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Andrew Hore – Quoted Micro 13 April 2020

AQUIS STOCK EXCHANGE

Suffolk-based brewer Adnams (ADB) returned to profit in 2019. Revenues fell from £78.9m to £74.7m, while a loss of £877,000 was turned into a pre-tax profit of £39,000. Stripping out one-off costs, there was an underlying decline in profit. Investment in the brewery and a new IT system have led to some disruption of the business. There will be no final dividend due to COVID-19 and the subsequent pub closures. There are tangible assets valued at £43.8m, much of which is freehold property and Adnams is in discussions about new lending facilities.

Directors’ pay has been halved and other costs reduced to a minimum.

Ananda Developments (ANA) is formulating responses to the latest questions from the Home Office. The MHRA has also requested a meeting to discuss the application to grow >0.2% THC cannabis. Ananda has a 50% interest in DJT Plants which plans to grow the cannabis in Lincolnshire.

World High Life (LIFE) has gained a quotation on the US OTC market. They started trading on 8 April.

NQ Minerals (NQMI) produced 8,127 tonnes of lead concentrate and 4,609 tonnes of zinc concentrate at the Hellyer mine in the first quarter of 2020. Further production increases are planned. Mining continues in Tasmania and the concentrate can still be shipped.

AIM

Replacement windows supplier Safestyle (SFE) has raised £8.5m at 17p a share and this will provide a strong cash buffer during the COVID-19 outbreak. Banking covenants will be waived for up to six months.

ReNeuron (RENE) has secured a collaboration with a major pharma company for the potential use of the company’s exosomes, derived from the CTX neural stem cell line.

D4T4 Solutions (D4T4) won additional SaaS-based business in the fourth quarter. That has delayed the recognition of revenues and led to a 14% fall in reported revenues to £21.7m. The forecast was for revenues of £26.7m. Pre-tax profit fell from £6m to £5m. There is £12.7m of cash in the bank.

Churchill China (CHH) has decided not to pay a final dividend even though net cash was £15.6m at the end of 2019. Underlying pre-tax profit improved from £9.4m to £11.2m in 2019. Manufacturing operations have been suspended and costs are being reduced. Capital investment in manufacturing and kiln capacity should be completed in the first half of 2020.

Real Estate Investors (REI) says that trading remains strong and it still intends to pay its dividend. Rental collection was good in the first quarter of 2020. Forecasts have been trimmed with nav expected to fall from 67.4p a share to 66.1p a share. That is still well above the share price.

Circassia Pharma (CIR) is transferring the US commercial rights to Tudorza and Duaklir to AstraZeneca. The $149.9m loan from AstraZeneca (and accrued interest) will be offset against the consideration for the transfer. AstraZeneca still owns 18.9% of Circassia. The focus of Circassia will be the Niox respiratory diagnostic platform.

Advanced Oncotherapy (AVO) has raised a further £14.9m at 25p a share. This will be spent on development and gaining approval for its LIGHT proton therapy system.

Cinema operator Everyman Media (EMAN) has raised £17.5m at 100p a share. This will help finance the business while the cinemas are closed.

Upheavals continue at Nostra Terra Oil and Gas (NTOG) with a further general meeting requisitioned and the resignation of chairman Andrew Morrison. A share issue raised £318,000 at 0.25p a share. Chief executive Matt Lofgran has agreed to a 60% reduction in salary until the next significant fundraising.

Trading in the shares of Bould Opportunities (BOU) has been cancelled but it continues to push ahead with a potential biotechnology acquisition.

MAIN MARKET

Aquila Services Group (AQSG) is aiming to at least break even in 2020-21 and maintain a positive cash balance. The figures for the year to March 2020 will not be as good as forecast, although it was profitable. Cost savings by the consultancy services provider include the chief executive standing down and there will be no final dividend.

Avation (AVAP) says that it has received bid interest, but progress has been hampered by COVID-19. The commercial aircraft lessor has $129m in cash and it is offering short-term financial relief to airlines. Management believes that ongoing income should be enough to cover costs for another 12 months.

Car and property bridging finance provider S and U (SUS) is paying a final dividend of 50p a share. That is lower than the previous year’s final of 51p a share, but it means the total dividend for 2019-20 is 2% higher. There are signs of reduction in lending in the early weeks of the new financial year.

Flavourings and fragrances supplier Treatt (TET) says interim revenues were 5% lower due to a fall in the price of citrus raw materials. There was growth in other areas with tea revenues 48% higher. There has been strong growth in recent orders because of the use of ingredients in soaps and sanitisers. The factory relocation in the UK will not happen until 2021. Net cash was £6.5m at the end of March 2020. The interims will be published on 12 May.

Argo Blockchain (ARB) generated revenues of £6m in the first quarter of 2020. There was £1.8m generated in March, down from £2.5m in February. The decline was due to lower bitcoin prices and more difficult cryptocurrency mining conditions.

Spinnaker Opportunities (SOP) has raised £40,000 from a loan note issue to two investors. The conversion price is 5p a share. There will be a warrant for every two shares that is exercisable at 5p a share.

Andrew Hore

Andrew Hore – Quoted Micro 30 March 2020

AQUIS STOCK EXCHANGE

AQSE and AIM-quoted Arbuthnot Banking (ARBB) improved its underlying pre-tax profit from £4.4m to £5.8m in 2019, while the second interim dividend is 5% higher at 21p a share. This does not have to be agreed at an AGM. NAV rose from 1283p a share to 1364p a share. The total capital ratio has edged up from 17.2% to 17.3%.

Newbury Racecourse (NYR) says that its insurers stipulated that COVID-19 was excluded from the insurance for the abandonment of race meetings. There will be a significant loss of revenues even if horse racing remains suspended until the end of April. Events, the hotel and the nursery will also be hit. There are bank facilities that should be enough to cover needs for the foreseeable future and the company is talking with its lenders. Management still expects David Wilson Homes to make a further payment of £10.9m for the development sites it has acquired.

Employee-owned businesses investor Capital for Colleagues (CFCP) believes that the value of its investments has declined by up to 15% since the end of February. NAV will have fallen from 50.17p a share to a range of 42.6p a share to 45.1p a share. That offsets the increase in the previous six months.

Hydro Hotel, Eastbourne (HYDP) is cancelling its interim dividend of 14p a share. The hotel has been temporarily closed.

KR1 (KR1) has invested $65,000 in the Acala Network project and will receive 866,666.67 tokens at 7.5 cents each. Acala will offer a stablecoin that can be transferred across different blockchains and collateralised with digital assets.

Cadence Minerals (KDNC) says that its 4.1%-owned investee company Macarthur Minerals is seeking a partner for its Lake Giles iron ore project in Western Australia. Another investee company, 16.7%-owned AIM-quoted European Metals Holdings (EMH), has secured a strategic investment by CEZ in the Cinovec project. CEZ will subscribe for a 51% stake in the company that owns the project, subject to EMH shareholder approval. The price payable has been reduced from €34.1m to €29.1m.

AFH Financial (AFHP) non-executive director has invested nearly £25,000 in the IFA at 198p a share.

Clean Invest Africa (CIA) says that subsidiary Coal Agglomeration South Africa has stopped activities until 16 April, which is in line with the government lockdown.

EPE Special Opportunities Ltd (ESO) has cash of £26.4m and it could defer the July repayment of £2m of its £3.9m convertible loans, so it is in a strong position to cope with the effects of COVID-19.

Eastinco Mining and Exploration (EM.P) has suspended mining in Rwanda because of COVID-19. This will be for an initial two weeks. Planning for continues exploration will continue.

NQ Minerals (NQMI) has employed consultants to prepare a mine reopening due diligence study on the Beaconsfield gold mine.

TechFinancials (TECH) is exercising its option to acquire shares in Cedex Holdings and the resulting stake will be 97.3% or 90.8% fully diluted. The company will consider disposing of the stake.

World High Life (LIFE) is holding a general meeting on 14 April in order to gain shareholder approval for each existing share to be sub-divided into ten new shares.

First Sentinel (FSEN) has issued a further £245,000 of bonds. This takes the total value of bonds in issue to £1.23m. Trading in First Sentinel 7% bonds, February 2023, First Sentinel preference shares and EPE Special Opportunities 7.5% unsecured loan stock, 2022 has started again after the market maker resumed activities.

AIM

Novacyt (NCYT) has signed a contract manufacturing deal with Yourgene Health (YGEN) for its COVID-19 test. The initial plan is for Yourgene to manufacture critical components. A global distribution agreement for the COVID-19 test has been secured with Bruker-Hain Diagnostics for use on its instruments. The Philippines has approved the test for commercial use.

Graphene materials supplier Applied Graphene Materials (AGM) has successfully reduced its cost base and it had £4.3m in the bank at the end of January 2020. This should last until the second half of 2021. Revenues remain small but a number of coatings products using the company’s graphene have been launched in the past year. There is a pipeline of additional products.

Cyber security services provider ECSC (ECSC) is still losing money, but it is generating cash. In 2019, ECSC revenues grew by 10% to £5.91m. Managed services revenues increased by 48% to £2.61m. Managed services has additional capacity and as more work is won margins could continue to improve. Consulting revenues dipped slightly to £2.9m, although they did grow in the second half. The other revenues come from third party products and other services.

Secure payments systems provider PCI-Pal (PCIP) is raising £5m at 30p a share. The cash will finance sales and marketing in North America and further product development. There will also be additional flexibility for any medium-term effects of COVID-19.

Georgia-focused oil and gas company Block Energy (BLOE) is acquiring two blocks adjacent to its own from Schlumberger. They include Block XIB, which is Georgia’s most productive block, although the peak production was in the 1980s. This will boost Block’s production by 245 barrels of oil per day. There is also another exploration block and a central production facility being acquired. There are 14 years remaining on the permits for the two blocks. Block is paying for the assets with 120 million options exercisable at nil cost. They are deemed to have a value of 5 cents each. The options can be exercised between 12 and 24 months from completion.

Replacement windows and doors supplier Safestyle UK (SFE) has temporarily ceased installations. Safestyle believes with cost reductions and government assistance it will be able to cope with the closure of activities until after the end of June.

Wynnstay Group (WYN) is still paying its 9.4p a share final dividend. Trading in the four months to February 2020 was subdued but in line with expectations. The company’s agricultural stores have been allowed to stay open. There may be some additional costs relating to COVID-19.

Geospatial software provider IQGeo (IQG) has secured an expansion to its contract with Tokyo Electric Power Company, which is worth £1.8m over three years.

MAIN MARKET

Trident Resources (TRR) is becoming a mining royalty company and moving to AIM. The first acquisition is a 1.5% free on board revenue royalty over part of the Koolyanobbing iron ore operation in Western Australia for a staged cash consideration of A$7m. There are plans to increase production from an annualised rate of 11Mtpa to 15Mtpa by the end of 2020. The initial payment is A$4m and the other A$3m is payable one year after completion. The most recent quarterly royalty was A$731,000. Further royalty interests are set to be acquired. A fundraising is planned and the company will change its name to Trident Royalties.

Dev Clever (DEV) says that COVID-19 restrictions have increased demand for its SaaS-based career guidance platforms. The US launch was in April.

Nanoco (NANO) says Merck has issued three-month notice of termination of its cadmium-free quantum dots licence agreement so that the licence can be renegotiated. The existing licence had minimum annual royalties. Merck continues to buy materials.

Spinnaker Opportunities (SOP) says that an investor commitment to provide £1.4m for the company when it acquires Kanabo Research has been terminated. This arrangement was made in July 2019 and the acquisition of the medicinal cannabis company has still not been completed.

Zenith Energy (ZEN) is amending the terms of the purchase of 80% of the Anglo American Oil and Gas (AAOG) subsidiary that owns 56% stake in the Tilapia oilfield in the Republic of Congo. The purchase price has been reduced by one-fifth to £800,000 and it will be paid in ten monthly instalments. Zenith will no longer issue any shares and it will not be providing a £250,000 secured loan facility.

Books publisher Quarto (QRT) says revenues fell from $149.3m to $135.8m in 2019 but it did return to profit. Banking facilities have been extended to July 2021.

Dukemount Capital (DKE) says the Wavertree project is at the final fit out stage, but work has been suspended due to COVID-19. There are 16 apartments and offices on the site in north west England.

Andrew Hore

Andrew Hore – Quoted Micro 16 March 2020

NEX EXCHANGE

Brewer Shepherd Neame (SHEP) edged up its interim profit helped by a strong performance from tenanted pubs and lower interest charges. In the six months to end December 2019, revenues were 3% higher at £79m, while underlying pre-tax profit improved 5% to £6.2m. Cost pressures held back the performance of the managed pubs. There was a fall in profit contribution from brewing. Net debt was £84m at the end of 2019. The interim dividend was increased by 2% to 6p a share. Brewing volumes have increased since the period end and like-for-like pub revenues continue to grow, although the rate is slower for managed pubs. Coronavirus has not had an impact yet but it is likely to.

Altona Energy (ANR) is raising up to £400,000 through an open offer to existing shareholders at 6.5p a share. That is a one-third discount to the previous mid-price. The cash is required to acquire a new petroleum exploration licence application in South Australia and the maximum will provide 12 months working capital. This will enable assessment of an in-situ gasification project. There is also potential for wind and solar projects in the area. There was an overdraft of £96,000 at the end of June 2019. The latest time for acceptance is 31 March.

European Lithium (EUR) reported a dip in interim income in 2019 from $23,817 to $3,365, while the loss was flat at $2.3m. There was $32,000 in cash at the end of 2019. There are convertible notes valued at $1.1m, some of which have been subsequently converted, but more have been issued.

KR1 (KR1) has been hit by weak Bitcoin and other cryptocurrency prices, but it had already banked some of its profit. The value of the remaining portfolio has dropped sharply. There will be an update shortly.

Rutherford Health (RUTH) has requested a subscription of £9.64m at 176p a share under the Woodford Commitment at the time of the company’s flotation. LF Equity Income Fund, formerly LF Woodford Equity Income Fund, will own 28.8% of the proton beam therapy company. This is the final subscription under the agreement.

Former investment banker Dr Keith Harris has been appointed as executive chairman of SAPO (SAPO) and Selwyn Lewis is joining the board as an executive director.

Fuel emulsification company SulNOx Group (SNOX) has filed an international patent application for its technology. It has already filed for the patent in the UK. The technology can be used for many fuels but the focus is diesel and heavy fuel oil.

Cannabis investment company World High Life (LIFE) has raised £2.36m from two issued of convertible loan notes with a 10% coupon. The conversion price is 100p a share.

Trading in First Sentinel 7% bonds, February 2023, First Sentinel preference shares and EPE Special Opportunities 7.5% unsecured loan stock, 2022 has been suspended because of the market maker temporarily withdrawing from market making activities.

