Salt Lake Potash FY20 Results Show Lake Way Fully Funded with Production in 1H21

Salt Lake Potash Limited (SO4 FOLLOW) results for the year ended 30 June 2020 focussed on the development the Lake Way project in the Goldfields district of Western Australia. 

On-Lake Operational highlights included: 

• 48km of brine extraction trenches were constructed during the year at Lake Way, delivering the majority of brine to the evaporation pond network.  
• The trenches were excavated to an average depth of around four meters. To move brine from the trench network to the evaporation pond system, a specialised pipe network and pumping system was designed to suit the site environment. 
• During the second half of the financial year, SO4 commenced development of the Lake Way paleochannel, drilling the first four brine abstraction bores into the paleochannel basal sands at pads 8, 17, 18 and 21. 
• The results from the test-pumping confirmed the BFS model for both aquifer parameters, brine grade and flow rates.  
• Two of the four completed brine abstraction bores were test-pumped (Pad 8 and 17) with results pending for pads 18 and 21. Test pumping at pads 8 and 17 was conducted at flow rates ranging from 10-18 l/s with the observed grades during testing ranging from 7,240mg/l to 5,370mg/l. 

Pond Operational highlights included: 

• In the March 2020 quarter the Company completed the Stage 2 pond network consisting of 275ha of evaporation pond area, taking total pond evaporation area to 400ha. 
• The Stage 1 pond network spans approximately 125ha and was commissioned in the June quarter of 2019. The Stage 1 ponds were initially filled with high grade brine (25kg/m3 SOP) from the Williamson Pit. 
• The Stage 2 pond network spans approximately 275 ha and commenced commissioning in the June quarter of 2020. The Stage 2 pond construction included the installation of 12,000 sheet piles and 200,000 cubic meters of earthworks to form the walls of the ponds. 
• Across the pond network brine chemistry was monitored continuously and aligned with modelled outcomes. In March 2020, a 277kg bulk sample taken from Kainite Pond 1, Cell C4 was analysed and reported a potassium grade of 7.5%, ahead of the average modelled harvest salt grade in the BFS of 6.8%. 
• Halite salts form in the initial cells in the pond train, after which the more concentrated brine is pumped into the harvest cells for the precipitation of the potassium rich harvest salts schoenite and kainite. Over the course of FY 20 the harvest salt pavement in the Stage 1 harvest cells accumulated to heights of up to 330mm. 

Off-Lake Operational highlight included: 

Early works at the process plant site commenced in earnest in the first calendar quarter of 2020. By the end of the financial year the Company had completed bulk civil earthworks and commenced pouring concrete foundations. 

Construction of Non-Process Infrastructure commenced in the first calendar quarter with bulk civil earthworks. By financial year-end the Lake Way village had been constructed with 100 permanent and 160 temporary rooms. 

Bulk civil earthworks were finalised including pad preparation for construction of the power plant, warehouse, workshop, administration and site village, as well as construction of the raw water pond, runoff settlement ponds and site access roads. 

At the West Creek process water borefield the Company drilled a total of seven production bores and two monitoring bores that will supply the RO Plant (potable water) and water for the process plant. The production bores have been test-pumped and the steady state operation pumping philosophy finalised. 

In June 2020 SO4 awarded the Engineering, Procurement and Construction (EPC) and Engineering, Procurement and Construction Management (EPCM) contracts for construction of the processing facility to GR Engineering Services (ASX:GNG).  The EPC contract encompassed the provision of plant, labour, materials and construction services for the process plant and Non-Process Infrastructure (NPI) valued at A$85m. The EPCM contract encompassed the provision of services for the engineering, procurement and construction management for areas of the process plant and NPI, valued at A$22m. 

By the end of the financial year the project was 90% procured for major packages with all key vendor contracts executed. The largest procurement package, the process plant crystalliser, arrived at site in July 2020, several weeks ahead of schedule. Other major plant components including centrifuges, attritioners, flotation cells, sizing screens, thickeners, rotary drier, impact crushers, lump breakers and conveyer belts were procured and expected to arrive at site towards the end of the 2020 calendar year. 

Off-Take Agreements 

The Company executed purchase agreements with six offtake partners during the year, accounting for 224kt per annum of Lake Way's 245kt per annum capacity. In combination these agreements geographically diversify SO4's marketing portfolio with six reputable partners supplying SOP to six continents. 

Shares in SO4 have traded as high as 34p over the past three months with the shares opening flat at 25.5p following publication of FY20 Results. 

SO4 price chart

Financial Position 

At 30 June 2020, the Group had cash reserves of $7,030,418 (2019: $19,304,075) and net assets of $59,522,349 (2019: $14,708,374), an increase of 305% compared with the previous year.  

The increase in net assets is largely a result of raising $49,108,876 (net of costs) throughout the 12 month period and directly applying those funds to the construction and ongoing development of the Lake Way Project. 

Post Balance Sheet Date Highlights 

• On 2 July 2020, Salt Lake Potash announced it had received commitments to raise A$15m through the placement of unsecured zero-coupon Convertible Notes to corporate and institutional investors. The Convertible Notes are structured as deferred equity with zero coupon and mandatory conversion into equity at the lower of $0.45c per share or a 5% discount to any future equity raising of at least A$10m. Convertible Notes raising A$5m have since been converted at $0.45c per share. 
• On 5 August 2020, the Company announced it had fully funded the Lake Way Project via the execution of  a US$138m (A$203m) debt financing package and a fully underwritten equity placement and accelerated non-renounceable offer for A$98.5m to complete the construction of the Lake Way Project on schedule. The debt financing package is via a Syndicated Facility Agreement with Taurus Mining Finance Fund No.2 L.P. and the Clean Energy Finance Corporation.