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Salt Lake Potash Ltd (SO4)

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Friday 30 July, 2021

Salt Lake Potash Ltd

June 2021 Quarterly Report

RNS Number : 1077H
Salt Lake Potash Limited
30 July 2021
 

30 July 2021

 

AIM/ASX Code: SO4

 

 

SALT LAKE POTASH LIMITED

June 2021 Quarterly Report

 

Salt Lake Potash Limited (SO4 or the Company) is pleased to present its Quarterly Report for the period ending 30 June 2021. The Company is focussed on delivering the Lake Way Sulphate of Potash Project in Wiluna, Western Australia.

Construction of the Lake Way process plant was finalised with GR Engineering Services handing over the plant to SO4 operations. Each of the 34 Process Units in the plant were individually commissioned with the SO4 operations team working towards achieving 'Stage 4' commissioning - bringing the plant into continuous operation and producing SOP. Recent activities have primarily focused on calibration of the flotation circuit to achieve expected recoveries. The company continues to work with the flotation circuit vendor and Design Engineer to bring performance up to modelled targets and expects the issue to be resolved this quarter.

Part IV Environmental Approval was received for the Lake Way project covering full-scale operations, including the expanded pond footprint and required brine abstraction infrastructure to enable production of 245kt per annum of SOP.

Salt harvesting activities continued with additional harvesting taking place in Train 1 and removal of the in-cell stockpiles, which were transported to the plant. Approximately 74kt of plant feed salts have now been harvested and are ready as feedstock for the plant.

A$28m in new equity was raised at A$0.35/share to enable the final US$33m tranche of the Senior Debt Facility to be drawn. The capital raise also enabled the implementation of an A$18m guarantee facility provided by Sequoia Economic Infrastructure Income Fund (SEQI), in support of the gas pipeline constructed by APA Operations Pty Ltd (APA).

Following the period-end the Company announced it will be implementing a revised ramp-up strategy that involves suspending the initial plant feed programme, following the processing of the first 90-110kt of harvest salts. As a result forecasted SOP production in FY'22 has been reduced and the Company has determined that it will require further funding before the end of 2021 to continue operations at Lake Way. Discussions to resolve the funding shortfall have commenced and once complete and agreed will be announced to the market.

Tony Swiericzuk Chief Executive Officer

"The Lake Way Project took major strides forward during the June quarter with the hand-over of the Process Plant and the granting of EPA Part IV approval. The entire SO4 team has been working tirelessly through the harvest salt pond management system and plant commissioning challenges over the last few weeks. We are disappointed these challenges have pushed out our expected ramp up profile however the project fundamentals remain attractive. I am grateful for the support and patience of our shareholders and our lenders as we work towards delivering first SOP and positive cash flow."

 

For further information please visit www.so4.com.au or contact:

Tony Swiericzuk / Richard Knights

Salt Lake Potash Limited

Tel: +61 8 6559 5800

Colin Aaronson / Lukas Girzadas

Grant Thornton UK LLP (Nominated Adviser)

Tel: +44 (0) 20 7383 5100

Derrick Lee / Peter Lynch

Cenkos Securities plc (Broker)

Tel: +44 (0) 131 220 6939




This announcement has been authorised for release by the Board of Directors.



 

Process Plant handover and commissioning

Construction and practical completion of the Lake Way process plant has been finalised with GR Engineering Services handing over the plant to SO4 in late June. Each of the 34 process units in the plant have been individually commissioned and the SO4 operations team is now working through the 'Stage 4' load commissioning process.

The SO4 operations team have been systematically working through the plant to ensure each unit is functioning within design parameters and the plant chemistry is established.

COVID-19 related border restrictions have impacted the travel arrangements of key commissioning personnel as well as affecting the timely transport of some commissioning supply items, impacting the commissioning schedule.

The commissioning process has involved calibrating and fine tuning several mechanical components in the plant including crushers, screens, cyclones, thickeners, centrifuges, control valves, agitators and pumps as well as the electronic control systems. More recently work has focussed on the calibration of the flotation circuit to achieve the designed waste mass pull.  'Batch trials' each using 500-800t of low-grade feed salt have been run, with mass-pull performance achieving variable results. The company continues to work with the flotation circuit vendor and design engineer to bring performance up to modelled targets and expects the issue to be resolved this quarter.

Non-process infrastructure

Installation of bagging plant and equipment were progressed with the Flexicon bulk bagging plant completed and installed.

