Reporting by Michael Nienaber; additional reporting by Edward Taylor, Ilona Wissenbach, Ludwig Burger and Andrea Shalal.
BERLIN — Germany has earmarked 1 billion euros ($1.2 billion) to support a consortium looking to produce electric car battery cells and plans to fund a research facility to develop next-generation solid-state batteries, three sources told Reuters.
The measures, expected to be announced next week, are designed to reduce the dependence of German carmakers on Asian electric vehicle (EV) battery suppliers and protect German jobs at risk from the shift away from combustion engines.
Berlin’s push to shape industrial policy marks a break with its generally “hands off” approach to business decisions and is part of European efforts to forge battery alliances to counter the dominance of Chinese, Japanese and Korean firms.
Ensuring local companies are involved throughout the electric vehicle supply chain is particularly important for Germany as it has become so economically dependent on the success of its car industry.
But Germany’s car battery push could be too late. Asian market leaders are ramping up output and some experts say there’s a risk of a glut that could hinder the establishment of large-scale battery cell production by European newcomers.
For Chancellor Angela Merkel’s fractious ruling coalition, the plan is also a way to show voters ahead of three elections next year in eastern Germany that it can get its act together to help Europe’s largest economy thrive in the electric car era.
“We have a concentration of risk in the automobile sector. The industry is too dependent on the combustion engine,” Deputy Economy Minister Christian Hirte told Reuters. “The government therefore wants to help the sector in its efforts to diversify.”
Hirte said Berlin was in talks with several companies and other governments in Europe to support a battery cell factory.
“There are possibilities for example in the Lausitz region, maybe in cooperation with Poland,” said Hirte, who is the government’s coordinator for Eastern German affairs and for small- and medium-sized enterprises policy.
“One thing is clear: you cannot ignore east Germany if you are planning such mega projects. There is a lot of space and the acceptance among the population is great.”
Companies involved in talks with Economy Minister Peter Altmaier about building a factory include German battery maker VARTA Microbattery, chemical giant BASF and Ford’s German subsidiary Ford-Werke GmbH, three people familiar with the matter told Reuters.
A spokeswoman for BASF said it would attend a meeting with Altmaier next week. Varta and Ford declined to comment.
Varta specializes in batteries for hearing aids and large storage systems for solar energy. It said last month it was studying the production of large lithium batteries and was in intensive discussions with relevant market actors.
Volkswagen’s supervisory board is due to discuss its electric car and battery cell strategy at a meeting on Nov. 16. The German carmaker has said in the past that it was studying battery cell production at its plant in Salzgitter.
A source told Reuters on Thursday that the board would discuss a far-reaching alliance with South Korean battery cell maker SK Innovation.
Some analysts say Europe is already too far behind in the race with Asian firms, at least with the current technology.
Boston Consulting Group (BCG), for example, has estimated global battery cell production capacity will exceed demand by about 40 percent in 2021, exerting massive pressure on prices and making it hard for new entrants to make money.
The announcement by the world’s biggest EV battery maker — China’s Contemporary Amperex Technology Ltd (CATL) — that it would build its first European plant in eastern Germany and has struck a deal with German carmaker BMW has been welcomed by the government.
But Merkel told business leaders it was “extremely important” Germany also develops its own battery cell capacity to secure the country’s role in the car industry.
For years, German car bosses have been reluctant to push ahead with electric cars, instead focusing on diesel engines. But they now face a challenge to make combustion engines comply with tougher emissions rules introduced following the emissions cheating scandal that engulfed Volkswagen.
Despite BCG’s predictions of a glut, analysts at consultants McKinsey & Company and Germany’s Fraunhofer Institute say there will be room for European newcomers as demand is likely to outstrip supply when automakers ramp up EV production.
German carmakers have warned, however, that jobs could disappear — because it takes less time to build electric cars and as positions shift overseas to foreign battery makers.
Germany’s VDA auto industry association has said a ban on combustion engine-powered vehicles in 2030 would threaten 436,000 jobs at car companies and their suppliers.