AIM

OnTheMarket (OTMP) has ended its litigation with Connells and its subsidiary Gascoigne Halman. The property portal had already won a judgement in a Competition Appeal Tribunal and it was seeking the recovery of further damages. Earlier in the week, Ian Springett was dismissed as chief executive of OnTheMarket. He has a 12 month contract and earns £250,000 a year.

Geospatial software provider IQGeo (IQG) reported an increased loss last year, but that masks the progress made. Third party revenues declined. In 2019, total revenues fell from £9.98m to £7.81m, however, own product revenues increased from £4.74m to £5.55m, while recurring revenues contributed £1.63m, up from £918,000. More people were employed in sales and product development and operating expenses jumped from £6m to £9.5m. That is why the loss increased from £1.6m to £6.17m. There was still £13m left in the bank at the end of 2019, following £11m spent on buying back shares.

Mass spectrometry instruments developer Microsaic Systems (MSYS) continues to add to its partners. Last year, revenues rose 51% to £870,000 with the benefit of the newer agreements still to come. Higher development spending meant that the loss edged up to £3.1m. There was £2.62m in the bank at the end of 2019 and management admits it is assessing its options in terms of raising more cash.

Concrete levelling equipment supplier Somero Enterprises Inc (SOM) had a stronger second half, following the profit warning in the first half due to bad weather. The outcome in 2019 was slightly better than the previously downgraded expectations. Even so, revenues fell 5% to $89.3m and pre-tax profit was down by a similar percentage. The dividend was reduced by 1% to 18.75 cents a share. The additional dividend relating to excess cash (net cash was $23.8m) is 7.7 cents a share. Increased costs mean that there could be a further decline in profit this year.

Mark Greenwood has further increased his stake in Richland Resources (RLD) by buying the market and acquiring shares in a placing at 0.12p a share, which raised £100,000 for the company. Greenwood’s stake is 18.5%. The share price is one of the few AIM risers this month.

The Panoply Holdings (TPX) has acquired consultancy Ameo Professional Services, which generates 9-% of its revenues from the public sector. Ameo made a pre-tax profit of £1m last year and is being acquired for £7m in cash and shares, plus the distribution of £1.3m in excess cash.

Molecular diagnostics developer Yourgene Health (YGEN) is acquiring its French distributor and this will be immediately earnings enhancing. Yourgene will still make a loss in 2020, but the following year earnings per share will improve from 0.18p to 0.23p.

Open Orphan (ORPH) has reported positive results for the phase IIb field study of FLU-v vaccine, which has been developed by a 49%-owned joint venture. The results have been published in a journal. IP Group has cut its stake to below 3%.

Redx Pharma (REDX) says it has received a bid approach from Yesod Bio-Sciences, which is considering offering 15p a share. Redmile Group is making a mandatory offer of 15.5p a share, following its purchase of the 39.5% stake owned by Moulton Goodies, which obtained most of its shares at 5.25p each when it capitalised its £2.5m loan. Redmile owns 45.5% of Redx, which is valued at £29.5m. The board recommends the bid.

Brickability (BRCK) has made its second acquisition in one month. It is paying £6m for plastic fascia and guttering merchant U Plastics, which made a pre-tax profit of £1.3m in 2019.

MAIN MARKET

Moss Bros (MOSB) has agreed a 22p a share bid that values the suit hire and retail company at £22.6m. The bid vehicle is owned by people involved in the apparel sector, including Michael Shina of Crew Clothing. The main executives will be retained.

Motor dealer Lookers (LOOK) has discovered accounting irregularities. The fraudulent transactions in one of the operating divisions mean that the 2019 figures will be delayed until late April. These transactions should not be significant for the group. Chief operating officer Cameron Wade has resigned.

Standard list shell Hertsford Capital (HERT) has agreed the acquisition of oil services provider OTAQ Group for £12.4m through an issue of shares at 57.5p each (post-consolidation). A placing will raise £1.5m at the same price. OTAQ designs and supports products for the aquaculture and offshore oil and gas sectors. The focus is on growing the aquaculture operations. The company will change its name to OTAQ and be readmitted on 31 March.

Sure Ventures (SURE) is raising £250,000 at 100p a share, which is a premium to NA of 95.74p a share. This followed news of an investment by 25.9%-owned Sure Valley Ventures in AI security company Getvisibility. The fund has invested €750,000. The cash will be used to expand the business internationally.

Spinnaker Opportunities (SOP) has spent more than one year trying to finalise the acquisition of cannabis processor Kanabo Research and a commitment to invest £1.4m has been secured. At the end of 2019, there was £597,000 left in the bank.

Dev Clever (DEV) is acquiring Phenix Digital, a digital agency focused on the educational sector. It is paying £100,000 in cash and 3.57 million shares. There is an existing relationship between the two companies.

Andrew Hore

Andrew Hore – Quoted Micro 27 January 2020

NEX EXCHANGE

Results from IFA group AFH Financial (AFHP) indicate the success of the acquisition policy. In the year to October 2019, underlying pre-tax profit improved from £10.3m to £17m and earnings per share rose by more than two-fifths. The dividend was one-third higher at 8p a share. Assets under management were £6.2bn. AFH plans to grow to annual revenues of £140m and assets under management of £10bn in five years. Cash generated from operations was held back by the protection division predominantly generating non-indemnity business, where the payment is spread over the term of the package. Non-indemnity business will reduce in order to have a higher proportion of revenues that gets paid upfront. Cash generation will improve, and this will mainly go on deferred consideration.

Corporate adviser First Sentinel (FSEN) has raised £220,000 at 27p a share in order to provide working capital for the business. That was a small discount to the market price the day before the placing was announced, but the price fell to 19p/22p on the day. On the day, there were 25,000 shares traded at 20p each and 186,370 shares traded at 20.09p each.

NQ Minerals (NQMI) has appointed New York-based Ortoli Rosenstadt as the law firm to help it with a potential ADR listing in the US.

Broadband-focused shell SAPO (SAPO) has announced the death of its executive chairman Michael Meyer, who was the founder of Emess Lighting. He and his wife own 43.4% of SAPO. Michael Langoulant is the only remaining director of SAPO.

Eight Capital Partners (ECP) has placed an additional €90,000 of 7% July 2022 bonds, which are traded on the Vienna Stock Exchange. A total of €3.64m of bonds have been issued, which is 73% of the total that can be issued.

BWA Group (BWAP) has issued 3.26 million shares at 0.5p each to settle directors’ fees for the fourth quarter of 2019. The current share price is 0.2p/0.4p. Richard Battersby’s stake is 16%, Alex Borelli holds 9.48% and James Butterfield owns 15.8%.

Juliet Adelstein will become chief executive of Ganapati (GANP) on 1 February. She previously worked at Japanese advertising agency Dentsu. Hiroki Hasegawa and Toshitaka Nakajima are stepping down as chief executive and finance director respectively.

Via Developments (VIA1) 7% debenture stock 2020 has been withdrawn from MEX. Trading was suspended on 21 October 2019 because of a delay in appointing an independent non-executive director.

Former NEX-quoted company MESH Holdings still plans to acquire AI business Sentiance and Mike Power has taken over as chairman. MESH has also appointed two new directors. Corporate finance professional Lindsay Mair and Ireland-based former broker Rory O’Sullivan.

AIM

Last year was a tough one for agriculture and feed products supplier Wynnstay (WYN) and pre-tax profit fell from £9.5m to £7.9m, but the dividend was still raised. Profit is expected to be flat this year. There was net cash of £3.8m at the end of the year, as lower commodity prices reduced working capital requirements, but there will be £7m of lease liabilities included as debt in the next balance sheet. Seasonality means that there will be a net debt figure at the interim stage and the leases mean it will be much higher than it would have been. Net cash could still be £6m by the end of next October.

Concrete levelling equipment Somero Enterprises (SOM) had a better than expected fourth quarter and this led to an upgraded 2019 earnings forecast from 33.7 cents a share to 36.5 cents a share. That is still lower than 2018 and a further dip is expected in 2020 due to higher marketing spend. The expected total dividend for 2019 is 24.6 cents a share.

United Oil and Gas (UOG) says that the ASH-2 well that is part of the interests being acquired in Egypt has been producing more than 3,000 barrels of oil per day since the beginning of the year. United’s share is 660 barrels of oil per day. The acquisition of the Egypt interest from Rockhopper Exploration (RKH) will not be completed until February.

Nostra Terra Oil and Gas (NTOG) says a general meeting requisition is valid and it will announce a date for the meeting by next week. Eridge Capital wants to remove Matt Lofgran from the board and replace him with Andrew Morrison.

Regenerative medical products developer Tissue Regenix (TRX) says that revenues grew 12% last year, but the cash will not last much longer. There was £2.4m at the end of 2019 and this will last until the end of April. More funding will be required before then.

Peel Hunt has halved its dividend forecast for construction services provider Van Elle (VANL) to 1p a share, although it has maintained its 2019-20 pre-tax profit forecast at £4m. The interim dividend was cut by four-fifths to 0.2p a share. A sharp drop in interim profit means that two-thirds of the forecast needs to be made in the second half. Net debt was £10.4m at the end of October 2019.

IPTV technology company Mirada (MIRA) has completed the cancelation of the share premium account.

Gear4Music (G4M) had strong Christmas trading and gross margins improved. Revenues grew by 7% to the end of 2019 and gross profit was 18% ahead. Earnings of 3.9p a share are forecast for the 2019-20 financial year.

Agronomics (ANIC) has raised a further £5.5m at 7p a share. That is a one-third discount to the market price. At the end of last year £7.7m was raised at 5.5p a share. Agronomics has invested some of the cash it previously raised in cultivated meat businesses developing meat and fish that is produced without animals, but It will have £9.9m in the bank after the cash raising.

Cyber security software provider Kape Technologies (KAPE) generated slightly better 2019 margins than anticipated. EBITDA grew by 40% to $14.5m in 2019 and it will more than double this year.

Touchstone Exploration Inc (TXP) believes that the best possible outcome was achieved from the initial production tests of the Cascadura well in Trinidad, which appears to have oil and associated gas. The Coho-1 well should be in production by June.

Trinidad-based oil and gas producer Trinity Exploration and Production (TRIN) increased production by 5% in 2019 and exited the year with daily production of 3,400 barrels. The current forecast for 2020 is 3,260 barrels per day. There was cash of $13.8m at the end of 2019.

Fuel cells developer Proton Motor Power Systems (PPS) has received a €400,00 order from E-Trucks Europe for fuel cells for refuse collection trucks. They will be delivered by the end of 2020.

MAIN MARKET

Standard list shell Spinnaker Opportunities (SOP) still intends to acquire medicinal cannabis company Kanabo Research but there are still conditions to be satisfied. The deal was announced 11 months ago.

Contango Holdings (CGO) is another cash shell and it has been in the process of acquiring the Lubu coal project since April. A £1.4m placing at 5p a share puts Contango in a position to publish a circular for the acquisition.

Tex Holdings (TXH) says it has a record order book. It is responding to matters raised by the FCA and trading in the shares remains suspended. Trading was suspended nine months ago and it has reported its late annual figures, although there still appear to be doubts about the financial state of the company. The overdraft has been repaid.

Andrew Hore

Andrew Hore Quoted Micro 29 July 2019

NEX EXCHANGE

Inqo Investments Ltd (INQO) is investing in the South Lake Medical centre in Kenya. Other investors include Johnson and Johnson’s social impact fund. The total investment is $950,000, but Inqo’s contribution is not quantified. The medical centre was previously owned by a flower growing business and it caters for its workers.

Clean Invest Africa (CIA) has issued £130,000 worth of 8% convertible loan notes. They expire on 24 July 2020. The conversion price is 2.75p a share. Creditors have also agreed to accept payments of £54,000 in shares.

Sport Capital Group (SCG) had nearly £22,000 in the bank at the end of June 2019. There is also a 15% stake in Mighty Oak Exploration, which has exploration licences for cobalt and lithium in Uganda, and 2.4% in KKME, which has nickel and platinum prospecting licences in Botswana. A freehold property is in the books for £204,000.

Panther Metals (PALM) has raised £130,000 at 0.3p a share and the cash will help to finance the development of the company.

AIM  

Parcel delivery business DX (DX.) says that figures for the year to June 2019 will be in line with expectations. That means that there will still be a small, but much reduced, loss. Revenues were 8% ahead at £322.5m. The loss of the passport delivery contract will hit this year but that will be offset by growth in the courier market. Net debt was £1.3m at the end of June 2019.

Cyber security services provider GRC International (GRC) has postponed its full year results because it is calculating deferred consideration payable for DQM Holdings. The expected deferred payment is £3.7m, which is higher than the original range. The deferred consideration should be 60% cash and 40% shares at 116.5p each. The share price has fallen to 49p. GRC wants to change the terms. GRC is loss-making and it wants to spread the cash payments. It may need to raise more cash.

Good news from Shield Therapeutics (STX) which has gained FDA approval for Feraccru in the US. The approval covers the treatment of iron deficiency, with or without anaemia, thanks to its high tolerability. This doubles the potential market for the treatment. Shield is in discussions with potential commercial partners. finnCap increased its target share price from 200p to 350p.

Safe credit card payments technology provider PCI Pal (PCIP) says that its full year loss will be in line with expectations of £4.6m. Total contract value in the US is £1.4m, which indicates that progress is being made in that important market. Net cash was £1.5m at the end of June 2019, although PCI Pal is awaiting a tax credit and some additional contract payments in the first quarter of this year. There could be scope to raise funds on the back of recurring revenues.

Document management software provider GetBusy (GETB) is growing its revenues internationally and its eponymous new software product GetBusy is reaching the point of a commercial launch. Net cash is £1.95m, which is plenty for the immediate requirements of the group.

Polarean Imaging (POLX) is raising £2.1m at 18p a share. Last December’s placing was at 14p a share. The medical imaging technology developer will use the cash to finance the phase III clinical trial for its technology, where patient enrolment should be complete in the third quarter of 2019, and preparations for a product launch. There will also be working capital to build polarisers for future orders.

Judges Scientific (JDG) says that order intake was 4% higher in the first half of 2019. Delivery times have also been reduced so the order book has fallen from 14 weeks to 132 weeks.  

Tristel (TSTL) has acquired 80% of its Italian distributor for an initial £600,000. This should be earnings neutral this year. The disinfection products supplier generated revenues of £26m in the year to June 2019, which were 17% higher than last year. Underlying pre-tax profit will be £5.5m. Management is waiting for a response from the FDA in the US for the usability and human factors pilot.

Tri-Star Resources’ (TSTR) 40%-owned SPMP has produced the first antimony metal from its plant in Oman. There is expected to be a slow ramp up of production until full production is reached in 2020. The gold recovery circuit has yet to produce commercial levels of gold. SPMP needs to raise additional debt in order to cover the upcoming months prior to antimony production reaching breakeven levels. There are negotiations concerning the conversion of mezzanine debt into interest-free shareholder loans or shares. Tri-Star is expected to lose £500,000 this year. Although SPMP is not being consolidated, there will be a share of profit. That could eventually be as much as £10m a year.