The form fill seal bagging plant installation has progressed significantly and is expected to be completed during the September quarter. The plant will bag the product into 25kg bags for export via Fremantle.

On-Lake infrastructure

The paleochannel drilling campaign continued throughout the quarter, with new production bores drilled on pads 4, 16 and 22.

Total trench length excavated remained at 65.5km, with design for the upcoming Stage 3 extension programme finalised during the period.

Salt harvesting recommenced in Train 1 with the in-cell stockpiles that were harvested during the March quarter also transported to the plant. Around 90-110kt of harvest salt harvested ready as feedstock for the plant. 

Equity raise to enable final debt drawdown

In May, the Company completed a A$28 million equity capital raising by way of a placement of 79,947,858 Ordinary Shares at A$0.35 per new share (Placement).

The proceeds from the Placement will be used for general operating expenses during the ramp up of the Lake Way Project. The Placement was a key condition to enable the Company to undertake the final US$33 million drawdown under the Syndicated Facility Agreement, as well as providing for the implementation of an A$18 million guarantee facility to be provided by SEQI in support of the gas pipeline constructed by APA. The guarantee facility provided by SEQI will release A$18m in equity that will be used for general operating expenses during the ramp up of the project.

Within the Placement SO4 Directors subscribed for 2.8 million Placement Shares, including 2.5 million shares by Chairman Ian Middlemas and 250,000 by Managing Director and CEO Tony Swiericzuk, approved in a July shareholder meeting.

The issue price of A$0.35 per share represented a 12.5% discount to the last traded share price on ASX of A$0.40 and 14% to the 5-day volume weighted average share price on ASX prior to the Company entering into the Trading Halt on 21 May 2021.

Grant of Part IV EPA permit

The Company's Part IV Environmental submission was approved by the Government in April, having been recommended by the EPA with no appeals in January.

The permit enables SO4 to finalise construction of the remaining evaporation ponds as well as the  trench and bore construction that will support full scale operations at Lake Way of 245kt per annum of SOP.

Revised ramp-up strategy

Following the period-end the Company announced it will be implementing a revised ramp-up strategy that involves suspending the initial plant feed programme, following the processing of the first 90-110kt of harvest salts.

Under the revised ramp-up strategy the Company plans to process 90-110kt of plant feed salts to produce SOP for initial customer sales. Plant feed will then be suspended for a period of 10-14 weeks before harvesting activities and SOP production recommence. As a result, FY'22 forecast SOP production has reduced from 165-185kt to 85-105kt.

The revised mine plan is a result of three factors.

· A change in operating methodology for the ramp up period of the pond system has been implemented to manage salt grade variability in the harvest cells, reducing SOP production by c.63kt in FY'22: Ramp up of the ponds has followed the original modelling and expert advice, applying a continuous flow model that has resulted in brine with concentrations of less than 3.4%Mg (the concentration at which potassium salts begin to precipitate), being pumped into the harvest cells. As a result, salt formation in several harvest cells has exhibited higher grade variability than modelled, resulting in a lower average potassium and higher halite content. To rectify this issue the Company has adopted a revised operating methodology for the continued ramp up of the pond system that suspends brine transfer into all harvest cells until the chemistry reaches the required level, to minimise salt grade variability.

· Reduction in the estimation of available plant feed salt inventory, reducing SOP production by c.12kt of SOP in FY'22: The reduction in estimated plant feed salt inventory is based on the change between the Mine Plan Inventory Model used for the previous mine plan, and newly acquired data from bulk sampling taken during and after harvesting activities in June. Prior to the opportunity to undertake bulk sampling arising from cell harvesting, only multiple single point data collection had been taken from across the cells.

· The deferment and sterilisation of lower grade inventories determined as unsuitable for plant feed during ramp up, reducing SOP production by c.7kt of SOP in FY'22. As part of the plant modelling that was undertaken from bulk sampling results in June, the lower potassium grade threshold has been increased for the plant ramp-up period. As a result some material was sterilised (not to be used) and other deferred with the intention of being fed through the plant at a later date, once in steady state.