“Battery cells are a key technology and an important part of the value chain. That’s why we want to locate this in Germany,” Hirte said.
Recognizing the importance of a homegrown battery industry for jobs and profits, the European Commission launched its own European Battery Alliance (EBA) in 2017 but Sweden’s Northvolt is seen as the only serious contender to emerge so far.
As part of Berlin’s push, Economy Minister Altmaier is talking to German and European companies as well as neighboring countries to try to join forces. He is coordinating his efforts with Brussels to resolve any state aid and antitrust issues.
“In a few years, Europe will have a competitive battery cell sector that can survive without state aid,” Altmaier said in September after meeting the E.U.’s Vice-President for Energy Union Maros Sefcovic, who has been the driving force behind the EBA.
Altmaier is expected to announce more details of his battery cells plan during a two-day conference in Berlin starting on Nov. 12 that will be attended by Sefcovic.
The billion euros earmarked for a German battery cells consortium would help establish a first factory, probably in western Germany, two sources familiar with the plans said.
Berlin is also willing to support a second plant, possibly in the Lausitz region near the German-Polish border where two of the regional elections in 2019 will take place, they said.
An Economy Ministry spokeswoman said Altmaier was in talks with all relevant parties and no decisions had been made.
In addition, the government wants to spend up to 500 million euros to co-finance a research factory to help put German companies ahead of the curve when solid-state batteries are ready for the mass market, another source told Reuters.
Lithium-ion batteries are likely to be overtaken in a matter of years by solid-state technology that is expected to produce cheaper batteries with higher energy density.
The location of the research factory has not been decided and the government is about to start a tender process in which authorities and firms can pitch for the site, the source said.
A Science Ministry spokesman said the government was supporting efforts to develop solid state batteries by bringing together leading research institutes with the private sector.
Companies involved in the network, known as FestBatt, include Varta, BASF, Volkswagen, BMW, car parts maker Continental, conglomerate Thyssenkrupp, carbon fiber specialist SGL Carbon, Belgian materials firm Umicore, Coperion and Heraeus, the spokesman said.
For now, German carmakers are sourcing battery cells predominantly from Asian suppliers such as CATL, LG Chem and Samsung SDI although BMW has struck a partnership with Northvolt.
Underlining the uphill battle German firms face, one of the world’s biggest automotive suppliers, Bosch, has opted out of making lithium-ion cells, saying it would be too costly.
Hans-Martin Henning, an electric mobility researcher at Fraunhofer, is less pessimistic.
“If automakers boost their electric car production to 10 to 20 percent of total sales in coming years, Europe will need battery cell factories with more than 100 gigawatt hours,” he said, well above the capacity planned by Asian producers so far.
“We’ll need far more battery cells in Europe — and this must happen pretty fast indeed,” Henning said.
The expected shift to solid-state batteries could also make European suppliers less dependent on the rare earth resources largely controlled by China that are used in lithium-ion cells.
Full article here
SSE plc SSE although interim results for the six months to the 30th September are ahead of previous expectations they are only slightly so and they are still fairly dire. Adjusted profit before tax is down by 40.9% and adjusted earnings per share by 39.9% with a reported loss per share of 22.6p. The Chairman admits that they fall well short of what the company hoped to achieve at the start of the year and that this is disappointing and regrettable. Not however so regrettable and disappointing as to prevent the company from increasing the dividend by 3.2%. No doubt that may help to divert a certain amount of wrath.