CCTV technology provider Synectics (SNX) says that results will be second half weighted this year. Interim profit fell from £1.5m to £1.2m, but Shore still forecasts a rise in full year pre-tax profit from £2.9m to £4m. Net cash was £5.3m at the end of May 2019. The interim dividend was increased by 8% to 1.3p a share.

Trading in United Oil and Gas (UOG) shares has been suspended ahead of the conditional acquisition of the Egyptian oil and gas business of Rockhopper Exploration (RKH) for $16m, with an initial cash payment of $11m. The main asset is a 22% working interest Abu Sennan and share of production was 813 barrels of oil equivalent per day in 2018. Net book value was $13.8m at the end of 2018. United needs to raise cash for the deal and it is not expected to complete until the end of this year.   

MAIN MARKET 

At the AGM of Trifast (TRI) the chairman said that the industrial fasteners supplier was growing strongly in the US, particularly in the electronics and automotive sectors. Debt facilities have been increased and management is seeking acquisitions. The uncertain economic environment in Europe has led to some delays in the production schedules of clients.

Pembridge Resources (PERE) says that its subsidiary Minto Explorations is getting a working capital facility from Sumitomo Corporation as part of an offtake agreement for 55,000 tonnes of copper concentrate. That lasts until the 55,000 tonnes is delivered or the end of 2020. There will be an advanced payment for 90% of the value of concentrate each month. There is an interest charge.

Zen Global has decided not to make a bid for World Trade Systems (WTS) because it could not come to an agreement with major shareholder Suzhou Weibao about buying its shares and convertibles in return for coins issued by ultimate holding company Zen Ltd. Zen wanted to use WTS to use as a shell in which to reverse its blockchain operations.

Spinnaker Opportunities (SOP) had cash of £880,000 at the end of June 2019. The company subsequently received a commitment to invest up to £1.4m from a single investor conditional on the deal to acquire medicinal cannabis company Kanabo Research. The deal documentation is being prepared.

Andrew Hore

Andrew Hore Quoted Micro 22 July 2019

NEX EXCHANGE

Arbuthnot Banking (ARBB) improved its underlying pre-tax profit from £2.7m to £3.4m in the first half of 2019. The interim dividend has been raised from 15p a share to 16p a share. The recent residential mortgage portfolio acquisition was after the end of June. The strategy is to diversify the business and asset-based lending and specialist finance are being built up. Savings platform Arbuthnot Direct has recently been launched. The core private banking operations of Arbuthnot Latham are still growing, though. The shareholding in Secure Trust Bank has been sold down to below 10%, which means it is no longer consolidated. The change from associate led to a write down and NAV declined to £13.21 a share.

VI Mining (VIM) has so far paid $9.1m in cash to the vendors of the Minaspampa and Rosario projects in Peru. There is still $42.2m outstanding 18 months after the acquisition agreement was signed. Majority shareholder Sumner Group Holdings is raising money from a security token offering, which could be completed in the autumn. Some of the proceeds will be used to replace existing facilities and help to pay outstanding acquisition considering, pending renegotiation of the deal. Chief executive David Sumner has provided a $10m term loan, plus a £39m facility of which $3m has been drawn down. There is $1.2m outstanding on the Tassili Jewellery LLC loan facility.

AfriAg Global (AFRI) has completed its acquisition of a 2.325% stake in cannabis company Apollon Formularies. The Jamaican subsidiary has produced its first licensed medical cannabis oils for commercial sale on the island.

MetalNRG (MNRG) has published a prospectus for its move to a standard listing on 23 July. It has raised £193,000 at 0.3p a share.

Clean Invest Africa (CIA) says that its CoalTech subsidiary has signed a joint venture agreement with Creon Capital covering Russia and nearby countries. CoalTech is negotiating with other potential partners to set up operations in Europe, Indonesia and the US.

Tectonic Gold (TTAU) says its mining subsidiary has received approval for the R and D tax incentive scheme in Australia for 2018-19. A claim is being prepared.

Share trading has recommenced in Ganapati (GANP) after it published results for the year to January 2019. There was a cash outflow from operations of £23.8m. Since January, two new games have been generated each month.

AIM

Focusrite (TUNE) has acquired Germany-based studio monitor loudspeakers supplier Pro Audio for £16.2m in cash and it will still have £12m left in the bank. Pro Audio supplies ADAM branded products and made a pre-tax profit of €1m. This is an earnings enhancing acquisition. The businesses will operate separately but work together to develop cross-selling benefits.

Swallowfield (SWL) is selling its manufacturing business to the much larger US manufacturer Knowlton Development Corporation for £35m in order to concentrate on its portfolio of personal care and beauty brands. This should leave net cash of £23m in Swallowfield and this will be used to acquire more brands. The company is changing its name to Brand Architekts Group.

Lawyer Gateley (GTLY) grew all its main operations. Acquisitions helped revenues to increase by one-fifth to £103.5m in the year to April 2019, but there was still organic growth of 9.5%. Pre-tax profit improved from £15.4m to £18.1m. The dividend was raised from 7p a share to 8p a share. Corporate business grew more modestly than other parts of the business, but this was impressive given market conditions for corporate deals. A profit of £21m is forecast for this year.

Victoria (VCP) has raised €330m via an issue of 5.25% senior secured notes 2024. This offer was three times subscribed. The floorcoverings manufacturer is using the money to refinance existing debt and will have £80m of cash after the issue.

Packaging machinery supplier Mpac Group (MPAC) is trading significantly ahead of expectations. Equity Development has increased its 2019 operating profit forecast from £4.6m to £5.5m.

Adamas Finance Asia (ADAM) has completed a co-investment agreement with a Hong Kong-based family office for the investment in Japanese resort business Infinity Capital Group. The family office will pay Adamas $1m of the $2m already drawn by Infinity and the other $2m will be provided 50/50 by the two parties. The facility has a coupon of 17.5% per annum. This deal provides cash to invest in other opportunities. Adamas took advantage of a dip in the share price to buy back £30,400worth of shares at 38p each.

Velocys (VLS) has raised £7m at 3p a share on the back of news that Shell and British Airways will co-fund the development of the Immingham biorefinery project. The cash will be used for further technology development and to progress the Mississippi biorefinery project.

Block Energy (BLOE) has completed the increase from a 71.5% to 100% of its working interest in the West Rustavi field in Georgia. The cash and shares payment means tha Georgia Oil and Gas has increased its stake in Block to 7.7%. Miton has cut its stake from 9.17% to 4.73%.

Mortice (MORT) has decided to cancel its AIM quotation and is offering shareholders the chance to sell their shares for 12p each. A lack of liquidity and a weak share price making it difficult to finance acquisitions are the main reasons for leaving AIM.

Albert Technologies Ltd (ALB) also wants to leave AIM, but it is not offering an exit for shareholders. It believes it can attract investors, but they would prefer to invest in an unquoted company.  

Science Group (SAG) has been buying more shares in Frontier Smart Technologies (FST) at the bid price of 35p each and it has built up a 39.9% stake. It also has 3.1% acceptances for its bid.

Mirada (MIRA) has integrated Netflix into its set-top box platform and this will make its technology even more attractive to broadcasters.

Bangladesh has brought in a law that all listed companies have to pay at least 30% of post-tax profit, or an extra 10% tax charge will be levied. Beximco Pharmaceuticals (BXP) is assessing the legislation and will consider how best to manage cash.

Novacyt (NCYT) has sold its loss-making clinical labs business for £400,000 and it will concentrate on diagnostics businesses Primerdesign and Lab21. The first instalment of £100,000 has been paid and £100,000 more is due in September, but the rest will be paid in three equal instalments on the first, second and third anniversaries of the deal.

MAIN MARKET 

Spinnaker Opportunities (SOP) has received a commitment to invest up to £1.4m from a single investor conditional on the deal to acquire medicinal cannabis company Kanabo Research. The investment will be for a maximum of 4.99% of the enlarged share capital, although if there is any of the £1.4m left it could be invested in a convertible loan note. The investment underpins the expected acquisition-related fundraising and a fee of 10% of the investment is payable.

General meeting resolutions to wind-up Avocet Mining (AVM) were withdrawn at its general meeting. This comes after discussions with shareholders. There is a few weeks cash left in the business and any potential transaction would have to come with finance to cover the costs of an acquisition process.

Dukemount Capital (DKE) has commenced construction of 17 specially developed apartments and retail space on its West Derby property.

OTHER MARKETS 

Fashion On Screen has listed on the Vienna Stock Exchange, which has European Growth Market status by the HMRC. This means that there is no stamp duty. The company had previously considered a listing on the Nasdaq First North market in Copenhagen. Fashion On Screen has raised more than £3m prior to its listing. A film based on the kidnapping of racing driver Juan Fangio in Cuba in 1958 could start before the end of the year (for more about the background to the story listen to https://www.bbc.co.uk/programmes/p055fjfx).

Andrew Hore

Salt Lake Potash (SO4) Commencement of Commercial Scale SOP Evaporation

Highlights

  • Salt Lake Potash has completed construction of a commercial scale SOP brine evaporation pond at Lake Way
  • Pumping of the high grade SOP brine from Williamson Pit has now commenced
  • De-watering is expected to be finished during Q3 2019 ensuring the evaporation process will be underway during the summer months and provide the initial feed salts for the process plant
  • Salt Lake Potash has commenced a Bankable Feasibility Study (BFS) for a commercial scale 200ktpa Sulphate of Potash development at Lake Way, targeting completion in Q3 2019

Salt Lake Potash Limited (Salt Lake Potash or the Company) is pleased to announce it has commenced pumping the Williamson Pit brine into a commercial scale Sulphate of Potash (SOP) brine evaporation pond (Williamson Ponds) at its Lake Way Project.

Construction of the Williamson Ponds has recently been completed, with pond dimensions of 2.5km by 0.5km. These ponds have been designed to receive the 1.2GL of high-grade SOP brine from the Williamson Pit mine, with de-watering of the pit now underway. The de-watering is scheduled to complete in Q3 2019.  

Given the super-saturated nature of the Williamson Pit brines, precipitation of salts started immediately upon pumping into the evaporation pond. The Company will be able to harvest first salts from the Williamson Ponds which are expected to be utilised as initial feed stock for processing.

Salt Lake Potash’s Chief Executive Officer, Mr Tony Swiericzuk, said:

“It is very pleasing to see the high-grade Williamson Pit brines being pumped into the commercial scale SOP evaporation ponds. It’s a real milestone in the development of our Lake Way Project and a first in the development of an exciting new industry for Western Australia.

Importantly, construction of the Williamson Ponds has provided the team with invaluable data on both methodology and costs, which will feed into the BFS that is now well advanced and due to be completed during the September quarter.”

Link to Interview with Tony Swiericzuk as the de-watering of Williamson Pit commences

Having recently completed the Scoping Study for a commercial scale 200ktpa development at Lake Way, Salt Lake Potash has commenced the Bankable Feasibility Study targeting completion in Q3 2019.

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

 

Tony Swiericzuk/Clint McGhie

Salt Lake Potash Limited

Tel: +61 8 6559 5800

Jo Battershill

Salt Lake Potash Limited

Tel: +44 (0) 20 7478 3900

Colin Aaronson/Richard Tonthat/Ben Roberts

Grant Thornton UK LLP (Nominated Adviser)

Tel: +44 (0) 20 7383 5100

Derrick Lee/Beth McKiernan

Cenkos Securities plc (Joint Broker)

Tel: +44 (0) 131 220 6939

Rupert Fane / Ingo Hofmaier / Ernest Bell

Hannam & Partners (Joint Broker)

Tel: +44 (0) 20 7907 8500

Forward Looking Statements

This announcement may include forward-looking statements. These forward-looking statements are based on Salt Lake Potash Limited’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 Salt Lake Potash Limited, which could cause actual results to differ materially from such statements. Salt Lake Potash Limited makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, to reflect the circumstances or events after the date of that announcement.

 

Competent Persons Statement

The information in this Announcement that relates to Mineral Resources is extracted from the report entitled ‘Significant High-Grade SOP Resource Delineated at Lake Way’ dated 18 March 2019. This announcement is available to view on www.so4.com.au. The information in the original Announcement that related to Mineral Resources was based on, and fairly represents, information compiled by Mr Ben Jeuken, who is a member Australasian Institute of Mining and Metallurgy (AusIMM) and a member of the International Association of Hydrogeologists. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Jeuken has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. Salt Lake Potash Limited confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.

Production Target

The Lake Way Project Production Target stated in this announcement is based on the Company’s Scoping Study as announced on 13 June 2019. The information in relation to the Production Target that the Company is required to include in a public report in accordance with ASX Listing Rule 5.16 and 5.17 was included in the Company’s Announcement released on 13 June 2019. The Company confirms that the material assumptions underpinning the Production Target referenced in the 13 June 2019 release continue to apply and have not materially changed.

Salt Lake Potash Ltd (SO4) Holding(s) in Company

TR-1: Standard form for notification of major holdings

NOTIFICATION OF MAJOR HOLDINGS (to be sent to the relevant issuer and to the FCA in Microsoft Word format if possible)i

1a. Identity of the issuer or the underlying issuer of existing shares to which voting rights are attachedii:

Salt Lake Potash Ltd

1b. Please indicate if the issuer is a non-UK issuer  (please mark with an “X” if appropriate)

Non-UK issuer

x

2. Reason for the notification (please mark the appropriate box or boxes with an “X”)

An acquisition or disposal of voting rights

 

 

An acquisition or disposal of financial instruments

An event changing the breakdown of voting rights

x

Other (please specify)iii:

3. Details of person subject to the notification obligationiv

Name

Lombard Odier Asset Management (Europe) Limited

City and country of registered office (if applicable)

London, United Kingdom

4. Full name of shareholder(s) (if different from 3.)v

Name

Disclosure on behalf of accounts managed on a discretionary basis by Lombard Odier Investment Managers group.

City and country of registered office (if applicable)

5. Date on which the threshold was crossed or reachedvi:

18/06/2019

6. Date on which issuer notified (DD/MM/YYYY):

19/06/2019

7. Total positions of person(s) subject to the notification obligation

% of voting rights attached to shares (total of 8. A)

% of voting rights through financial instruments
(total of 8.B 1 + 8.B 2)

Total of both in % (8.A + 8.B)

Total number of voting rights of issuervii

Resulting situation on the date on which threshold was crossed or reached

14.30%

14.30%

245,137,865

Position of previous notification (if

applicable)

15.07%

15.07%

 

8. Notified details of the resulting situation on the date on which the threshold was crossed or reachedviii

A: Voting rights attached to shares

Class/type of
shares

ISIN code (if possible)

Number of voting rightsix

% of voting rights

Direct

(Art 9 of Directive 2004/109/EC) (DTR5.1)

Indirect

(Art 10 of Directive 2004/109/EC) (DTR5.2.1)

Direct

(Art 9 of Directive 2004/109/EC) (DTR5.1)

Indirect

(Art 10 of Directive 2004/109/EC) (DTR5.2.1)

AU000000SO44

35,047,501

14.30%

SUBTOTAL 8. A

35,047,501

14.30%

 

 

B 1: Financial Instruments according to Art. 13(1)(a) of Directive 2004/109/EC (DTR5.3.1.1 (a))

Type of financial instrument

Expiration
date
x

Exercise/
Conversion Period
xi

Number of voting rights that may be acquired if the instrument is

exercised/converted.