 

 



 

DISCLOSURES IN ACCORDANCE WITH ASX LISTING RULE 5.3

Summary of Mining Tenements

 

Project

Status

Type of Change

License Number

Interest (%)

31-Mar-21


Interest (%)

30-Jun-21

Western Australia






Lake Way






Central

Granted

-

E53/1878

100%

100%

East

Granted

-

E53/2057

100%

100%

South

Granted

-

E53/1897

100%

100%

South

Granted

-

E53/2059

100%

100%

South

Granted

-

E53/2060

100%

100%

West

Application

-

L53/208

100%

100%

Central

Granted

Application to Granted

M53/1102

100%

100%

Central

Granted

Application to Granted

M53/1103

100%

100%

Central

Granted

Application to Granted

M53/1104

100%

100%

Central

Granted

Application to Granted

M53/1105

100%

100%

Central

Granted

Application to Granted

M53/1106

100%

100%

Central

Granted

Application to Granted

M53/1107

100%

100%

East

Application

-

M53/1109

100%

100%

Central

Granted

-

E53/1862

100%

100%

West

Granted

-

E53/1863

100%

100%

North

Application

-

E53/1905

100%

100%

North

Withdrawn

Application to Withdrawn

E53/1952

100%

0%

West

Application

-

E53/1966

100%

100%

North

Application

-

E53/2049

100%

100%

North

Surrendered

Granted to Surrendered

P53/1637

100%

0%

North

Surrendered

Granted to Surrendered

P53/1642

100%

0%

West

Granted

-

P53/1643

100%

100%

West

Granted

-

P53/1644

100%

100%

West

Granted

-

P53/1645

100%

100%

West

Surrendered

Granted to Surrendered

P53/1646

100%

0%

Central

Surrendered

Granted to Surrendered

P53/1666

100%

0%

Central

Surrendered

Granted to Surrendered

P53/1667

100%

0%

Central

Surrendered

Granted to Surrendered

P53/1668

100%

0%

North

Granted

-

M53/121

100%

100%

West

Granted

-

M53/122

100%

100%

West

Granted

-

M53/123

100%

100%

West

Granted

-

M53/147

100%

100%

Central

Granted

-

M53/253

100%

100%

Central

Granted

-

M53/796

100%

100%

Central

Granted

-

M53/797

100%

100%

Central

Granted

-

M53/798

100%

100%

Central

Granted

-

M53/910

100%

100%

West

Application

Application

L29/147

0%

100%

West

Granted

-

L53/51

100%

100%

West

Granted

-

L53/207

100%

100%

West

Granted

-

L53/211

100%

100%

North

Granted

-

L53/212

100%

100%

West

Granted

-

-

L53/214

100%

100%

West

Granted

-

 

L53/215

100%

100%

North

 

 

 

 

Granted

-

L53/216

100%

100%

West

Application

-

L53/217

100%

100%

West

Granted

-

L53/218

100%

100%

West

Application

-

L53/210

100%

100%

West

Application

-

L53/219

100%

100%

South

Granted

-

L53/225

100%

100%

West

Granted

-

L53/226

100%

100%

West

Application

-

L53/228

100%

100%

West

Granted

Application to Granted

L53/229

100%

100%

West

Application

-

L53/238

100%

100%

West

Granted

-

G53/24

100%

100%

West

Granted

-

G53/25

100%

100%

Lake Wells






Central

Granted

-

E38/2710

100%

100%

South

Granted

-

E38/2821

100%

100%

North

Granted

-

E38/2824

100%

100%

Outer East

Granted

-

E38/3055

100%

100%

Single Block

Granted

-

E38/3056

100%

100%

Outer West

Granted

-

E38/3057

100%

100%

North West

Granted

-

E38/3124

100%

100%

West

Granted

-

L38/262

100%

100%

East

Granted

-

L38/263

100%

100%

South West

Granted

-

L38/264

100%

100%

South

Granted

-

L38/287

100%

100%

South Western

Granted

-

E38/3247

100%

100%

South

Granted

-

M38/1278

100%

100%

Central

Application

-

E38/3380

100%

100%

  North

Application

-

E38/3469

100%

100%

  Central

Application

-

E38/3470

100%

100%

Lake Ballard






West

Granted

-

E29/912

100%

100%

East

Granted

-

E29/913

100%

100%

North

Granted

-

E29/948

100%

100%

South

Granted

-

E29/958

100%

100%

South East

Granted

-

E29/1011

100%

100%

South East

Granted

-

E29/1020

100%

100%

South East

Granted

-

E29/1021

100%

100%

South East

Granted

-

E29/1022

100%

100%

South

Granted

-

E29/1067

100%

100%

South

Granted

-

E29/1068

100%

100%

East

Granted

-

E29/1069

100%

100%

North

Granted

-

E29/1070

100%

100%

Lake Irwin






West

Granted

-

E37/1233

100%

100%

Central

Granted

-

E39/1892

100%

100%

East

Granted

-

E38/3087

100%

100%

North

 

