $484m, KLL said the new terms would help provide working capital over the first three years of production and it was negotiating deferred payments and debt restructuring with its two main financiers, the Northern Australia Infrastructure Fund (NAIF) and Germany's KfW IPEX-Bank, to help cover the additional cost.
It is also seeking to borrow an additional $10m each from NAIF and KfW.
German SoP engineering experts from Ebtec GbR, onsite for the almost completed commissioning of KLL's processing plant, have agreed to stay on until modifications to accommodate the new production target are completed.
In March KLL announced a "debottlenecking" review of the project and its then 90,000tpa capacity.
A subsequent feasibility study identified the 120,000tpa target and modifications needed to achieve it.
These include additional pumps and bores at the Ten Mile and Sunshine lakes bore fields to increase hypersaline brine supply to the evaporation ponds system and increasing the ponds area by 68 hectares to a total of 446ha by adding an additional train for each of the primary and recycle evaporation pond areas.
An extra generator would also be required in the site power station.
More than 90,000t of potassium salts have been stockpiled on a pad adjacent to the production plant, equivalent to about 9000t of SoP fertiliser production, KLL has told the ASX.
First commercial production of fertiliser is expected in late September or early October, it said.
Construction of a granulation plant for a later premium granulated SoP fertiliser product and of a bagged product storage area is continuing as the final commissioning of the process plant ramps up.
KLL chief executive officer Rudolph van Niekerk said expanded production would enable the company to improve its return from rising SoP fertiliser demand and global pricing and help overcome the disruptive impacts of the COVID-19 pandemic.
"We are firmly committed to being a key, long-term supplier to the Australian agricultural sector, enabling our farmers to provide nutrition for the world," Mr van Niekerk said.
"SoP is likely to play an increasing role in a greener world, with fertiliser usage increasing yields and hopefully leading to reduced global deforestation," he said.
"As we approach our inaugural production target of September/ October, we are acutely aware of the recent surge in fertiliser prices globally, paralleling price highs not seen for the past decade.
"At the same time, we have seen the inflationary headwinds increase due to COVID-19, driving forecast operating cost increases across the Australian mining industry.
"The rationale for the 120,000tpa SoP expansion is to accelerate low capital intensity increase in SoP production into a rising SoP price market, whilst delivering economies of scale which offset various other negative macro-economic factors and operating cost pressures, including the COVID-19 impacts.
"As a result, the proposed expansion will put Kalium Lakes on a stronger platform, as well as maximising the benefit from the recent higher SoP prices."
KLL is still in the running to become the first Australian producer and exporter of SoP fertiliser.
It's nearest competitor, Salt Lake Potash (SO4 on ASX listings), is expected to make an announcement about its immediate production plans on Monday.
SO4 shares have been in an extended trading halt pending the announcement.
It has previously indicated first commercial production from its Lake Way SoP project 12 km south of Wiluna would be in the June quarter.
But earlier this month it advised the ASX it planned to temporarily suspend its ramp-up to full production after processing the first 90,000-110,000t of harvest salts to allow more suitable grade salts to precipitate in its evaporation ponds system.
SO4 also said it would need to raise more funds before the end of this year to continue operating at Lake Way.
A change in evaporation ponds management to better deal with salt grade variability, a reduction in estimated available feed salts following bulk sampling of the ponds and reclassification of some stockpiled harvest salts as unsuitable for ramp-up processing had led to a ramp-up plan revision, SO4 said.
SoP production estimates for 2021-22 have been cut from 165,000-185,000t to 85,000-105,000t, but annual production estimates for 2022-23 and beyond will not be impacted, it has said.
Social pressure on governments around the world to legislate for carbon-neutral economies by 2050 has signalled an eventual end to SoP fertiliser production using the Mannhiem process, which currently accounts for between 40 per cent and up to half of global SoP production.
Revenue from part of BHP's divesting of its fossil fuel assets to Woodside will fund its investment in the US$5.7 billion Jansen potash project in central Canada.
The project is to develop underground mines to bring potash to the surface for processing into fertiliser for export, with commercial production proposed by 2027.
By that time three, possibly five, WA companies are likely to be producing and exporting various grades of SoP fertiliser, all derived from hypersaline brine from beneath remote salt lakes.