% of voting rights

SUBTOTAL 8. B 1

 

 

B 2: Financial Instruments with similar economic effect according to Art. 13(1)(b) of Directive 2004/109/EC (DTR5.3.1.1 (b))

Type of financial instrument

Expiration
date
x

Exercise/
Conversion Period 
xi

Physical or cash

settlementxii

Number of voting rights

% of voting rights

SUBTOTAL 8.B.2

9. Information in relation to the person subject to the notification obligation (please mark the

applicable box with an “X”)

Person subject to the notification obligation is not controlled by any natural person or legal entity and does not control any other undertaking(s) holding directly or indirectly an interest in the (underlying) issuerxiii

X

Full chain of controlled undertakings through which the voting rights and/or the
financial instruments are effectively held starting with the ultimate controlling natural person or legal entity
xiv (please add additional rows as necessary)

Namexv

% of voting rights if it equals or is higher than the notifiable threshold

% of voting rights through financial instruments if it equals or is higher than the notifiable threshold

Total of both if it equals or is higher than the notifiable threshold

10. In case of proxy voting, please identify:

Name of the proxy holder

The number and % of voting rights held

The date until which the voting rights will be held

11. Additional informationxvi

Place of completion

London, United Kingdom

Date of completion

19/06/2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

Salt Lake Potash #SO4 – Appendix 3B and Issue of Placement Shares

Salt Lake Potash Limited (the Company) has today released the following information on the Australian Securities Exchange (ASX), in accordance with the ASX Listing Rules.

The 25,476,000 ordinary shares of no par value (Ordinary Shares) represent the first tranche of the placement of 37.5 million Ordinary Shares (Placement) that was announced on 6 June 2019.

The balance of 12,024,000 Ordinary Shares are expected to be admitted to ASX and the full number of the Placement shares admitted to AIM on 18 June 2019.

Total Voting Rights

For the purposes of the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules (DTRs), following issue of the 25,476,000 Ordinary Shares, the Company will have 232,496,581 Ordinary Shares in issue with voting rights attached. The Company holds no shares in treasury. This figure of 232,496,581 may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company, under the ASX Listing Rules or the DTRs.

 

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

Tony Swiericzuk / Clint McGhie

Salt Lake Potash Limited

Tel: +61 8 6559 5800

Jo Battershill

Salt Lake Potash Limited

Tel: +44 7540 366000

Colin Aaronson / Richard Tonthat / Ben Roberts

Grant Thornton UK LLP

(Nominated Adviser)

Tel: +44 (0) 20 7383 5100

Derrick Lee / Beth McKiernan

Cenkos Securities plc (Joint Broker)

Tel: +44 (0) 131 220 6939

Rupert Fane / Ingo Hofmaier / Ernest Bell

Hannam & Partners (Joint Broker)

Tel: +44 (0) 20 7907 8500

 

Important Information 

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available.  Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96  Origin: Appendix 5  Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

 SALT LAKE POTASH LIMITED

ABN

 98 117 085 748

We (the entity) give ASX the following information.

Part 1 ‑ All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1

+Class of +securities issued or to be issued

Ordinary Shares

2

Number of +securities issued or to be issued (if known) or maximum number which may be issued

25,476,000

3

Principal terms of the +securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

Fully paid ordinary shares

 

4

Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities?

If the additional +securities do not rank equally, please state:

·    the date from which they do

·    the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

·    the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

Yes

 

5

Issue price or consideration

$0.54

6

Purpose of the issue

(If issued as consideration for the acquisition of assets, clearly identify those assets)

Proceeds from the issue will be used to fund ongoing construction of the Lake Way Project, including the development of on-lake infrastructure, the payment of deposits on certain process plant long-lead items, completion of feasibility studies, and general working capital. 

6a

Is the entity an +eligible entity that has obtained security holder approval under rule 7.1A?

If Yes, complete sections 6b – 6h in relation to the+securities the subject of this Appendix 3B, and comply with section 6i

Yes

6b

The date the security holder resolution under rule 7.1A was passed

30 November 2018

6c

Number of +securities issued without security holder approval under rule 7.1

4,822,231

 

6d

Number of +securities issued with security holder approval under rule 7.1A

20,653,769

6e

Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting)

Nil

 

6f

Number of +securities issued under an exception in rule 7.2

Nil

6g

If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3?  Include the +issue date and both values.  Include the source of the VWAP calculation.

Yes

 

Issue date: 14 June 2019

Issue price: $0.54

15 day VWAP: $0.6144

 

 

6h

If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements

Not Applicable

6i

Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements

7.1 – 11,201,537

7.1A – Nil

 

7

+Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12).  For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

14 June 2019

Number

+Class

8

Number and +class of all +securities quoted on ASX (including the +securities in section 2 if applicable)

232,496,581

Ordinary Shares

Number

+Class

9

Number and +class of all +securities not quoted on ASX (including the +securities in section 2 if applicable)

 

 

 

7,500,000

 

10,000,000

 

750,000

 

 

1,000,000

 

 

250,000

 

 

500,000

 

 

750,000

 

 

400,000

 

 

1,700,000

 

 

 

2,750,000

 

 

 

3,000,000

 

 

 

21,095,016

 

Class B Performance Shares

 

Class C Performance Shares

 

Incentive Options exercise price $0.50, expiry date 29 April 2020

 

Incentive Options exercise price $0.60, expiry date 29 April 2021

 

Incentive Options exercise price $0.40, expiry date 30 June 2021

 

Incentive Options exercise price $0.50, expiry date 30 June 2021

 

Incentive Options exercise price $0.60, expiry date 30 June 2021

 

Incentive Options exercise price $0.70, expiry date 30 June 2021

 

Incentive Options exercise price $0.60, expiry date 1 November 2023

 

Incentive Options exercise price $1.00, expiry date 1 November 2023

 

Incentive Options exercise price $1.20, expiry date 1 November 2023

 

Performance rights which are subject to various performance conditions to be satisfied prior to the relevant expiry dates between 31 December 2018 and 1 November 2023

10

Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Not Applicable

Part 2 ‑ Pro rata issue

11

Is security holder approval required?

Not Applicable

12

Is the issue renounceable or non-renounceable?

Not Applicable

13

Ratio in which the +securities will be offered

Not Applicable

14

+Class of +securities to which the offer relates

Not Applicable

15

+Record date to determine entitlements

Not Applicable

 

16

Will holdings on different registers (or subregisters) be aggregated for calculating entitlements?

Not Applicable

17

Policy for deciding entitlements in relation to fractions

Not Applicable

18

Names of countries in which the entity has security holders who will not be sent new offer documents

Note: Security holders must be told how their entitlements are to be dealt with.

Cross reference: rule 7.7.

Not Applicable

19

Closing date for receipt of acceptances or renunciations

Not Applicable

 

20

Names of any underwriters

Not Applicable

21

Amount of any underwriting fee or commission

Not Applicable

22

Names of any brokers to the issue

Not Applicable

23

Fee or commission payable to the broker to the issue

Not Applicable

24

Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders

Not Applicable

25

If the issue is contingent on security holders’ approval, the date of the meeting

Not Applicable

26

Date entitlement and acceptance form and offer documents will be sent to persons entitled

Not Applicable

27

If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders

Not Applicable

28

Date rights trading will begin (if applicable)

Not Applicable

29

Date rights trading will end (if applicable)

Not Applicable

30

How do security holders sell their entitlements in full through a broker?

Not Applicable

31

How do security holders sell part of their entitlements through a broker and accept for the balance?

Not Applicable

32

How do security holders dispose of their entitlements (except by sale through a broker)?

Not Applicable

33

+Issue date

Not Applicable

Part 3 ‑ Quotation of securities

You need only complete this section if you are applying for quotation of securities

34

Type of +securities

(tick one)

(a)

+Securities described in Part 1

(b)

All other +securities

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

 

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35

If the +securities are +equity securities, the names of the 20 largest holders of the additional +securities, and the number and percentage of additional +securities held by those holders

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Sign here:            …………………………………………………..            Date: 14 June 2019

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== == == == ==

Notice Under Section 708A

Salt Lake Potash Limited (the Company) has today issued 25,476,000 fully paid ordinary shares. The issued shares are part of a class of securities quoted on Australian Securities Exchange (“ASX”). 

The Company hereby notifies ASX under paragraph 708A(5)(e) of the Corporations Act 2001 (Cwth) (the “Act”) that:

1.            the Company issued the securities without disclosure to investors under Part 6D.2 of the Act;

2.            as at the date of this notice, the Company has complied with the provisions of Chapter 2M of the Corporations Act as they apply to the Company, and section 674 of the Act; and

3.            as at the date of this notice, there is no information that is “excluded information” within the meaning of sections 708A(7) and (8) of the Act.

Salt Lake Potash (SO4) Exceptional Economics of Commercial Scale Development and Lake Way

Salt Lake Potash Limited (Salt Lake Potash or Company) is pleased to report the results of the Company’s Scoping Study for a commercial scale Sulphate of Potash (SOP) development at Lake Way (Lake Way Project or Project) in Western Australia.

Based on the Scoping Study results, the Project generates exceptional economic returns due to its low capital intensity, bottom quartile operating costs and sustainable operating life.

Cautionary Statement

The Scoping Study referred to in this announcement has been undertaken to determine the potential viability of a Sulphate of Potash (SOP) development at the Lake Way Project. The Scoping Study has been prepared to an accuracy level of ±30%. The results should not be considered a profit forecast or production forecast.

The Scoping Study is a preliminary technical and economic study of the potential viability of the Lake Way Project. In accordance with the ASX Listing Rules, the Company advises it is based on low-level technical and economic assessments that are not sufficient to support the estimation of ore reserves. Further evaluation work including infill drilling and appropriate studies are required before Salt Lake Potash will be able to estimate any ore reserves or to provide any assurance of an economic development case.

Approximately 80% of the total production target is in the Measured resource category, 16% in the Indicated resource category and 4% is in the Inferred resource category. The Inferred resource included in the total production target is located at the southern end of Lake Way and is expected to be the last of the brine extraction system constructed. It does not feature as a significant portion of production either during the payback period or during the life of mine. Accordingly, the Company has concluded that it has reasonable grounds for disclosing a production target which includes a small amount of Inferred material. However, there is a low level of geological confidence associated with Inferred mineral resources and there is no certainty that further exploration work will result in the determination of Indicated mineral resources or that the production target itself will be realised.

The Scoping Study is based on the material assumptions outlined elsewhere in this announcement. These include assumptions about the availability of funding. While Salt Lake Potash considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved.

To achieve the range outcomes indicated in the Scoping Study, additional funding will likely be required. Investors should note that there is no certainty that Salt Lake Potash will be able to raise funding when needed. It is also possible that such funding may only be available on terms that dilute or otherwise affect the value of the Salt Lake Potash’s existing shares. It is also possible that Salt Lake Potash could pursue other ‘value realisation’ strategies such as sale, partial sale, or joint venture of the Project. If it does, this could materially reduce Salt Lake Potash’s proportionate ownership of the Project.

The Company has concluded it has a reasonable basis for providing the forward looking statements included in this announcement and believes that it has a reasonable basis to expect it will be able to fund the development of the Project. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Scoping Study.

EXECUTIVE SUMMARY

Salt Lake Potash is pleased to report the results of the Scoping Study for the commercial scale development of its SOP project at Lake Way. The Scoping Study demonstrates the potential for the Lake Way Project to support a low capital and operating cost operation with annual production of approximately 200,000 tonne of premium grade SOP.

The Scoping Study demonstrates the compelling economics of the commercial scale development of Lake Way with the ability to support a long mine life:

  • Lake Way Project to produce an estimated 200,000 tonnes per year of premium grade SOP (>52% K2O)
  • High-grade SOP resource underpins long Mine Life of 20 years
  • Lowest operating cost for global SOP producers with an FOB operating cost estimate of $264/t (US$185/t)
  • Low development capital requirements of approximately A$237m (US$166m) including a growth allowance of ~13% ($32m) supported by the close proximity to infrastructure
  • Exceptional economics with estimated project post-tax NPV8 of A$381m (pre-tax NPV8 of A$580m) and post-tax IRR of 27% (pre-tax IRR 33%)
  • Steady state EBITDA of A$90m annually and average annual after tax cashflow of A$64m
  • Strong cashflow and low capital cost result in early payback period of 3.2 years
  • Construction underway on the first phase of Evaporation Ponds (the Williamson Ponds) which will support the dewatering of the Williamson Pit’s super saturated brine with an SOP grade of 25kg/m3
  • Plant commissioning expected Q4 2020 utilising salts from the Williamson Pit brine
  • BFS currently underway with completion expected in Q3 2019 to support project financing

Salt Lake Potash has already significantly de-risked the commercial scale project through the early construction works on the first phase of the Evaporation Ponds (the Williamson Ponds). The de-watering of the Williamson Pit and commencement of evaporation will provide additional insight into the critical evaporation processes which in turn will further de-risk the project.

Lowest Operating Costs

The results of the study demonstrate the potential for very low operating costs. It is estimated that the Lake Way Project will have the lowest operating costs of any SOP operation globally with an FOB operating cost of $264/t (US$185/t).

Short Payback period

The low development capital requirements and significant margins received for the Lake Way Project provides a short payback period of just 3.2 years from first production. This will result in full repayment of development capital by 2024.

KCl Addition Opportunity

The resource at Lake Way contains a significant excess of sulphate (SO4) which provides the opportunity for the Company to explore value adding measures including a potassium chloride (KCl) reaction phase to the processing stage. Preliminary work has shown significant benefits to the Lake Way Project through the inclusion of the KCl reaction phase in the process, including a potential increase in annual production of SOP and subsequent improvements in financial returns to shareholders. The Company will explore this opportunity as part of the BFS for the Lake Way Project.

Robust Economics

The Study demonstrates that the Lake Way Project provides exceptional economics even under the most extreme downside pricing scenarios. The breakeven pricing scenario is a significant 40+% decrease in price at US$323/t.

Table 1: Pricing Scenarios

SOP Price

Breakeven

US$323/t

US$400/t

US$450/t

US$500/t

Base

US$550/t

US$600/t

US$650/t

NPV
(post tax)

A$130m

A$214m

A$298m

A$381m

A$465m

A$548m

Project Funding Advanced

On 6 June 2019, the Company announced that it had received binding commitments for a placement to raise A$20.25m from strategic investors.