Smiths Group SMIN saw revenue fall by 1% in the 3 months to the end of October as the company was impacted by a number of factors. At Smiths Medical, revenue was impacted by the previously announced regulatory and contract challenges. In Smiths Detection, the phasing of orders impacted first quarter revenue but a robust order book is expected to see a strong second half. Management expectations for the full year remain unchanged
AB Dynamics plc ABDP has delivered another year of record revenue and adjusted profit. Revenue for the year to 31st August grew by 51%, profit before tax by 78% and basic earnings per share by 74%. The proposed final dividend is to be increased by 10%. Despite this very strong growth, order intake has continued to run ahead of sales and this has provided a healthy order book with visibility into the third quarter of 2019
Workspace Group WKP reports a strong perfomance driven by customer demand for the half year to the 30th September. Strong growth in net rental income, up 17% year on year, resulted in 20% growth in adjusted trading profit and the interim dividend is also to be increased by 20%. However despite all this talk of strong performances and dividend increases profit before tax fell by 18%
Marshall Motor Holdings MMH updates that following better than anticipated trading during October 2018 and a more positive outlook for the remainder of the current financial year.the Board expects continuing underlying profit before tax for the year ending 31 December 2018 will be ahead of the Group’s record results reported last year.
Falanx Group Ltd FLX Interim results for the six months to the 30th September delivered a rise of 51% in Group Revenue, with an even more spectacular rise in the cyber division of 198%. Cyber attacks pose ever growing threats and provide an increasing opportunity for the company. New business is at record levels, as are tendering opportunities.
Oil play, 5.5% yield (income paid quarterly),8% discount to assets, BREXIT currency hedge..what more do you want?
Black Rock Commodities Income Investment Trust –ISIN GB00B0N8MF98-BRCI
Oil remains one of the strongest major commodities this year and despite recent exemptions from Iranian sanctions, looks likely to stay well supported.
The major companies themselves Royal Dutch #RDSB, BP #BP, Total, Eni, Norsk Hydro etc have been major beneficiaries of the stronger spot price and, with greater capital discipline, have rebuilt balance sheets and engaged in shareholder friendly actions whether dividend increases or share buy-backs.
One way of accessing this sector is through the Black Rock Commodities Income Investment Trust.
The object of this investment trust is to achieve an annual dividend target, (currently 4p), and over the long term, capital growth, by investing primarily in securities of companies operating in the mining and energy sector.
- The fund predominantly invests in large quoted equities, the split between oil and mining being approximately oil, majors plus exploration/production 42%, and mining 56%, as at end September 2018.
- Underlying major mining companies, have for the large part responded to the historic weaker trend in resource prices, maintaining balance sheet discipline and adjusting their cost bases. There have been some examples of spectacular self-help stories e.g. Glencore and Anglo-American Mining.
- Recent mining conferences have highlighted the need for increased use of Lithium, Cobalt, Nickel and Copper relating to Electronic Vehicles.BRCI has been building exposure to these elements over the last couple of years. For example, Glencore (5.2% of assets) is now one of the leading global suppliers of Cobalt, a vital component for rechargeable batteries.
- Rising economic growth projections, supply constraints and a changing OPEC stance have significantly helped the prospects of the major oil companies held. Royal Dutch and BP have both recently announced good third quarter figures and both have annual dividend yields near 6%. Statoil and Total also confirmed the more favourable trend for oil majors.
- As at End September 2018, the Fund ‘s major holdings featured BHP (8.9%), Royal Dutch (6.7%) Rio Tinto (6.2%), First Quantum (5.7%), Glencore (5.2%), Exxon (4.2%), and Teck Resources (4. 5%). The top ten holdings represented over 55% of the total portfolio, a relatively concentrated stance.
- The global nature of these companies provides exposure to non-sterling currencies, especially the US dollar. This can benefit both capital and income when sterling is on a weaker trend. In this regard, the instrument may be seen partially as a no-deal BREXIT hedge.
- On a TECHNICAL NOTE, it should be noted that energy and material stocks represent about 27% and 24% of the FTSE100 index and the FT All-Share index respectively. If using these as benchmarks, the weighting in these sectors can materially affect the relative performance of UK active and passive funds.
- As well as targeting financially strong dividend paying equities the company also employs option writing strategies and an element of gearing, currently near 10%, to further improve the sources of income.
- On an annual yield, over 5.5%, (payable quarterly), this trust represents a high-income longer-term value play, but investors should be aware of the volatility of the underlying sector-maybe another reason to adopt a pooled approach. The trust currently trades at a current discount to net assets of near 8%, near the ten year’s low, compared with the premium on which it traded for most 2008-2016 period (see graph below). The company operates a discount management procedure from time to time.
Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.
Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.
Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.
All stock recommendations and comments are the opinion of writer.
Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.
All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.
You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk
The author may have historic or prospective positions in securities mentioned in the report.
The material on this website are provided for information purpose only.
Please contact Ken, (firstname.lastname@example.org) for further information
Vodafone Group plc “challenging competitive conditions” are words which bring a chill to the boardroom of any company and Vodafone is no exception. Quite simply the impact of its problems turned it from a profitable company in 2017 to a loss making one in the first half of 2018. Group revenue declined by 5.5%, impacted by those troublesome foreign exchange headwinds, the adoption of IFRS 15. and the sale of Quatar. With all these impacts the loss for the half year came in at €7.8 billion, including the further impact of a €3.4 billion loss on the disposal of Vodafone India. Impairments of €3.5 billion in Spain, Romania and Vodafone Idea, added to the company’s woes. Some of its customers may say that this is the year when at last Vodaphone got its comeuppance.
Taylor Wimpey TW Claims delivery of a strong performance during the second half of 2018, with very strong sales, a supportive lending environment and of course huge and completely unjustifiable support from the taxpayer. The order book remains strong, with a 12% rise on last year and customer demand is robust. Shareholders naturally get their rewards with the return of £600 million by way of total dividends promised for 2019, a 20% increase on 2018.
IQE plc IQE confirms it was notified yesterday, following an announcement made by a major chip company in the VCSEL supply chain , that the chip company had received notice from one of their largest customers for 3D sensing laser diodes that they would materially reduce shipments for the current quarter. As a result IQE expects revenues for the full year 2018 will be approximately £160.m.compared to £154.6m for 2017, whilst adjusted EBITDA is expected to be approximately £31m as against £37.1m for 2017. The slowdown in shipments will therefor materially impact expected year end revenues and profitability at IQL.
AdEPT Tech Group plc ADT is delighted by the continued progress being made by the Group in its transformation.Total revenue for the six months to the 30th September rose by 9.5%, EBITDA by 10.7% and the interim dividend is to be increased by 15.3% to 4.9p per share.
James Cropper plc CRPR Produced revenue growth in all divisions with total revenue up 6% in the half year to the 29th September. Profit before tax however at £1.4m, fell by 39% compared to 2017 and earnings per share were down by 44% as profitability was impacted by higher pulp prices over the year.
ECR has published a new corporate presentation on its website, which may be viewed at the following link:
In addition, reflecting interest in the Sierra de las Minas gold project in La Rioja, Argentina, ECR has prepared a project specific presentation in both English and Chinese and this may be viewed on the Company’s website at the following link:
FOR FURTHER INFORMATION, PLEASE CONTACT:
|ECR Minerals plc||Tel: +44 (0)20 7929 1010|
|David Tang, Non-Executive Chairman|
|Craig Brown, Director & CEO|
|WH Ireland Ltd||Tel: +44 (0)161 832 2174|
|Katy Mitchell/James Sinclair-Ford|
|SI Capital Ltd||Tel: +44 (0)1483 413500|
ABOUT ECR MINERALS PLC
ECR is a mineral exploration and development company. ECR’s wholly owned Australian subsidiary Mercator Gold Australia has 100% ownership of the Avoca, Bailieston, Creswick, Moormbool and Timor gold exploration licences in central Victoria, Australia.
ECR has earned a 25% interest in the Danglay epithermal gold project, an advanced exploration project located in a prolific gold and copper mining district in the north of the Philippines. An NI43-101 technical report was completed in respect of the Danglay project in December 2015 and is available for download from ECR’s website.
ECR’s wholly owned Argentine subsidiary Ochre Mining has 100% ownership of the SLM gold project in La Rioja, Argentina. Exploration at SLM has focused on identifying small tonnage mesothermal gold deposits which may be suitable for relatively near-term production.