Granted

-

E37/1261

100%

100%

Central East

Granted

-

E38/3113

100%

100%

South

Granted

-

E39/1955

100%

100%

North West

Granted

-

E37/1260

100%

100%

South West

Granted

-

E39/1956

100%

100%

Lake Minigwal






West

Granted

-

E39/1893

100%

100%

East

Granted

-

E39/1894

100%

100%

Central

Granted

-

E39/1962

100%

100%

Central East

Granted

-

E39/1963

100%

100%

South

Granted

-

E39/1964

100%

100%

South West

Granted

-

E39/1965

100%

100%

Lake Marmion






North

Granted

-

E29/1000

100%

100%

Central

Granted

-

E29/1001

100%

100%

South

Granted

-

E29/1002

100%

100%

West

Granted

-

E29/1005

100%

100%

West

Application

-

E29/1069

100%

100%

Lake Noondie






North

Granted

-

E57/1062

100%

100%

Central

Granted

-

E57/1063

100%

100%

South

Granted

-

E57/1064

100%

100%

West

Granted

-

E57/1065

100%

100%

East

Granted

-

E36/932

100%

100%

Central

Granted

-

E36/984

100%

100%

Central

Application

-

E36/985

100%

100%

Lake Barlee






North

Granted

-

E30/495

100%

100%

Central

Granted

-

E30/496

100%

100%

South

Granted

-

E77/2441

100%

100%

Lake Raeside






North

Granted

-

E37/1305

100%

100%

Lake Austin






North

Application

-

E21/205

100%

100%

West

Application

-

E21/206

100%

100%

East

Granted

-

E58/529

100%

100%

South

Granted

-

E58/530

100%

100%

South West

Granted

-

E58/531

100%

100%

 

Appendix 5B

Mining exploration entity or oil and gas exploration entity
quarterly cash flow report

Name of entity

Salt Lake Potash Limited

ABN

 

Quarter ended ("current quarter")

98 117 085 748


30 June 2021

 

Consolidated statement of cash flows

Current quarter
$A'000

Year to date (12 months)
$A'000

1.

Cash flows from operating activities

-

-

1.1

Receipts from customers

1.2

Payments for

(105)

(1,825)


(a)  exploration & evaluation


(b)  development

-

-


(c)  production

-

-


(d)  staff costs

(545)

(2,149)


(e)  administration and corporate costs

(467)

(3,099)

1.3

Dividends received (see note 3)

-

-

1.4

Interest received

12

96

1.5

Interest and other costs of finance paid

(109)

(120)

1.6

Income taxes paid

-

-

1.7

Government grants and tax incentives

-

3,639

1.8

Other (provide details if material)

  - Business Development

  - Other

 

(1,537)

-

 

(5,588)

-

1.9

Net cash from / (used in) operating activities

(2,751)

(9,046)


2.

Cash flows from investing activities

-

-


Payments to acquire or for:


(a)  entities


(b)  tenements

-

(715)


(c)  property, plant and equipment

(295)

(2,267)


(d)  exploration & evaluation

-

-


(e)  investments

-

-


(f)  other non-current assets - Mine Properties in development

(51,725)

(203,048)

2.2

Proceeds from the disposal of:

-

-


(a)  entities


(b)  tenements

-

-


(c)  property, plant and equipment

-

-


(d)  investments

-

-


(e)  other non-current assets

-

-

2.3

Cash flows from loans to other entities

-

-

2.4

Dividends received (see note 3)

-

-

2.5

Other - (Bank Guarantee)

-

(18,000)

2.6

Net cash from / (used in) investing activities

(52,020)

(224,030)


3.

Cash flows from financing activities

27,000

200,547

3.1

Proceeds from issues of equity securities (excluding convertible debt securities)

3.2

Proceeds from issue of convertible debt securities

-

-

3.3

Proceeds from exercise of options

-

-

3.4

Transaction costs related to issues of equity securities or convertible debt securities

(1,730)

(9,728)

3.5

Proceeds from borrowings

61,279

199,535

3.6

Repayment of borrowings and leases

(849)

(61,116)

3.7

Transaction costs related to loans and borrowings

(3,864)

(19,568)

3.8

Dividends paid

-

-

3.9

Other (Cash allocation of Debt Service Reserve and Debt Prepayment Reserve)

(14,533)

(25,069)

3.10

Net cash from / (used in) financing activities

67,303

284,601


4.