In addition, the Company is in advanced discussions with a debt provider for a debt funding package which will support funding for the Lake Way Project.

Next Steps

Having completed the successful Scoping Study, Salt Lake Potash has subsequently commenced a Bankable Feasibility Study (BFS) targeted for completion in Q3 2019. The Company has appointed GR Engineering Services Limited (GRES, ASX:GNG) as lead engineer for the BFS. GRES will work with a number of industry experts including Wood Saskatoon.

The BFS will include the following:

  • Further drilling and trenching programs to increase resource definition and confidence levels for the Lake Way Resource including lake playa and paleochannel
  • Additional test work at Saskatchewan Research Council (SRC) on the process flow sheet, including completion of two pilot plant test runs
  • Review KCl opportunity and determine the options for the possible inclusion of a KCl reaction within the SOP Plant Process
  • Refinement of logistics solution and identification of preferred constructors
  • Update the trench hydraulic analysis and optimisation of trench design in partnership with Cardno
  • Incorporate findings from the first phase of Evaporation Pond construction into the design and construction methodology for the commercial scale project
  • On-going design and refinement of the Process Plant including partnering with vendors for major equipment including crystallisers to conduct testwork relevant to their equipment

SCOPING STUDY RESULTS

The Scoping Study is based on the Mineral Resource Estimate for the Lake Way Project reported in March 2019, comprising 8.2Mt of SOP calculated using Drainable Porosity (73 million tonnes of SOP using Total Porosity).

The Scoping Study assumes a mine life of 20 years with plant commissioning in Q4 2020. The study mine plan, comprising a network of trenches and paleochannel bores, provides for a 200,000tpa production run rate. Table 2 provides a summary of production and cost figures for the Project.

Table 2: Lake Way Project Overview

Lake Way Project

Unit

Estimated Value

PHYSICAL

Mine life

years

20

Annual Production of SOP

tpa

200,000

Mineral Mine Plan

Measured Resource (Lake Way Playa)1.8Mt @ 15.2kg/m3 SOP

%

80

Indicated Resource (Paleochannel) 1.4Mt @ 13.6kg/m3 SOP

%

16

Inferred Resource (Lake Way Playa & Paleovalley) 5Mt @ 15.2kg/m3 SOP

%

4

MINING METHOD

Trenches (production and transport) – average depth 5m

km

130

Bores – average depth 120m

number

14

Brine Chemistry (average Lake Brine SOP grade)

Kg/m3

15.2

EVAPORATION PONDS

Area

ha

1,325

Halite Ponds

ha

1,020

Harvest Ponds

ha

291

Recovery of Potassium from feed brine

%

78

PLANT

Operating time

hpa

7,600

Recovery of Potassium from feed salt

%

80

OPERATING AND CAPITAL COSTS

LOM Cash Operating Costs FOB ex-Geraldton port

A$/t

$264

Mine Gate Operating Costs

A$/t

$184

Transport and handling

A$/t

$80

Capital Costs

A$m

$237

Direct Costs

A$m

$177

Indirect Costs & Growth

A$m

$60

FINANCIAL PERFORMANCE – LIFE OF PROJECT

Price (FOB)

US$/t

$550

Exchange Rate

US$/AUD

0.70

Discount Rate

%

8

EBITDA

A$m

$90

Average Annual after-tax cash flow

A$m

$64

Post tax Internal Rate of Return (IRR)

%

27

Post tax Net Present Value (NPV) @ 8% discount rate

A$m

$381

Pre-tax Internal Rate of Return (IRR)

%

33

Pre-tax Net Present Value (NPV) @ 8% discount rate

A$m

$580

PROJECT OVERVIEW

Lake Way is located in the Northern Goldfields Region of Western Australia, less than 15km south of Wiluna. The surface area of the Lake is over 270km2.

Salt Lake Potash holds five Exploration Licences (two granted and three under application) covering most of Lake Way and select areas off-lake, including the paleochannel defined by previous exploration. The northern end of the Lake is largely covered by a number of Mining Leases, held by Blackham Resources Limited (Blackham Resources), the owner of the Wiluna Gold Mine.

In April 2019, the Company entered into a binding Split Commodity and Access Agreement (Access Agreement) with Blackham Resources in relation to the development of the Lake Way Project on terms in line with the previously executed MOU announced on 12 March 2018.

Lake Way has a number of compelling advantages which make it an ideal site for Salt Lake Potash’s initial SOP operation, including:

  • Access to Blackham Resources’ existing infrastructure (including camps, power and maintenance) to accelerate development.
  • The site has excellent freight solutions, being adjacent to the Goldfields Highway, which is permitted for heavy haulage, quad trailer road trains to the railhead at Leonora and then direct rail access to both Esperance and Fremantle Ports, or via other heavy haulage roads to Geraldton Port.
  • The Goldfields Gas Pipeline is adjacent to Salt Lake Potash’s tenements, running past the eastern side of the Lake.
  • Access to Blackham Resources’ existing Mining Leases provides advanced permitting pathway for early development activity, including the construction of the first phase of Evaporation Ponds (the Williamson Ponds).
  • Salt Lake Potash is constructing the first phase of the Evaporation Ponds to enable the Company to commence dewatering from the existing Williamson Pit. The pit contains an estimated 1.2GL of brine at the exceptional grade of 25kg/m3 of SOP. This brine is the ideal starter feed for evaporation ponds, having already evaporated from the normal Lake Way brine grade, which averages over 15kg/m3.
  • The high grade brines at Lake Way will result in lower capital and operating costs due to lower extraction and evaporation requirements.
  • The presence of clays in the upper levels of the lake which are amenable to low cost, on-lake evaporation pond construction.

SCOPING STUDY CONSULTANTS

The Scoping Study was managed by Wood (formerly Amec Foster Wheeler) and is based on information and assumptions provided by a range of leading independent consultants, including the following consultants who have contributed to key components of the Scoping Study.

Table 3: Lake Way Project Scoping Study Consultants

Area

Responsibility

Study Manager

Wood

Resource Estimate

Groundwater Science

Brine Evaporation

Ad-Infinitum/ Knight Piesold

Brine Transfer Hydraulics 

Cardno

Process Plant:

–     Design basis/criteria

–     Process Test Work

–     Process Plant Design

 

Carlos Perucca Process Consulting

Saskatchewan Research Council

Wood

Plant Infrastructure

Wood

Area Infrastructure

Wood/Salt Lake Potash

Environmental & Heritage

Pendragon Environmental Solutions

Capital Estimate Compilation

Wood

Operating Estimate Compilation (Mine Gate)

Wood

Marketing

CRU International/Argus Media

Economics

Salt Lake Potash

PROJECT GEOLOGY AND MINERAL RESOURCE

Geological Setting

Lake Way is in the Northern Goldfields Province on the Archaean Yilgarn Craton. The province is characterised by granite-greenstone rocks that exhibit a prominent northwest tectonic trend and low to medium-grade metamorphism. The Archaean rocks are intruded by east-west dolerite dykes of Proterozoic age, and in the eastern area there are small, flat-lying outliers of Proterozoic and Permian sedimentary rocks. The basement rocks are generally poorly exposed owing to low relief, extensive superficial cover, and widespread deep weathering.

A key characteristic of the goldfields is the occurrence of paleochannel aquifers. These palaeodrainages are incised into the Archean basement and in-filled with a mixed Tertiary and Quaternary sedimentary sequence.

The paleochannel sediments of Lake Way are characterised by a mixed sedimentary sequence including sand, silts and clays of lacustrine, aeolian, fluvial and colluvial depositional origins. These near-surface deposits also include chemically-derived sediments of calcrete, silcrete and ferricrete. Beneath eastern parts of the playa, there is a deep paleochannel that is infilled with Tertiary-aged palaeochannel clay and basal sands in the deepest portion.

The Sediments infilling the paleochannel are described below:

Lake Bed Sediment

Recent (Cainozoic), unconsolidated silt, sand and clay sediment containing variable abundance of evaporite minerals, particularly gypsum. The unit is ubiquitous across the salt lake surface. The thickness of the unit ranges from approximately 3 to 20m.

The upper part of the unit comprises unconsolidated, gypsiferous sand and silt from surface to around 1.5m depth. The unit is widespread, homogeneous and continuous with the thickest parts in the centre and southern portion of the lake. This is underlain by well sorted, lacustrine silt and clay.

Palaeovalley Sediment

The Paleovalley sediment consists of Tertiary clay and silt that overlies basement or the Basal Sand.

Paleochannel Basal Sand

Tertiary, unconsolidated fine, medium to coarse grained sand interbedded with silt, clay and some lignite horizons.

Mineral Resource

The Mineral Resource Estimate underpinning the production target, classified as Measured, Indicated and Inferred, was prepared by a competent person and was reported in accordance with the JORC Code (2012 Edition) on 18 March 2019.

The Company engaged an independent hydrogeological consultant with substantial salt lake brine expertise, Groundwater Science Pty Ltd, to complete the Mineral Resource Estimate for the Lake Way Project.

The Lake Way Mineral Resource Estimate describes a brine hosted resource. The minerals are dissolved in brine, and the brine is contained within pore spaces of the host sediment.

The Mineral Resource Estimate of 73Mt of SOP calculated using Total Porosity and 8.2Mt of SOP calculated using Drainable Porosity is hosted within approximately 15 billion cubic metres of sediment ranging in thickness from a few metres to over 100m, beneath 189km2 of playa lake surface including the paleochannel basal sand unit of 20m thickness and 30km length.

The Mineral Resource Estimate for Lake Way is divided into resource classifications that are controlled by the host geological units:

  • Lake Bed Sediment
  • Paleovalley Sediment
  • Paleochannel Basal Sands

The mineral resource estimate is summarised in the Tables 4 – 6.

The estimated SOP tonnage represents the SOP within the in-situ contained brine with no recovery factor applied. The amount of contained brine which can be extracted depends on many factors including the permeability of the sediments, the drainable porosity, and the recharge dynamics of the aquifers.

Brines by their nature are not a static resource as they are subject to groundwater movement, dilution and concentration over time. Reporting both total and drainable porosity allows the reflection of this dynamic resource environment, including the consideration of the recharge and physical diffusion impacts on the mine plan and production output.

The impact of the recharge and physical diffusion in the development and long term abstraction of a brine resource is discussed in subsequent sections.

Table 4: Measured Resource

Total Volume

Brine Concentration

Mineral Tonnage Calculated from Total Porosity

Mineral Tonnage Calculated from Drainable Porosity

K

Mg

So4

Total Porosity

Brine Volume

SOP Tonnage

Drainable Porosity1

Brine Volume

SOP Tonnage

(Mm3)

(kg/m3)

(kg/m3)

(Kg/m3)

%

(Mm3)

(Mt)

%

(Mm3)

(Mt)

North Lakebed

(0.4-8.0 m)

1,060

6.8

8.0

27.6

43

456

6.9

11

117

1.8

Williamson Pit

1.26

11.4

14.7

48.0

1.26

0.03

Total

6.9

1.83

Table 5: Indicated Resource

Total Volume

Brine Concentration

Mineral Tonnage Calculated from Total Porosity

Mineral Tonnage Calculated from Drainable Porosity

K

Mg

So4

Brine Volume

SOP Tonnage

Brine Volume

SOP Tonnage

(Mm3)

(kg/m3)

(kg/m3)

(Kg/m3)

(Mm3)

(Mt)

(Mm3)

(Mt)

Basal Sands

(Paleochannel)

686

6.1

8.2

25.0

40

274

3.7

15

103

1.4

Table 6: Inferred Resource

Total Volume

Brine Concentration

Mineral Tonnage Calculated from Total Porosity

Mineral Tonnage Calculated from Drainable Porosity

K

Mg

So4

Total Porosity

Brine Volume

SOP Tonnage

Drainable Porosity

Brine Volume

SOP Tonnage

(Mm3)

(kg/m3)

(kg/m3)

(Kg/m3)

%

(Mm3)

(Mt)

%

(Mm3)

(Mt)

South Lakebed

(0.4-8.0 m)

316

6.8

8.0

27.6

43

135

2.0

11

35

0.5

Lakebed

(8m to Base)

9,900

6.8

8.0

27.6

40

3,960

60.0

3

297

4.5

Total

62.0

5.0

1 The Drainable Porosity does not include the significant resource potentially available through the recharge cycle.

Mineral Brine Resource Cycle

The production of brine within the lakebed sediment is cyclic and described below.

Stage 1 – Initial Resource

The initial brine resource comprises of two distinct porosity categories:

  • Brine dissolved in water held in Drainable Porosity, (11% of the total aquifer volume).
  • Brine dissolved in water held in Retained Porosity, (32% of total aquifer volume).

The combined porosity (Total Porosity) then comprises the total SOP brine resource held in the Lake Bed Sediments aquifer.

The remaining volume is occupied by solid material (sand, silt and clay grains comprising approximately 57% of the aquifer volume).

Stage 2 – Production Cycle

During production the brine drains under gravity toward the trench and is subsequently removed by pumping. This creates a hydraulic gradient toward the trench and brine is drawn some distance through the aquifer toward the trench (typically hundreds of meters depending on aquifer permeability).

Over time the aquifer immediately surrounding the trench is partially dewatered. This means that the drainable brine has been removed from the sediment, but the retained brine is still held in place by surface tension.

Stage 3 – Recharge Cycle

Western Australian Salt Lake playas receive water supply from both direct rainfall and surface run-off annually. Direct rainfall lands on the playa each year, and most years, heavy, cyclonic rain events cause run-off from the surrounding catchment onto the lake playa. This water infiltrates the lake playa surface and re-fills the drainable pores in the aquifer. The larger rainfall events usually occur from January through to March.

Stage 4 – Mixing Cycle

The water that has infiltrated and refilled the drainable porosity then mixes (by physical diffusion) with the brine held in retained porosity.

Through repeated production cycles the total brine resource is mined. The concentration of brine pumped from the production trenches will decline over time as the total resource is depleted over repeated production cycles.

The pumping rate is controlled by the hydraulic conductivity of the host sediment. The concentration of produced brine will change over time and will be controlled by the tonnage contained in total porosity and the mechanism of mixing between repeated production cycles.

MINING AND PRODUCTION TARGET

The estimated production target of 200,000tpa of SOP is supported by the total brine production volume of 23GL/year. A numerical groundwater model was developed to predict water level drawdowns due to brine production from trenches in the superficial lake sediments at Lake Way. The model simulates brine abstraction of 19.3GL/year from a trench network. This is supplemented by an assumed volume of 3.7GL/year of brine from the paleochannel delivering a total brine volume of 23GL/year sufficient to support the production target of 200,000tpa of SOP.