Andalas Energy and Power PLC, is pleased to report that Corallian Energy Limited (“Corallian”), the Exploration Operator for Licence P1918, has informed the joint venture partners that the Department for Business, Energy and Industrial Strategy, Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) has advised the Oil and Gas Authority of its in principle agreement to the issue of the relevant consent for the Colter well, in which Andalas has an 8% interest.
There are several regulatory approvals and notifications still required before the consenting process is completed for the work programme. When all the necessary approvals have been obtained, Corallian expects to commence a two-well work programme, with the drilling of the Wick well (in which Andalas does not have an interest) expected to commence during December 2018. Following completion of the Wick well, the rig will be mobilised from the Moray Firth to the English Channel to drill the Colter well.
No further announcements are expected from Corallian until all the approvals are in place and the drilling programme has commenced.
Simon Gorringe, CEO of Andalas Energy and Power PLC said “We are pleased with the continued progress of the operator towards the commencement of the proposed well, which follows today’s announcement and the recent announcement of the contracting of the Ensco-72 rig to execute the Wick and Colter drilling programme.
“The drilling of the Colter well will expose Andalas shareholders to an exciting period of drilling activity, whilst we continue to work with our partners to complete the acquisition of Bunga Mas and to provide updates on the Badger licence. I look forward to keeping the market informed as we continue to progress our portfolio.”
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (‘MAR). Upon the publication of this announcement via a Regulatory Information Service (‘RIS’), this inside information is now considered to be in the public domain.
For further information, please contact:
|Simon Gorringe||Andalas Energy and Power Plc||Tel: +62 21 2965 5800|
|Roland Cornish/ James Biddle||Beaumont Cornish Limited
|Tel: +44 20 7628 3396|
|Colin Rowbury||Novum Securities Limited
|Tel: +44 207 399 9427|
|Christian Dennis||Optiva Securities Limited
|Tel: +44 20 3411 1881|
|Stefania Barbaglio||Cassiopeia Services Limited
Article by Mike Scott, Forbes
Large-scale energy storage used to be part of the future of energy. But it’s here now, and it’s going to become increasingly important in the years to come.
Clean energy researchers at Bloomberg NEF (BNEF) find that more than $1 trillion will be invested in the sector between now and 2040. The group’s latest Long-Term Energy Storage Outlook says that the “tumbling costs of utility-scale lithium-ion battery storage systems will transform the economic case for batteries in both the vehicle and the electricity sector”, predicting that prices will fall by 52% between 2018 and 2030, adding to the steep declines already experienced this decade.
This will lead to $1.2 trillion of investment flowing to the sector in the next 22 years, creating a cumulative capacity of 942GW, BNEF said. In the near term, the market will be dominated by South Korea and the US, but China will be the driving force from the 2020s onward.
Energy storage is key to helping governments decarbonize their economies by using more renewable energy because the dominant sources, wind and solar, are intermittent and do not provide constant power. “ Cheap batteries mean that wind and solar will increasingly be able to run when the wind isn’t blowing and the sun isn’t shining ,” the report says.
Logan Goldie-Scot, head of energy storage at BNEF, added: “We see energy storage growing to a point where it is equivalent to 7% of the total installed power capacity globally in 2040. The majority of storage capacity will be utility-scale until the mid-2030s, when behind the meter applications overtake.”
Behind-the-meter, or BTM, applications will be installed in business and industrial premises, and in millions of homes. For their owners, they will perform a variety of tasks, including shifting grid demand in order to reduce electricity costs, storing excess rooftop solar output, improving power quality and reliability, and earning fees for helping to smooth voltage on the grid.
Two thirds of installed capacity in 2040 will be in just nine markets – China, the US, India, Japan, Germany, France, Australia, South Korea and the UK, the Outlook says. However, there will also be rapid growth in other markets, especially emerging markets in Africa. Utilities are likely to “recognize increasingly that isolated assets combining solar, diesel and batteries are cheaper in far flung sites than either an extension of the main grid or a fossil-only generator,” the report says.