Net increase / (decrease) in cash and cash equivalents for the period



4.1

Cash and cash equivalents at beginning of period

46,066

7,030

4.2

Net cash from / (used in) operating activities (item 1.9 above)

(2,751)

(9,046)

4.3

Net cash from / (used in) investing activities (item 2.6 above)

(52,020)

(224,030)

4.4

Net cash from / (used in) financing activities (item 3.10 above)

67,303

284,601

4.5

Effect of movement in exchange rates on cash held

202

245

4.6

Cash and cash equivalents at end of period

58,800

58,800

 

5.

Reconciliation of cash and cash equivalents
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter
$A'000

Previous quarter
$A'000

5.1

Bank balances

58,750

46,016

5.2

Call deposits

50

50

5.3

Bank overdrafts

-

-

5.4

Other (provide details)

-

-

5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

58,800

46,066

 

6.

Payments to related parties of the entity and their associates

Current quarter
$A'000

6.1

Aggregate amount of payments to related parties and their associates included in item 1

(223)

6.2

Aggregate amount of payments to related parties and their associates included in item 2

-

Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments.

 

7.

Financing facilities
Note: the term "facility' includes all forms of financing arrangements available to the entity.

Add notes as necessary for an understanding of the sources of finance available to the entity.

Total facility amount at quarter end
$A'000

Amount drawn at quarter end
$A'000

7.1

Loan facilities

176,909

176,909

7.2

Credit standby arrangements

-

-

7.3

Other (please specify)

-

-

7.4

Total financing facilities

176,909

176,909




7.5

Unused financing facilities available at quarter end

-

7.6

Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

In August 2020, the Company and its subsidiaries and Taurus Mining Finance Fund No. 2, L.P. and the Clean Energy Finance Corporation entered into the Syndicated Facility Agreement for a US$138 million debt financing package (SFA). After achieving financial close in December 2020, the Company announced its first draw down under the SFA totalling US$105 million enabling repayment of the US$45 million Stage 1 Bridge facility originally entered into in 2019.

The SFA is secured and interest payable at 9.00% pa and as of June 2021 the entire $138 million has been drawn down.

As the loan is denominated in USD, the facility amount drawn down has been converted at an FX rate of $0.7518 USD/AUD, being the FX cross rate at 30 June 2021.


In June 2021, the company also executed an A$18m Guarantee Facility with Sequoia Economic Infrastructure Fund (SEQI) at an interest rate of 12.00% pa.

 

8.

Estimated cash available for future operating activities

$A'000

8.1

Net cash from / (used in) operating activities (item 1.9)

(2,751)

8.2

(Payments for exploration & evaluation classified as investing activities) (item 2.1(d))

-

8.3

Total relevant outgoings (item 8.1 + item 8.2)

(2,751)

8.4

Cash and cash equivalents at quarter end (item 4.6)

58,800

8.5

Unused finance facilities available at quarter end (item 7.5)

-

8.6

Total available funding (item 8.4 + item 8.5)

76,800




8.7

Estimated quarters of funding available (item 8.6 divided by item 8.3)

n/a refer note below

Note: if the entity has reported positive relevant outgoings (ie a net cash inflow) in item 8.3, answer item 8.7 as "N/A". Otherwise, a figure for the estimated quarters of funding available must be included in item 8.7.

8.8

If item 8.7 is less than 2 quarters, please provide answers to the following questions:







Answer: Not applicable.


 



 

Compliance statement

1  This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2  This statement gives a true and fair view of the matters disclosed.

 

Date:  xx July 2021

 

Authorised by:  By the Board

(Name of body or officer authorising release - see note 4)

 

Notes

1.  This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.  If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.  Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.  If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5.  If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related Party Payments

During the quarter ended 30 June 2021, the Company made payments of $223,000 to related parties and their associates. These payments relate to existing remuneration arrangements (executive salaries, director fees and superannuation).

 

Additional Disclosures

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018 . Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Forward Looking Statements

This announcement includes forward-looking statements. These forward-looking statements are based on the Company's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, which could cause actual results to differ materially from such statements. Although the Company believes that its forward-looking statements have reasonable grounds, can give no assurance that they will be achieved. They may be affected by a variety of variables and changes in underlying assumptions that are subject to risk factors associated with the nature of the Company's business (including those described in pages 25 to 29 (inclusive) of the Presentation released to ASX on 11 December 2020), which cause actual results to differ materially from those expressed herein. The Company makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, save where required by law or regulation, to reflect the circumstances or events after the date of this announcement.

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