Recharge is a key element of the mining strategy, as it refills the drainable porosity and activates salts contained within the retained porosity by physical diffusion. Direct rainfall recharge has been estimated from water level fluctuations due to rainfall and specific yield (Groundwater Science, 2017). Evaporation from water ponded in the Lake was set to 0.7 x (pan evaporation).

Recharge calculations used in the abstraction model were based on historic (1971 – 1990) precipitation at Wiluna and estimated surface inflows (Groundwater Science, 2018) into the lake for a 20-year production period.

Over the life of mine, 80% of the total brine production volume is sourced from the Measured Mineral Resource (Lake Bed Sediment), 16% from the Indicated Mineral Resource (Paleochannel) and 4% from the Inferred Mineral Resource (Lake Bed Sediment – South). The trenches for abstraction of the Inferred component of brine production is expected to be the last of the brine extraction system constructed. Whilst the Company has a reasonable expectation that the portion of the Inferred Mineral Resource included in total brine production will be capable of upgrade, it does not feature as a significant portion of production either during the payback period or during the life of mine.

Brine Extraction

The brine extraction methodology and requirements for the Scoping Study are supported by hydrogeological modelling and hydraulic design work undertaken by Cardno Engineering.

The Scoping Study has assumed brine will be extracted from Lake Way using two methods:

  • Surface trenching provides access to brine contained within the playa lake sediments;
  • Vertical bores provide access to brine from the paleochannel aquifer.

The design requirements assumed an average brine demand of 730L/s to be supplied to the halite ponds for the extraction network concept design. The contribution to brine production is approximately 84% from trenching and 16% from bores. The current basis is:

  • Bore production rate of 8.4L/s/bore
  • Trench yield rate (flow) minimum of 4L/s/km
  • Trench yield rate (flow) maximum of 8L/s/km

The hydraulic analysis used a conceptual brine extraction network layout and the proposed evaporation pond locations to determine the likely requirements of the on-lake brine transfer pumping scheme.

Brine extracted from paleochannel bores will be fed directly into nearby trenches. Bore pumps have been sized for a flowrate of approximately 8L/s and a pumping head at 90m.

The location and geometry of the paleochannel has been identified from a passive seismic survey. Bores will be drilled using the mud rotary method through the lake bed sediments and the Tertiary clays into the basal sand terminating in the weathered bedrock horizon.

The bores will be screened across the basal sands section. Gravel pack will be installed across the screened section with a bentonite seal at the top, the annulus will be backfilled to surface.

Trench Layout

The trench network designed as part of the Scoping Study stretches a total of 130km across the lake surface and includes two types of trench systems required to maintain the feed brine into the Halite Ponds:

·    Extraction trenches provide a low pressure zone for brine contained in the surrounding playa lake sediments to drain into.

·    Transport trenches to convey brine into distinct areas as required, and capture brine pumped from the paleochannel bores into the trench network.

Trench Flow

The brine extraction pumping systems must provide sufficient brine to meet seasonal pond demand, which is at a peak during the summer months due to solar evaporation.

A hydraulic analysis was undertaken on a conceptual network layout to calculate flowrates, flow velocities, pump requirements and power demand. Typical industry norms for pumped open channels were adopted, maintaining a minimal trench base gradient of 1:5000 and a maximum flow velocity of 0.3m/s.

Pump stations are located on-lake between trench segments, and at entry points into each halite pond. In total, the trench network includes 12 transfer pump stations.

Trench Design

The trench design provides for approximately a 5m wide trench, with additional width to batter back any surficial loose soils, and from 5m to 6m deep. The trenches will likely be stepped to avoid wall collapse and to assist with constructability. The Scoping Study has assumed a construction methodology using an amphibious excavator.

Trench spoil will be used to create a light vehicle access berm on one side of the trench and include windrows if required. Bunding on the opposite side will be designed with gaps to allow surface water recharge.

The height and layout of the bunds will depend on hydrogeology requirements (i) to ensure regular groundwater recharge from surface water and (ii) to maintain surface water flow of the lake.

Regular trench maintenance will be required and allowance is made in the maintenance equipment fleet for purchase of excavators and constant coverage of personnel on-site to maintain the trench network.

BRINE EVAPORATION

Extracted brine is concentrated in a series of solar ponds to induce the sequential precipitation of salts and eventually potassium-containing salts in the harvest ponds. Based on modelling using historical data obtained from nearby weather stations at Wiluna Township and Wiluna Airport, the Lake Way region in Western Australia has an average rainfall of 260mm/a and an average water evaporation rate of 3,504mm/a, making conditions ideal for evaporation processes.

The operational area of the evaporation ponds required for the final 200,000tpa SOP production rate is 13.08km2, with area distribution between the various ponds based on mass balance modelling output.

The pond sizing is developed from a simulation using a combination of mathematical and thermodynamic models and is based on the average brine chemistry from the lake and paleochannel. The simulation uses average annual weather conditions to calculate the required brine flow and pond area (size) to meet the targeted 200,000tpa production scenario.

Salt Lake Potash engaged Ad-Infinitum to conduct meteorological modelling, evaporation modelling, pond sizing and design for the Lake Way Project. Geotechnical consulting services were provided by Knight Piésold.

Evaporation Pond Chemistry and Configuration

Brine evaporite chemistry is very complex due to the multitude of ions present in brine, however, in an effort to simplify the evaporation pathway representation, a three-component system of the major constituents (Mg-SO4-K) is commonly assumed. Sodium and chloride ions are not shown, for simplicity, as they are generally present in abundance in all salt lake brines and form halite in preference to all other salts.

The extraction brine composition used for the Scoping Study evaporation modelling is based on Lake Way sample data and is detailed below. The average brine composition below is based on an assumed 80% brine extracted from the lake playa and 20% brine extracted from the Paleochannel.

Table 7: Brine Extraction Composition

Element

Unit

Value

Na

g/L

74.3

K

g/L

6.5

Mg

g/L

7.4

Ca

g/L

0.5

SO4

g/L

26.7

Cl

g/L

122.8

 

Experience from numerous evaporation trials for Lake Way and Lake Wells has shown that astrakanite does not form, most likely because the kinetics of the formation are too slow for a dynamic pond system. Accordingly, the Scoping Study process has adopted this view and assumed that astrakanite will not form within the pond system. Instead, the composition of the solution will move directly towards the leonite-schoenite field to produce potassium sulphate salts, followed by the epsomite-kainite field where these salts precipitate. Finally, the carnallite field is reached.

Harvest salts from the kainite pond and carnallite pond are used for SOP production. Concentrated brine from the carnallite pond is sent to the bittern pond for additional concentration and store as a waste by-product.

Evaporation Pond Layout

The specific site conditions were reviewed to assess the most suitable evaporation pond locations:

  • Halite ponds (1020ha) are located on-lake, to make use of the in situ low permeability clays and avoid the need for HDPE lining.
  • Bitterns Pond (14ha) is located on-lake and unlined.
  • Kainite (200ha), Carnallite (11ha) and Recovery Ponds (80ha) are located on-lake.

On-Lake Ponds

All ponds are located on-lake providing significant benefits for both cost and operational efficiency. The on-lake evaporation pond system has been located to:

  • Avoid locating ponds in areas of high brine yield, to minimise pond footprints sterilising the available brine resource.
  • Where possible, avoid low lying areas subject to long periods of inundation resulting from surface water flow. Some ponds that span inundated areas will require specific design considerations.
  • Ensure availability of in situ clays beneath the pond footprint, proven to be of low permeability and will limit seepage of unlined ponds.
  • Ensure availability of good quality lake clays that are a potential source of embankment construction materials to allow a cut-to-fill method for pond construction.
  • Avoid disturbance of the lake edge due to environmental and heritage requirements.

The pond sizes are detailed in Table 8.

Table 8: On-lake Ponds

 

Halite

Bitterns

Kainite

Carnallite

Recovery

Area (ha)

1,020

14

200

11

80

Evaporation Pond Construction

On-lake construction requires specialist equipment given the challenges trafficking and placing fill on the soft lake surface. Construction material will either be clay sourced from borrow pits immediately adjacent to the embankments, or imported materials source from existing mining waste materials or planned mine pre-stripping.

The general construction methodology is currently being trialled and proven up as part of the first phase of the Evaporation Pond construction currently underway at Lake Way. This will provide important information to ensure an efficient construction methodology is implemented for the remaining pond construction operations at Lake Way.

Salt Harvesting

The harvest ponds have been designed to allow for up to 12 months of salt growth before harvest. Harvests may be made more frequently in the kainite ponds during plant start-up and operation. The carnallite and recovery ponds will also be harvested and salt processed through the plant.

Sulphate salts are to be recovered from the harvest ponds (kainite, carnallite and recovery) by grader and front end loader. Dump trucks are loaded to transport the salt to the process plant, where it is stockpiled in separate areas to allow for a blended feed to the process plant.

PROCESS PLANT

The potassium salts harvested from the solar evaporation ponds will be treated in a processing plant to convert these salts into sulphate of potash (SOP or K2SO4), while minimising deportment of chlorides to the product.

Salt Lake Potash has conducted extensive testing of lake brines and harvest salts from its salt lake projects, predominantly Lake Way and Lake Wells, in order to confirm the evaporation and associated harvested salt processing operations. The testing thus far has proven that lake brine can be concentrated economically, via solar evaporation, to produce mixed potassium sulphate double salts. It has also been shown that these salts, when harvested, can be economically converted into a valuable, high purity SOP fertiliser product.

The SOP production process consists of:

·    Attrition to break up crystals

·    Conversion of the mixed sulphate salts to schoenite in a sulphate solution at ambient temperatures

·    Reverse Flotation to remove chlorides

·    Conversion of the schoenite to SOP (in a schoenite solution at around 50°C)

·    Filtering, drying and packaging

The key design parameters are shown in Table 9.

Table 9: Design Basis

Parameter

Value

Flowsheet configuration

Feed preparation, conversion, reverse flotation and SOP crystallisation.

SOP production

200,000tpa

Process plant potassium recovery

80%

Operating Time

 

Brine extraction; evaporation ponds and harvesting

8200h/a

Process plant

7600h/a

Product Composition

 

SOP Grade

>96%

%K2O equivalent

>52%

Target Cl Content

<0.5%

Target Mg Content

<0.2%

The harvested salt is crushed in a roll mill to break up lump material and is further broken down and scrubbed in attritioning cells. The resulting slurry is pumped to the conversion circuit where the potassium harvest salts are converted to schoenite prior to flotation.

The conversion tanks’ discharge slurry is transferred to the conversion thickener, an inclined plate unit. The conversion thickener underflow slurry, now predominantly schoenite, reports to the reverse flotation circuit.

The converted harvest salts still contain an appreciable amount of halite which needs to be removed to minimise chloride and sodium reporting to the product. Therefore a reverse flotation configuration is used employing self-aspirated columns to remove the halite. The resulting halite slurry is filtered, then stockpiled for disposal back on the lake. The flotation product is a Schoenite slurry which is filtered, to remove excess flotation brine, and is presented to the crystalliser circuit. The filtered flotation brine, which is saturated in potassium, is internally recycled with any excess brine sent to the recovery pond.

The purified schoenite salt from flotation is re-slurried with a calculated amount of dilution water and then pumped into the SOP crystalliser which is maintained at 50°C to convert to the schoenite to SOP by dissolving the magnesium sulphate from the double salt. The SOP crystalliser mother liquor reports to a cooling crystalliser where schoenite is precipitated from the liquor by cooling the liquor to 20°C with a chiller system. The secondary schoenite produced by the cooling crystalliser is recycled to the SOP crystalliser along with the primary schoenite from flotation.

The SOP crystalliser produces fine SOP crystals which are first dewatered, then the SOP cake is dried in a rotary drier and then conveyed to the product storage shelter. Product is periodically reclaimed by an FEL and transferred into a loadout hopper for transportation to port.

MAJOR INFRASTRUCTURE

The Lake Way Project is located in the Goldfields region of Western Australia approximately 15km south of Wiluna. The Project is located in close proximity to the Goldfields Highway which is a state highway that extends 800km from south of Kambalda in the Goldfields to Meekatharra in the Mid-West. Given the proximity to the Goldfields Highway which supports quad road trains, road haulage options include either travelling south toward Leonora or west to Geraldton.

The process plant is located 5km from the evaporation ponds and connected by an existing haul road that services the Williamson Pit. A 1.4km haul road from the Williamson pit causeway to the Williamson pond has been constructed as part of the first phase of Evaporation Pond construction. Unsealed access roads will be required for access to the Goldfield Gas Pipeline, raw water borefield and paleochannel bores.

The Project power requirements will be provided by a standalone natural gas power station located near the process plant under a build, own, operate (BOO) arrangement and local diesel generators at remote locations. 

The Project requires natural gas for the power station and for process requirements such as the boiler. Natural gas will be supplied from the Goldfields Gas Pipeline which runs along the eastern side of Lake Way. The distance from the process plant to the gas pipeline is approximately 27km.

Water required for the Project will be sourced from a nearby borefield. Raw water will be extracted from the borefield by bore pumps. The total raw water requirement for the Project is 2.0GL/a.

A fly in/fly out (FIFO) workforce has been adopted for the Lake Way Project using the Wiluna Airport which is located 5km south of the main township. A permanent accommodation village with a capacity for 100 workers has been assumed. The village will be expanded to include 180 construction workers during the construction phase.

PRODUCT TRANSPORT AND LOGISTICS

Salt Lake Potash engaged several highly qualified transport logistic companies to assist with defining the optimal logistics solution for transportation of 200,000tpa of SOP from Lake Way to port. An assessment of numerous haulage options was undertaken, applying a fixed origin and modelling multiple potential destinations including Geraldton, Fremantle and Esperance. This assessment has included a road direct assessment, rail direct assessment, and intermodal hub and spoke solution incorporating both road and rail.

The road direct solution to Geraldton has been established as the most cost-effective option to use for the product transport logistics for the standalone 200,000tpa SOP project from Lake Way to underpin the overall economic assessment for the Scoping Study.

The relatively close proximity to the Geraldton Port facilities (780km) and the ability to leverage off the established sealed highway network from Lake Way to Geraldton provides cost effective access into the Geraldton port facility.

The transportation solution will consist of truck loading at Lake Way site via Front End Loader. The transport from Lake Way to Geraldton will be undertaken by trucks suitable for quad combinations. The Mainroads Restricted Access Vehicles (RAV) approvals for quad combination transport covers the entire route from Lake Way all the way into Geraldton Port.

Geraldton Port is capable of handling fully loaded Panamax size vessels up to 70,000 tonnes and 225m in length. The Port handles approximately 19 million tonnes per annum of trade per year with significant excess capacity available for handling and storage.

PRODUCT QUALITY AND MARKETING

Fertilisers consist of essential plant nutrients that are applied to farmed crops in order to achieve favourable quality and yield. They replace the nutrients that crops remove from the soil, thereby sustaining the quality of crops, and are considered the most effective means for growers to increase yields.