Energy storage can play a number of roles in the electricity system, helping to balance variable supply and demand, helping the grid operate more efficiently and allowing individual customers to cut their bills by cutting peak-time use . Eventually, it may be possible to aggregate lots of behind-the-meter projects to provide a viable alternative to utility-scale for many applications but it will take years before regulatory frameworks in some countries fully allow this, BNEF says.
Nonetheless, energy storage will become a practical alternative to new-build generation or network reinforcement, the analysts say.
But even with this rapid growth in the market, BNEF says that stationary storage sector will make up only 7% of total battery demand in 2040. “It will be dwarfed by the electrical vehicle market, which will more materially impact the supply-demand balance and prices for metals such as lithium and cobalt,” the Outlook concludes.
Article via Cube Investments Nov 10th
Salt Lake Potash (SO4) is an AIM/ASX listed-potash company looking to produce sulphate of potash (SOP) from nine salt lakes in Western Australia which total over 3,300km² (latest share price: 26p ask, market cap £53million).
The company recently appointed a new CEO and raised money to “fund construction of the Williamson Ponds and dewatering of the Williamson Pit, as well as ongoing development of on-lake infrastructure, exploration and feasibility studies, and general working capital”
SOP is a premium, environmentally-friendly product. I have previously discussed the benefits of SOP on this website.
The nine salt lakes are close to infrastructure and two shipping ports.
Fundraising – A$13m at 23p equivalent
Salt Lake have just raised A$13m at a price of 23p equivalent. The cornerstone investor is a “significant international investment fund” while management are taking over 7% of the new shares. My hunch is that the institutional investor doesn’t want to be named because they either want to purchase more shares or be involved with any future raises before the valuation starts to more accurately reflect the potential. See the fundraising RNS.
Director Holdings – yes, they do hold!
It’s a bit difficult to find out that directors hold shares. Unhelpfully, their names do not appear on the share register – the companies they hold the shares through do. Prior to the recent raise, directors owned over 10% of the shares. I have asked the company to show director holdings more clearly on their website.
Country Risk – Western Australia
Western Australia is both mining friendly and first world. I prefer investments in stable countries as financing in a stable jurisdiction is simpler and rule of law is more likely to be followed. Salt Lake already has approval to construct ponds at Lake Way.
New CEO – Tony Swiericzuk
Mr Swiericzuk was previously Director of Business Development and Exploration at Fortescue Metals (Australian ticker FMG, market cap A$13bn). He has overseen the construction and optimisation of one of the world’s lowest-cost iron projects.
Upon his appointment, he stated:
“A deep dive into Salt Lake Potash’s high quality technical work, business model and relationships has convinced me that it is easily the best company to lead the development of the sector in Australia. Its multi-lake holdings in proximity to the Goldfields infrastructure is paramount and offers great potential to achieve cost savings and economies of scale, as we did in the iron ore sector.”
Tony is no doubt well connected, technically capable and well-placed to accelerate the development of Salt Lake into a leading potash producer.
Salt Lake brine extraction
Salt Lake brine extraction is very simple – dig a trench, let it fill with brine, allow mother nature to evaporate the water content, harvest and process:
(Source: Salt Lake Potash. The presentation also includes the chemical processing information for those interested.)
Salt Lake have de-risked the process by digging demonstration trenches and analysing the product:
(Source: Salt Lake Potash.)
Salt lake has two memoranda of understanding that set out the basis for offtake agreements. Mitsubishi and Sinofert each have offtake rights for up to 50% of SOP production from the 50ktpa demonstration plant. Corporate executive Jo Battershill discussed the MOU’s and company progress recently here.
In order to de-risk financing, minimise dilution and reduce risk, Salt Lake has a multi-stage approach to becoming a globally significant SOP producer:
Stage 1 – Lake Way 50ktpa Demonstration Plant
Salt lake plans to build a 50ktpa demonstration plant to validate the technical and commercial viability of the project which will de-risk the project and allow for larger fundraising in the future to decrease capital costs. A feasibility study is due by year end which will facilitate debt funding. Note that all NPVs are calculated using a 10% discount rate.
