Potash, page-3

There is arguably nowhere in Australia more desolate or remote than Lake Mackay, in the north of the Gibson Desert on the Western Australia-Northern Territory border.
Standing in the middle of the lake, its flat pearl-coloured salt-encrusted surface stretches to the horizon in every direction. Temperatures here regularly climb into the mid-40Cs.
It is also a long way from anywhere. The closest major centre is Alice Springs, some 650km away. It was from the shores of Lake Mackay that Australia’s last nomads — the Pintupi Nine, the last indigenous group living a traditional desert existence — emerged from the wilderness just over 30 years ago, generating headlines around the world.
But the salt lake may be home to one of the world’s biggest sulphate of potash (SOP) projects in just a few years, with ASX-listed Agrimin confident the lake can justify a $350 million development.
It’s a scene being played out across many of WA’s inhospitable desert salt lakes. A mini-boom for the fertiliser has driven several local plays to assess the potential of combining the three factors that have long made the salt lakes so hostile — the hypersaline groundwater, the soaring temperatures and extreme evaporation rates — to underpin world-scale SOP projects capable of competing with rivals in China and Utah.
Joining Agrimin in the SOP rush are the likes of Kalium Lakes, Reward Minerals, Salt Lake Potash and Australian Potash, all of which have put their feet on various salt lakes around WA.
Their various plans revolve around extracting the super-salty brines beneath the lakes, evaporating off the water through a series of ponds and separating out the SOP.
The SOP is particularly sought-after at the intensive end of the agricultural industry, with the fertiliser making a big difference to yields for crops such as fruit, vegetables and tobacco.
Potash enjoyed a brief moment in the sun a few years ago, when BHP was making its $40 billion takeover bid for Canada’s Potash Corporation of Saskatchewan. But the market for the muriate of potash (MOP) produced by global majors such as Potash Corp has been in the doldrums in recent years following a breakdown of the Russian and Belarus cartel that previously controlled supply.
However, the fall in MOP prices has not been reflected in SOP prices, which have consistently held around $US500 per tonne.
That is a price that should warrant the development of Australia’s first potash operations, and end the nation’s reliance on imported SOP.
“At that price, all the projects in Western Australia work, which is really exciting,” Agrimin chief executive Mark Savich told The Weekend Australian.
“If we’re all getting $US500 a tonne we can all deliver into that price, the farmers are better off because SOP increases their yields and we’re better off because we make money for shareholders.”
The current crop of Australian potash hopefuls do carry technical risks unfamiliar to most who invest in the resources sector. Instead of geology or metallurgy, the potash projects will live or die based around their hydrogeological characteristics — basically, how well the lakes drain over time.
The marketing of SOP is also somewhat unusual in the commodities space. SOP is a premium product but buyers can easily opt for MOP, or even no fertiliser at all, if prices are too high.
Logistics are another key challenge. In the case of Agrimin, its base case involves trucking its output to Alice Springs before putting it on a train for a 1400km trip to Darwin. It is now looking at an alternative route to truck the output “only” 950km north to Wyndham, but would need to find a way to fund the upgrade of the dirt track that makes up most of the route.
Even the potash project closest to a port, Kalium Lakes’ Beyondie, is facing a road journey of at least 700km.
The other key hurdle for many will be native title.
Agrimin this month formally secured its historic native title mining agreement with the Kiwirrkurra people — which includes the surviving members of the Pintupi Nine — to give it new certainty over its plans.
Agrimin’s Trench 1, where the company is testing how it can sustainably remove brine. Picture: Marie Nirme.
Kalium Lakes has one of the two native title agreements it needs, while Australian Potash has not had any native title claim lodged over its project. But native title issues have effectively quarantined half of Reward Minerals’ Lake Disappointment project, and a native title claim was recently lodged over a portion of Salt Lake Potash’s Lake Wells project.
News of the native title agreement helped add further momentum to an Agrimin share price that had already been performing strongly in recent months. The stock, which was trading at less than 50c just over a month ago, is now trading at 85c following the native title breakthrough.
The remoteness of Lake Mackay hasn’t perturbed the likes of boutique brokerage Argonaut, which included Agrimin in its latest annual list of the ASX’s best undeveloped projects.
“The key is its scale; it compares with global SOP from brine producers and is larger than other potential Australian SOP developers,” Argonaut wrote this week.
“This should allow brine extraction via surface trenching and enable delivery of product to port towards the lower end of the industry cost curve despite the distances involved.”
While Agrimin continues to push ahead with its ambitious plans for Lake Mackay, rival Kalium Lakes is taking a somewhat different tack.
Kalium Lakes — which is 40 per cent-owned by Pilbara pastoralist and helicopter pilot Brent Smoothy — is going for a “smaller is better” approach, which it hopes will deliver a project sooner and at less start-up cost than its rivals.
The company’s managing director, Brett Hazelden, is confident that Beyondie is the most deliverable of the potash projects vying for attention.
“There’s a logistical and grade advantage that we’ve got that we’re always going to have,” Mr Hazelden told The Weekend Australian.
“It has to translate into capital costs being lower.”