The key components of agricultural fertilisers are nitrogen (ammonia and urea), phosphates (ammonium phosphates), and potassium (muriate of potash and sulphate of potash). In addition, sulphate has gained increased attention over the past several years due to soils becoming deficient in sulphur (the ‘fourth macronutrient’).

Global fertiliser demand is expected to increase significantly in the coming years due to the world population growth accompanied by decreasing arable land per capita, changes in diet and growth in income. These increases will provide an incentive for farmers to increase fertiliser use for improved yields and quality.

The most widely available source of potassium used by growers is Muriate of Potash (MOP or KCl), with around 65 million tonnes consumed annually. SOP is a speciality type of potassium fertilisers that is produced and consumed on a smaller scale.

MOP is widely used in all types of farming, however it can be detrimental to some plants, especially fruits and vegetables, due to its chloride content. SOP is primarily used as a source of potassium for crops intolerant to chloride. SOP is priced at a premium to MOP, due to supply constraints, high production costs and because of its ability to be used on chloride intolerant crops (such as fruits, vegetables, beans, nuts, potatoes, tea, tobacco and turf grass), which typically sell at sufficiently higher prices to absorb the premium cost.

SOP can be used in most applications where MOP is used and is preferred in many circumstances as it enhances yield and quality, shelf life and improves taste. SOP generally outperforms MOP in terms of crop quality and yield. SOP performs particularly well with crops that have a low tolerance to the chloride in MOP and in arid, saline and heavily cultivated soils. The low volume of SOP consumption relative to market demand is partly a result of the scarcity of reliable SOP supply.

SOP’s premium to the MOP price is correlated to the conversion costs from MOP to SOP (Mannheim Process) where MOP is used as an input in the process. The premium has been around 60% for the past decade. In recent years, this premium has expanded significantly, as decreases in the MOP price have not translated to similar declines in the price of SOP, indicating that the SOP market is supply constrained.

SOP can be sold as a standard powder, premium granular or soluble product. Granular and soluable SOP generally attracts a price premium. Salt Lake Potash plans to sell at a premium to the market price as a certified organic producer and also with a soluable product offering. The premium achievable for a soluable product can be upwards of 20% (CRU SOP Market Study May 2019).

The Company has engaged Argus Media (Argus) and CRU International Group to provide market analysis on both the broader SOP market and also specifically the Lake Way Project. The current SOP price averages between US$525/t (NW Europe – Standard bulk) (Argus Media 6 June 2019) and US$625 (California) (Greenmarkets 31 May 2019) with Salt Lake Potash utilising a life of mine SOP price of US$550/t (FOB) for the Scoping Study.

The Company will initially be targeting both global and domestic markets for its premium grade SOP product. SOP production is not easily substitutable and is in supply deficit, therefore the Company is confident in the current and forecasted levels of demand.

MINING TENURE

The Lake Way Project site has been secured with a mixture of contractual rights with Blackham Resources under the Access Agreement and Salt Lake Potash’s own exploration and mining tenements and applications. The Company’s and Blackham Resources mineral exploration and mining tenement locations are detailed in Table 10.

Salt Lake Potash is optimising the tenure approval process by staging the required approvals to ensure construction will be undertaken in line with the project schedule.

In addition to the exploration and mining tenements the Company is progressing the approval for various miscellaneous licences for non-process infrastructure, including water and power.

Table 10: Tenure Summary

Tenement

Status

Holding Name

E53/1878

Live

Piper Preston Pty Ltd

E53/1897

Live

Piper Preston Pty Ltd

E53/2057

Pending

Piper Preston Pty Ltd

E53/2059

Pending

Piper Preston Pty Ltd

E53/2060

Pending

Piper Preston Pty Ltd

L53/208

Pending

Piper Preston Pty Ltd

M53/1102

Pending

Piper Preston Pty Ltd

E53/1862

Live

Kimba Resources Pty Ltd

E53/1905

Pending

Matilda Operations Pty Ltd

E53/1952

Pending

Kimba Resources Pty Ltd

M53/121

Live

Kimba Resources Pty Ltd

M53/122

Live

Kimba Resources Pty Ltd

M53/123

Live

Kimba Resources Pty Ltd

M53/147

Live

Kimba Resources Pty Ltd

M53/253

Live

Kimba Resources Pty Ltd

M53/796

Live

Kimba Resources Pty Ltd

M53/797

Live

Kimba Resources Pty Ltd

M53/798

Live

Kimba Resources Pty Ltd

M53/910

Live

Kimba Resources Pty Ltd

P53/1642

Live

Kimba Resources Pty Ltd

P53/1646

Live

Kimba Resources Pty Ltd

P53/1666

Live

Matilda Operations Pty Ltd

P53/1667

Live

Matilda Operations Pty Ltd

P53/1668

Live

Matilda Operations Pty Ltd

ENVIRONMENTAL

Salt Lake Potash has engaged Pendragon Environmental Solutions (Pendragon) and a number of specialist ecological consultants to provide assistance with the necessary approvals for the Lake Way Project.

The Company has identified the key environmental risks for Lake Way Project and has commenced and completed its own studies to obtain the necessary information for the Company to complete environmental impact assessment/referral documentation as required under the Environmental Protection Act 1986 (EPA Act). In addition to the studies commissioned by the Company, the arrangement Salt Lake Potash has established with Blackham Resources has afforded the Company access to an extensive range of environmental studies completed by Blackham Resources across the Lake Way region. Refer Table 11 below for a summary of the key relevant studies completed by the Company and Blackham Resources to date.

The early environmental study information available, has greatly improved the Company’s understanding of the local and regional environment. This has allowed the Company to optimise and de-risk the development to minimise environmental impacts and constraints.

Table 11: Surveys Completed

Report Title

Area

Date

Study Description

Flora and Vegetation Assessment Lake Way Demonstration Plant Project

Lake Way and Surrounds

2019

Level 1 and Field Survey

Demonstration Plant Flood study

Lake Way

2019

Flood study

Lake Way Acid Sulphate Soil investigation

Lake Way

2019

Acid Sulphate investigation

Lake Way Fauna assessment of proposed project area

Lake Way and Surrounds

2019

Level 1 and Field Survey

Fauna Survey

Lake Way and Surrounds

2019

Targeted Night Parrot Survey

Lake Way Potash Project Subterranean Fauna Baseline Survey

Lake Way and Surrounds

2017

Level 1 Baseline survey

Detailed Flora and Vegetation Survey Lake Way Potash Project

West of Lake Way

2017

Level 1

Lake Way Potash Project Wetland Ecology Baseline Survey

Lake Way and Surrounds

2017

Level 1 Base line Survey

Fauna Survey Lake Way Potash

Lake Way and Surrounds

2017

Level 2

Fauna Assessment Lake Way Project Area

Lake Way and Surrounds

2016

Level 1

Flora & Vegetation Survey Lake Way

Lake and Surrounds

2015

Level 1

Matilda Gold Project Murchison Western Australia

Williamson Pit, Matilda Operations and Wiluna

2015

Level 1 Biological Survey

Matilda Gold Project Murchison Western Australia

Williamson Pit, Matilda Operations and Wiluna

2015

Field survey for Landscape Function Analysis Survey

Biological Assessment of Lake Way 2009

Lake Way and Surrounds and E53/1897

2010

Field Investigation of Lake Way discharge environment

NATIVE TITLE AND HERITAGE

The Lake Way Project is located in the Wiluna Peoples’ native title determination area (WCD2013/004). The Determination first took effect 23 January 2015, covering an area of approximately 40,665 km2. The determination area includes a number of pastoral leases, parts of the township of Wiluna, parts of the Canning Stock Route, areas of unallocated Crown Land and the Lake Way Project area.

Tarlka Matuwa Piarku Aboriginal Corporation RNTBC (TMPAC) manage the Wiluna Peoples native title rights over their determined area.

In December 2018, the Company signed a Native Title Land Access and Brine Minerals Exploration Agreement (the Agreement) with TMPAC, on behalf of the Wiluna People, covering the Lake Way Project area and providing consent to the grant of its exploration licences and for the area required for the construction and operation of the first phase of Evaporation Ponds.

The Company is continuing extensive consultation with TMPAC to achieve a Native Title Mining Agreement to provide consent to the grant of its mining lease and for the ongoing mining operation. The Native Title Mining Agreement negotiations are advanced and the Native Title Mining Agreement is expected to be finalised and signed in the near future.

The Aboriginal Cultural Material Committee (ACMC) is of the view that Lake Way is an Aboriginal Site for the purposes for the Aboriginal Heritage Act 1972. The Company’s full and ongoing consultation with TMPAC, will enable the Project to take into consideration TMPAC’s heritage requirements. The Company has, with the support of TMPAC, established a framework for obtaining consents under the Aboriginal Heritage Act 1972 necessary to ensure continuity of works on the Lake.

ECONOMICS

Operating Costs

Operating costs have been estimated for the Lake Way Project based on the production rate of 200,000tpa to an accuracy of ±30%.

The estimated cash operating costs were built up by creating cost schedules for the following categories:

Table 12: Operating Costs

Area

Cost per tonne ($A)

Labour

 $    49

Power

 $    33

Maintenance

 $    17

Reagents

 $      3

Consumables

 $    37

Miscellaneous

 $    27

General and Administration

 $    18

Total (Operating Costs per tonne) Mine Gate

 $  184

Transportation

 $    80

Total (Operating Costs per tonne)

 $  264

The total operating cash cost estimate of $264/t places the Lake Way Project as the lowest cost producer globally for SOP projects.

Capital Costs

Salt Lake Potash estimates the total capital cost to construct the brine extraction, evaporation and process plant and associated infrastructure to produce 200,000tpa SOP at $237 million.

Table 13: Capital Costs

Area

$Am

Brine Extraction

22

Evaporation

36

Process Plant

75

Plant Infrastructure

20

Area Infrastructure

12

Regional Infrastructure

1

Miscellaneous

11

Total Direct

177

Temporary Facilities

7

EPCM

21

Total Indirect

28

Total Bare

205

Growth Allowance

32

Total Initial Capital

237

Royalties, Taxes, Depreciation, and Depletion

The Scoping Study project economics include the following key parameters related to royalties, tax, depreciation, and depletion allowances:

·    State Government Royalties are 2.5% of Gross Revenue

·    Other Royalties up to 4.9% of Gross Revenue

·    Tax rate of 30% is applied

·    Depreciation is assumed on a diminishing basis over the life of the assets

Financial Modelling

An economic model has been prepared which reflects the proposed mine life for the Lake Way Project of 20 years. The Scoping Study assumes first production to occur in Q4 2020 with a gradual ramp up to full name plate capacity of 200,000tpa over the year 2021. This assumes completion of the BFS in Q3 2019 and a development timeframe of 12-15 months subject to availability of funding and in accordance with required approvals.

Financial modelling of the Lake Way Project highlights exceptional economic returns with a post tax NPV8 of $381m (pre-tax NPV8A$580m) and a post tax IRR of 27% (pre-tax IRR of 33%). Table 2 provides a summary of production and cost figures for the Lake Way Project.

Payback Period

Payback period for the initial development capital for the Lake Way Project is 3.2 years. The payback period is based on free-cash flow, after taxes.

Sensitivity Analysis

The Scoping Study was prepared at a ±30% accuracy to investigate the technical and economic parameters of a SOP production operation at Lake Way.

The Company has modelled numerous scenarios during the study process to evaluate the impact of key inputs to the Lake Way Project economics. The modelling has highlighted the robustness of the project with the findings detailed in Table 14 and 15 below.

Table 14: Scenario Analysis – NPV

Sensitivities (NPV)

-20%

-15%

-10%

-5%

Base

5%

10%

15%

20%

Price

197

243

289

335

381

427

473

519

565

FX

611

543

483

430

381

338

298

261

228

Operating Costs

449

432

415

398

381

364

347

331

314

Capital Costs

420

410

401

391

381

372

362

352

343

Table 15: Scenario Analysis – IRR

Sensitivities (IRR)

-20%

-15%

-10%

-5%

Base

5%

10%

15%

20%

Price

19%

21%

23%

25%

27%

29%

31%

32%

34%

FX

36%

33%

31%

29%

27%

25%

23%

22%

20%

Operating Costs

30%

29%

28%

28%

27%

26%

25%

25%

24%

Capital Costs

33%

31%

30%

28%

27%

26%

25%

24%

23%

NEXT STEPS

On the back of the outstanding results from the Scoping Study, the Company has commenced a Bankable Feasibility Study (BFS). Due to the advanced nature of the Scoping Study the Company expects to deliver the BFS within Q3 2019.

Salt Lake Potash is in advanced discussions with a debt provider for a debt funding package which will support funding for the Lake Way Project.

In parallel with work being undertaken on the BFS and utilising experience gained from the construction of the initial Evaporation Ponds, the Company is moving into a Front End Engineering Design (FEED).

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

 

Tony Swiericzuk / Clint McGhie

Salt Lake Potash Limited

Tel: +61 8 6559 5800

Jo Battershill

Salt Lake Potash Limited

Tel: +44 7540 366000

Colin Aaronson / Richard Tonthat / Ben Roberts

Grant Thornton UK LLP (Nominated Adviser)

Tel: +44 (0) 20 7383 5100

Derrick Lee / Beth McKiernan

Cenkos Securities plc (Joint Broker)

Tel: +44 (0) 131 220 6939

Rupert Fane / Ingo Hofmaier / Ernest Bell

Hannam & Partners (Joint Broker)

Tel: +44 (0) 20 7907 8500

 

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Forward Looking Statements

This announcement may include forward-looking statements. These forward-looking statements are based on Salt Lake Potash’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 Salt Lake Potash, which could cause actual results to differ materially from such statements. Salt Lake Potash makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, to reflect the circumstances or events after the date of that announcement.

 

Competent Persons Statement

The information in this Announcement that relates to Mineral Resources is extracted from the report entitled ‘Significant High-Grade SOP Resource Delineated at Lake Way’ dated 18 March 2019. This announcement is available to view on www.so4.com.au. The information in the original ASX Announcement that related to Mineral Resources was based on, and fairly represents, information compiled by Mr Ben Jeuken, who is a member Australasian Institute of Mining and Metallurgy (AusIMM) and a member of the International Association of Hydrogeologists. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Jeuken has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. Salt Lake Potash Limited confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.

The information in this announcement that relates to Process Testwork Results is extracted from the report entitled ‘Field Trials at Lake Way Confirm Salt Production Process’ dated 29 January 2019. This announcement is available to view on www.so4.com.au. The information in the original ASX Announcement that related to Process Testwork Results was based on, and fairly represents, information compiled by Mr Bryn Jones, BAppSc (Chem), MEng (Mining) who is a Fellow of the AusIMM. Mr Jones is a Director of Salt Lake Potash Limited. Mr Jones has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. Salt Lake Potash Limited confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.