Scoping study assumptions:
- Capex cost A$49m
- Cash costs per tonne A$387
- SOP price A$667/t
- Pre-tax NPV A$71m (£39 million at A$1 = 56p)
- IRR 28%
- EBITDA A$14m (EBITDA £8m)
Or using the current SOP price A$820:
- Pre-tax NPV A$134m (£75 million)
- IRR 44%
- EBITDA A$21.65m (EBITDA £12m)
Stage 2 – Lake Way 200ktpa
Once the demonstration plant is proven successful, the company will be well-placed to raise funds for a larger operation.
Scoping study assumptions:
- Capex cost A$191m
- Cash costs per tonne A$241
At current SOP price A$820:
- Pre-tax NPV A$781 million (£435 million)
- IRR 61%
- EBITDA A$115 million (EBITDA £64m)
Stage 2.5 – Lake Way 400ktpa
Once stage 2 capex is repaid, a modest amount of incremental capital will double production. I have used stage 1 calculations and once capex is paid off, deducted $39m capex required in the third year. From the fourth year, I’ve used the 400ktpa figures.
Scoping study assumptions:
- Stage 2.5 cash costs per tonne A$185
- SOP price A$667/t:
At current SOP price A$820:
- Pre-tax NPV A$1562m (£850 million)
- IRR 70%
- EBITDA A$115m in Stage 2 (£64 million) followed by A$254m in Stage 2.5 (£141 million).
Stage 3 – Other Lakes
Once Salt Lake has proven the process, its ability to pay back debt and the project economics, then raising funds to develop from the eight other lakes should be straightforward. In aggregate, these should be able to sustain millions of tonnes of SOP production.
At current prices SOP prices, Salt Lake trades at less than 10% of NPV from one 400ktpa operation supports a pre-tax NPV of £660m which means that SO4 trades at more than a 90% discount to one of many possible operations. The projects are attractive from both a financial and environmental position. The green credentials should help with fundraising. The company has always had incredible prospects but hasn’t been in a position to capitalise upon them. With a feasibility study soon to be released, equity raise out of the way, offtake agreements and a new CEO I believe firmly that the next 3 – 6 months will be transformational for Salt Lake.
Bonus Reading – Peer comparisons
In making my investment into Salt Lake Potash I have also evaluated other companies listed in London:
Sirius Minerals (SXX) – market cap £1.1bn, Polyhalite product (similar to MOP), UK
Sirius minerals is developing a huge polyhalite project in North Yorkshire. The project is incredibly capitally intensive for example they recently announced another $400m – $600m was required. The internal rate of return is likely to be below 20% now (they haven’t announced updated figures). The project would not be built were it not for government support. Such is my dislike for the project economics I’d almost go as far as to suggest it as a shorting opportunity.
Kore Potash (KP2) – market cap £49m, MOP product, Democratic Republic of Congo
I have not analysed Kore Potash in sufficient detail to have an opinion on it as an investment. I do however prefer investing int Western Australia and believe that Salt Lake will more easily obtain financing for its project for three reasons – country risk, MOU’s and construction permits.
Emmerson (EML) – market cap £22m, MOP product, Morocco
I believe Emmerson to be a good investment, particularly around the current price, for the reasons outlined previously. Why pay more than twice Emmerson’s market cap for Salt Lake? Emmerson is at the beginning of its journey and so there is no scoping study, no MOU’s, and no life of mine available. Given that Salt Lake has a world class resource and will be finance-ready by year-end, and trades at a huge discount to NPV, paying more than twice for Salt Lake is justified.
Danakali (DNK) – market cap £110m, SOP product, Eritrea
Danakali has an incredible project but the market cap reflects that, as covered here. As well as trading at a fraction of NPV, Salt Lake’s project is much easier to finance due to lower country risk, whether or not that is justified.
At the time of publication, the author holds a long position in SO4.