A REVISED agreement to resolve technical issues preventing Australia's first Sulphate of Potash (SoP) fertiliser plant achieving target volumes has set a new path forward, according to the signatories.
Kalium Lakes Limited (KLL) last week told the Australian Securities Exchange (ASX) a new engineering, procurement and services (EPS) agreement had been signed with German engineering and design firm Ebtec GbR, in relation to the SoP purification plant at its Beyondie fertiliser project in the Little Sandy Desert, 160 kilometres south east of Newman.
Ebtec is a German joint venture partnership between salt production specialist K-UTEC AG Salt Technologies and thermal separation technology specialist Ebner GmbH - which designed, constructed and installed the purification plant at Beyondie.
Under the new agreement, it has paid KLL about $2.8 million.
KLL told the ASX almost $2m of that money came from a loan facility with German international project and export financier KfW IPEX-Bank GmbH which, along with Northern Australia Infrastructure Facility (NAIF), comprised the two major lenders for the Beyonie project.
KLL said KfW and NAIF had agreed to the funds, which had been held in reserve in the loan facility as a final payment from KLL to Ebtec under the original EPS agreement, being paid to Ebtec and then on-paid to KLL.
Under the new agreement, Ebtec will continue to provide technical services to KLL - both onsite at Beyondie and from Germany - as the Beyondie project ramps up SoP fertiliser production.
KLL pointed out that the new EPS agreement "is in lieu of the performance guarantees provided by Ebtec for the operation of the SoP plant and includes a two-way release from any claims in connection with the original EPS agreement for the design, engineering, supply and commissioning of equipment" at Beyondie.
It said the new agreement's "settlement" and release from any claims also covered two additional heat exchangers recently added to the purification plant and expected to provide significant year-round improvements in efficiency.
The latest imported heat exchanger was added during a production shut down last month to the schoenite circuit in the process of converting potassium-rich brine from beneath the crust of a chain of remote salt lakes into standard and premium grade granulated SoP fertiliser.
KLL said performance incentives for Ebtec had also been revised, with an extra $407,740 set aside from the KfW loan facility to be "placed into escrow" (a legal arrangement in which a third party temporarily holds money or property until a particular condition has been met).
It will be payable to Ebtec upon the Beyondie SoP plant achieving a "simplified performance test" of a SoP production output equivalent to the minimum performance specification in the original EPS agreement, KLL said.
As well, 17,677,493 KLL performance rights were issued to Ebtec last week, which will be converted to fully-paid ordinary KLL shares upon the SoP plant "achieving the simplified performance test", it said.
KLL acting chief executive officer Jason Morin said the company was "focused on our production ramp up and achieving nameplate capacity (90,000 tonnes per annum) of the Beyondie SoP plant as soon as possible and now with commercial clarity in our relationship with Ebtec both parties will continue to drive towards that goal."
Ebtec managing partner Markus Pfnder said the new agreement "builds on our work to date with a defined pathway forward".
"We remain confident in achieving the SoP plant's design parameters and continue to work very closely with Kalium Lakes to ensure the success of Beyondie," Mr Pfnder said.
KLL was expected to ask the ASX this week to lift a voluntary halt since June 2 to trading of its shares, following the announcement of a new EPS agreement with Ebtec.
With original production estimates quickly upgraded from 90,000tpa to 120,000tpa and then 180,000tpa for a project life of between 30 and 50 years, KLL's Beyondie project made its first commercial delivery of SoP fertiliser to local manufacturer and distributor CSBP Fertilisers in July last year under a 10-year offtake agreement it has with K+S Asia Pacific, the local area arm of a German-based global distributor of farming inputs.
The Beyondie plant had produced its first SoP some 11 months earlier, but problems - some related to the high ambient desert temperature impacting on performance - with processing and purifying of mixed salts evaporated from salt lake brine into SoP fertiliser, prevented the plant meeting production target volumes and schedules.
In May, Southern Cross Certified, an agricultural certification specialist, certified KLL's Beyondie SoP fertiliser under the updated voluntary Australian Standard for Organic and Biodynamic Produce - AS 6000-2015 - as suitable for use in local organic production systems and for export under the National Standard for Organic and Biodynamic Produce (2016).
In its latest progress report in June, KLL told the ASX it had produced 1026t of SoP fertiliser in April and 1053t in May, exceeding its entire March quarter production by 16 per cent, making the June quarter its best yet after only two months.
KLL said it hoped to achieve a 55,000tpa production rate during the December quarter and a 90,000tpa rate by the September quarter next year.
Actual annual production of 50,000-60,000t was expected next year, but a "material increase" in operating costs "due to operational resourcing and inflationary pressures" was also expected, it said.
KLL acknowledged additional long-term funding for Beyondie will be required over the next two financial years during ramp up to achieve a targeted annual production of 90,000-100,000tpa.
Australia imports about 63,000tpa of SoP fertiliser, which has the lowest residual salt rating of any potassium fertiliser but currently is mainly used for higher-value horticulture production because of the cost of the imported product.
Some of the imported SoP is produced -mainly in China - by reacting Muriate of Potash (MoP) with sulphuric acid at temperatures of more than 600 degrees Celsius.
This Manheim method of producing SoP has high energy costs and also produces poisonous chlorine gas as a byproduct.
As previously reported in Farm Weekly, the Beyondie SoP project is the brainchild of KLL co-founder, director and major shareholder Brent Smoothy, who - as a Pilbara and central Queensland pastoralist - held the Beyondie pastoral lease when the potential for SoP production there was discovered.
A former muster pilot and helicopter aviation company owner, Mr Smoothy learned about SoP by quizzing geologists as he flew them to and from an exploration site that went on to be developed by Hancock Prospecting as the Roy Hill iron ore mine.