The information in this report that relates to the Process Plant, Non-Process Infrastructure and Capital and Operating Costs are based on information compiled by Mr Peter Nofal, who is a fellow of AusIMM. Mr Nofal is employed by Wood, an independent consulting company. Mr Nofal has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Nofal consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

 

SUMMARY OF MODIFYING FACTORS AND MATERIAL ASSUMPTIONS

The Modifying Factors included in the JORC Code have been assessed as part of the Scoping Study, including mining (brine extraction), processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and government factors. The Company has received advice from appropriate experts when assessing each Modifying Factor.

A summary assessment of each relevant Modifying Factor is provided below.

Mining (Brine Extraction) – refer to sections entitled ‘Project Geology and Mineral Resource’ and ‘Mining and Production Target’ in the Announcement.

Salt Lake Potash has conducted extensive exploration programs across Lake Way involving numerous evaluation methods.

To evaluate the lake bed sediments, sampling and data collation for the exploration field programme comprised extended pumping trials at 5 trenches across the lake for hydraulic parameter determination of drainable porosity and hydraulic conductivity (permeability). Separately, 49 test pits were developed and evaluated to assess variations in geology, brine grade and hydraulic parameters (determined from recovery testing and laboratory testing of in situ samples) across the Lake and 13 auger holes were developed to assess the deeper layers of the lake bed sediments validating the variations in geology and hydraulic parameters.

Salt Lake Potash undertook work in relation to the paleochannel which comprised a volumetric calculation from the geophysics and aquifer parameters and brine grade from the test pumping.

The Company engaged an independent hydrogeological consultant with substantial salt lake brine expertise, Groundwater Science Pty Ltd, to complete the Mineral Resource Estimate for the Lake Way Project. The Principal Hydrogeologist of Groundwater Science, Mr Jeuken, has over 10 years of experience in groundwater resources assessment and management for mining. He has experience in salt lake brine potash evaluation, aquifer testing, wellfield planning and installation for mining, and the development of conceptual hydrogeological models.

Refer to ASX Announcement dated 18 March 2019 for further details on the Mineral Resource Estimate upon which the production target is based.

The hydrological model was produced by the Company in consultation with independent experts. The two methods of extraction outlined in the Announcement are common practice for brine extraction. These extraction methods are used by the three main current operations which include Great Salt Lake in the US, Lop Nur Salt Lake (Luobupo) and SQM in Chile.

Recharge is a key element of the mining strategy, as it refills the drainable porosity and activates salts contained within the retained porosity by physical diffusion. Direct rainfall recharge has been estimated from water level fluctuations due to rainfall and specific yield (Groundwater Science, 2017). Evaporation from water ponded in the Lake was set to 0.7 x (pan evaporation).

Recharge calculations used in the abstraction model were based on historic (1971 – 1990) precipitation at Wiluna and estimated surface inflows (Groundwater Science, 2018) into the lake for a 20-year production period.

Importantly, over the life of mine, 96% of the total production target is in the Measured and Indicated resource categories:

·    Lake Bed Sediment (84% of the total production target)

o  80% Measured resource category

o  4% Inferred resources category

·    Paleochannel Basel Sands

o  16% Indicated resource category

The Inferred resource included in the total production target is located at the southern end of Lake Way and is expected to be the last of the brine extraction system constructed. Whilst the Company has a reasonable expectation that this portion of the Inferred Mineral Resource will be capable of resource category upgrade, it does not feature as a significant portion of production either during the payback period or during the life of mine.

Processing (including Metallurgical) – refer to sections entitled ‘Brine Evaporation’ and ‘Process Plant’ in the Announcement.

The Company engaged brine-processing experts Carlos Perucca Processing Consulting Ltd (CPPC) and AD Infinitum Ltd (AD Infinitum) and their principals Mr Perucca and Mr Bravo, who are highly regarded international experts in the potash industry. Mr Bravo previously worked as Process Manager Engineer at SQM, the third largest salt lake SOP producer globally. He specialises in the front end of brine processing from feed brine through to the crystallisation of harvest salts. Mr Perucca has over 25 years of experience in mineral process engineering and will provide high-level expertise with respect to plant operations for the processing of harvest salts through to final SOP product. AD Infinitum and CPPC were responsible for the brine evaporation and salt processing components in the Scoping Study.

Lake Way’s process development relied heavily on experience applied by Wood, SRC and specialist consultants (CPPC and Ad Infinitum) who are well experienced from working on similar operations. Production of SOP from lake brines is well understood and a well-established process.

Salt Lake Potash has conducted extensive testing of lake brines and harvest salts from its salt lake projects, predominantly Lake Way and Lake Wells. The testing conducted to date supports that lake brine can be concentrated economically, via solar evaporation, to produce mixed potassium sulphate double salts. It has also been shown that these salts, when harvested, can be economically converted into a valuable, high purity SOP fertiliser product.

In early 2018, modelling of the Lake Way evaporation pathway was completed by solar evaporation experts, Ad-Infinitum. The modelling revealed that the salts produced by solar evaporation were suitable for processing into SOP. The potassium harvest salts were predicted to include leonite (K2SO4·MgSO4·4H2O), schoenite (K2SO4·MgSO4·6H2O) and kainite (KCl·MgSO4·2.75H2O), which are all amenable to the conversion to SOP via the process developed for Lake Wells.

In March 2018, laboratory scale (wind tunnel) evaporation tests were initiated on brine from both the Williamson Pit and Lake Way brine. These tests were compared to the brine evaporation chemistry predicted by Ad-Infinitum showing an excellent correlation to the model. The tests also confirmed the Williamson Pit brine to be a pre-concentrated form of Lake Way brine with similar evaporation brine chemistry.

In April 2018, field evaporation tests were initiated at Lake Way as part of the Lake Way Site Evaporation Trials. These tests consisted of small batch tests designed to duplicate wind tunnel tests at site conditions, and larger batch tests including a specific evaporation rate trial to validate the Ad-Infinitum evaporation modelling.

Three small batch tests were completed in December 2018 using Lake Way playa brine and Williamson pit brine (INT-LY, INT-WP and INT-WP2). Each batch began with a single fill of brine and was subject to evaporation until the brine was exhausted of economic levels of potassium. The volume of brine was moved into progressively smaller ponds throughout the trial and the residual salts were harvested. The harvest salts were homogenised and sampled for analysis and characterisation.

A number of larger batch evaporation tests using larger evaporation ponds were conducted in parallel, and further batch evaporation testing has been continued throughout 2019.

These large batches began with over 100 tonnes of Lake Way playa brine and were operated in a similar manner to the smaller trials. Over 5 tonnes have been harvested from these batch trials. Throughout the trial, brine concentration was monitored and a portion was removed at various concentrations for use in an evaporation rate trial, consisting of multiple class “A” evaporation pans of varying brine concentrations.

The nearby weather station at Wiluna Airport, operated and maintained by the Bureau of Meteorology, provides meteorological conditions to correlate brine evaporation performance for the test work.

Harvest salts from laboratory evaporation tests have been sent to Saskatchewan Research Council (SRC) in Canada to perform a flowsheet testing program for the Lake Way Project. The program’s objective was to verify the suitability of the previous process flowsheet conditions developed for the Lake Wells project. The testing program involved:

·    Mineralogical characterisation

·    Conversion of mixed harvest salts to schoenite

·    Reverse flotation of halite from converted salts

·    Crystallisation tests to produce high purity SOP.

It was found that the type of potassium salts present in the Lake Way harvests were similar to Lake Wells (Kainite, Leonite and Schoenite) albeit in different ratios and therefore the process flowsheet remains very similar to Lake Wells. It was also found that potassium was present in both fine and coarse size fractions in the laboratory produced harvest salt sample, therefore finer crushing was required to achieve similar flotation results to Lake Wells. On-going tests are being undertaken on the site generated harvest salt to confirm mineralogy, size fraction and hence crushing size.

The program demonstrated that Lake Way harvest salt can be successfully converted to SOP using the identified process flowsheet, including; attritioning, crushing, conversion, flotation and crystallisation to produce an SOP product of very good chemical quality (>52% K2O equivalent).

Infrastructure – refer to sections entitled ‘Major Infrastructure’ and ‘Product Transport and Logistics’ in the Announcement.

Lake Way’s proximity to the West Australian goldfields means relatively minor area infrastructure upgrades and modifications are required.

The Scoping Study was managed by Wood. Wood is a recognised global leader in potash projects with capabilities extending to detailed engineering, procurement and construction management. Wood are able to leverage an international network, including access to its Centre of Potash Excellence located in Saskatoon, Canada.

Salt Lake Potash engaged several highly qualified transport logistic companies to assist with defining the optimal logistics solution for transportation of SOP to port facilities. The transport cost estimates have been derived directly from transport providers who have extensive knowledge of the Western Australian logistics market.

Marketing – refer to section entitled ‘Product Quality and Marketing’ in the Announcement.

Independent potash market forecasts and assessments were provided by experts CRU International and Argus Media.

These reports emphasised that the specifications proposed by Salt Lake Potash of a K2O content of >52% and Chloride content of <0.1% placed the product into the premium range. The reports confirmed that it would be feasible for Salt Lake Potash to monetise the high level of K2O content in its product relative to the more commonly traded specifications of 50-51% K2O. There is also a market for premium pricing for low chloride content where the chloride content can consistently be produced at levels below 0.5%.

The Company has previously entered MOUs with Mitsubishi Australia Limited and Sinofert Holdings Limited setting out the basis for binding offtake agreements. The Company continues to progress discussions with these parties and others with a view to signing binding offtake and marketing agreements for the future sale of its product.

Economic – refer to sections entitled ‘Economics’ in the Announcement.

Capital Estimates have been prepared by Salt Lake Potash and Wood, a global expert in engineering, using a combination of cost estimates from suppliers, historical data, reference to recent comparable projects, and benchmarked construction costs for Western Australia. Costs are presented in real 2019 terms and are exclusive of escalation. The overall accuracy is deemed to be ± 30%.

Capital costs include the cost of all services, direct costs, contractor indirects, EPCM expenses, non-process infrastructure, area infrastructure, sustaining capital and other facilities used for the operation of the Mine and Process Plant.

Operating costs have been estimated by Salt Lake Potash and Wood. Operating costs are based on a combination of first principles build-up, direct supplier quotes, and experience on similar projects with unit rates benchmarked to costs attributable to Western Australia.

Labour costs have been developed based on a first-principles build-up of staffing requirements with labour rates from bench marks for the Western Australian region.

Government royalties have been assumed at a 2.5% FOB gross revenue basis for the life of the project. Private royalties associated with Blackham Resources and Native Title are up to 4.9% gross revenue depending on the level of brine derived from Blackham Resources tenure.

Royalties account for an average life of mine cost of A$20/t per annum.

Rehabilitation and mine closure costs are included within the discounted cash flow modelling based on 10% of initial development capital and incurred at the end of mine life.

A detailed financial model and discounted cash flow (DCF) analysis has been prepared in order to demonstrate the economic viability of the Project. The DCF analysis demonstrated compelling economics of the Lake Way Project, with an NPV (ungeared, after-tax, at an 8% discount rate) of A$382 million, assuming a LOM Sulphate of Potash price of US$550/t and an (ungeared) IRR of 27%.

The Scoping Study assumes first production to occur in Q4 2020 with a gradual ramp up to full name plate capacity of 200,000tpa over the year 2021. This assumes completion of the BFS in Q3 2019 and a development timeframe of 12-15 months subject to availability of funding and in accordance with required approvals.

Sensitivity analysis was performed on all key assumptions used including price operating and capital costs and exchange rate. The sensitivity analysis highlighted the robustness of the project with the breakeven pricing calculated at US$323/t being a greater than 40% discount to central pricing assumptions.

Payback period for the Lake Way Project is 3.2 years. The payback period is based on free-cash flow, after taxes.

Salt Lake Potash is confident in being able to secure the required funding to develop the Lake Way Project.  The Company is in advanced discussions with a debt provider for a debt funding package which will support funding for the Lake Way Project. This is also supported by the recent capital raising of A$20.25m (ASX announcement 6 June 2019).

Environmental – refer to section entitled ‘Environmental’ in the Announcement.

An opportunities and constraints assessment was completed for the Project by Pendragon Environmental, a leading Western Australian environmental management consultancy. Based on the Project’s stage of development, Pendragon Environmental confirmed there are no current impediments on the Project.

To date, Salt Lake Potash has only undertaken preliminary desktop studies for the purposes of identifying potential environmental opportunities and constraints. Extensive data is available across the Scoping Project area from work undertaken historically by Blackham Resources. The further development of the Project may require additional detailed flora, fauna and other studies; this is dependent on the final design criteria.

Social, Legal and Governmental – refer to sections entitled ‘Mining Tenure’ and ‘Native Title and Heritage’ in the Announcement.

The Company has taken legal advice in relation to relevant Modifying Factors.

Material Assumptions

Project Start Date

Q4 2020

 

Cost and Pricing Basis

2019 Dollars

 

Currency

Australian Dollars (unless otherwise stated)

 

Cost Escalation

0%

 

Revenue Escalation

0%

 

Scoping Study Accuracy

±30%

 

Capex Growth and Allowance

13%

 

Mining & Processing

Mineral Resource (Drainable Porosity)

8.2Mt

 

Portion of Production Target – Measured

80%

 

Portion of Production Target – Indicated

16%

 

Portion of Production Target – Inferred

4%

 

Trenches (production and transport) – average depth 5m

130km

 

Bores – average depth 120m

14

 

Bore Production rate

8.4L/s/bore

 

Trench yield rate (flow) – minimum

4L/s/km

 

Trench yield rate (flow) – maximum

8L/s/km

 

Brine Chemistry (average Lake Brine SOP grade)

15.2Kg/m3

 

Annual Production (steady state)

200ktpa

 

Life of mine

20 Years

 

Pond Recovery

78%

 

Plant Recovery

80%

 

Pricing

Sulphate of Potash (FOB)

US$550/t

 

Operating Costs

   

Brine Extraction

A$23/t

 

Brine Evaporation & Harvesting

A$23/t

 

Process Plant

A$104/t

 

Plant Infrastructure

A$4/t

 

Area Infrastructure

A$7/t

 

General & Administration

A$22/t

 

Transportation

A$80/t

 

Capital

   

Brine Extraction

A$22 million

 

Evaporation

A$36 million

 

Process Plant

A$75 million

 

Plant Infrastructure

A$20 million

 

Area Infrastructure

A$12 million

 

Regional Infrastructure

A$1 million

 

Miscellaneous

A$11 million

 

Indirect Costs & Growth

A$60 million

 

Other

   

Royalties

Govt – 2.5%

Other – 4.9%

 

Corporate tax rate

30%

 

Discount rate

8%

 

 

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