PERTH (miningweekly.com) – An economic analysis of higher output at the Lake Wells sulphate of potash (SoP) project, in Western Australia, has improved the project’s economics.
ASX-listed Australian Potash on Wednesday told shareholders that by increasing production from the planned 170 000 t/y of SoP to 205 000 t/y, the project’s net present value would increase by 65%, from A$614-million to A$1.01-billion, while its internal rate of return would increase from 21% to 22%.
The higher output would also see average annual earnings before interest, taxes, depreciation and amortisation (Ebitda) rise by 27%, from A$124-million to A$158-million annually, while operating costs would decline by 17%, from $251/t to 295/t.
Meanwhile, capital cost estimates for the project would also increase by 39%, from the A$292-million originally considered, to A$408-million.
“The food security thematic is compounding global supply chain disruption caused by the pandemic and the conflict in eastern Europe. SoP pricing is at record levels in many markets. The short- and medium-term outlook for inflation in construction and operating costs has also increased since the front-end engineering design was published in April 2021,” said Australian Potash MD and CEO Matt Shackleton.
“Accordingly, we have updated SoP pricing assumptions, capital cost base and operational cost base of the Lake Wells model to reflect prevailing market conditions.
“Pleasingly, the SoP price outlook, upgrades to flow rates and brine grades and increased economies of scale offset a large proportion of the capital and operational cost inflation. The project is estimated to be valued at over A$1-billion, generating an average of A$158-million Ebitda a year with a mine life of 30 years,” said Shackleton.
“The Lake Wells SoP remains one of the world’s pre-eminent primary SoP project developments, which still carries Australia’s largest Joint Ore Reserves Committee-compliant SoP measured mineral resource.
“The significant learnings gained through witnessing and analysing peer developments, in addition to the expertise now available locally, underpin our conviction and momentum towards a final investment decision to proceed to development.”