trending Market Intelligence /marketintelligence/en/news-insights/trending/_GvtZFmgbepyHn4Bq8Rztw2 content esgSubNav
In This List

Australian Potash eyes domestic market long-term amid key milestone


Infographic: The Big Picture 2024 – Energy Transition Outlook

Case Study

An Oil and Gas Company's Roadmap for Strategic Insights in a Quickly Evolving Regulatory Landscape


Essential IR Insights Newsletter Fall - 2023


Battery metals - unbated long term need for supply security despite short-term headwinds

Australian Potash eyes domestic market long-term amid key milestone

Australian Potash Ltd. CEO Matt Shackleton is defying mainstream thinking by eyeing the domestic market long term, having just delivered 3 tonnes of potassium-rich feeder salts to its Perth, Australia-based pilot plant to produce sulfate of potash trade samples for potential Chinese off-takers.

Shackleton told S&P Global Market Intelligence that he plans to go to China in March 2019 to meet potential off-takers he visited in December 2018 to lock in about two-thirds of the production from the company's Lake Wells project in Western Australia. The rest will be reserved for the Australian domestic market, which has thus far been fed entirely from imports.

"When looking at the Australian domestic scene, the commonly accepted view is that Australia won't use [sulfate of potash, or SOP] as it's too expensive. We don't subscribe to that because that hasn't proven to be the case elsewhere in the world," Shackleton said.

"Our premise is that when we get into production, we'll be able to supply sulfate of potash to the Australian agriculture scene, particularly Western Australia, much cheaper," Shackleton said. "It's about logistics; you need access to rail infrastructure as road is too costly in a big state like Western Australia, and being proximate to Leonora's bulk rail terminals will come in handy."

'Build it and they will come'

Market analysis firm MineLife's founding director, Gavin Wendt, believes that both the cost and product quality advantage means budding Australian producers have every reason to be confident about developing a local industry for local needs, even if the end users have established relationships with overseas suppliers.

"Build it and they will come," Wendt told S&P Global Market Intelligence about the potential to supply Australian users, borrowing a famous phrase from the 1989 movie Field of Dreams.

"You have to think there's a very strong economic argument for end users to look at domestic production. Costs will be significantly reduced as you're not shipping it across the world, and it's clear that the Western Australian government, with its recently announced company incentives, is very keen for its SOP industry to develop and flourish."

Wendt said that while end users are used to price certainty and a certain standard of product with relationships with European suppliers built up over many decades, the key factor for them would be the product quality, which is why he believes that Australian Potash's Dec. 28 release is so important.

While there is also no shortage of hopefuls — including Agrimin Ltd., Reward Minerals Ltd., Kalium Lakes Ltd. and Salt Lake Potash Ltd. all in either Western Australia or the Northern Territory — Wendt believes that they will likely consolidate down to about two producers rather than all compete with each other.

That said, he also believes that in a business that is entirely new in the Australian context, there is strategic value in being the first to demonstrate the product, which would give Australian Potash a "significant leg up" in securing funding.

Shackleton said he is flying in a process engineer from Canada in January 2019 to help Australian Potash become the first company in the country's history to do so from field-evaporated salts by the last week of that month, which will be a "huge milestone."

The CEO hopes to secure finance for about A$100 million of the A$160 million total project cost with either prepayments, project equity, or a blend of project and corporate equity, with the rest likely funded via debt.

Macro scene is better than expected

Shackleton was Australian Potash's executive chairman before being appointed managing director and CEO in August to make way for Macmahon Holdings Ltd. nonexecutive Chairman Jim Walker to come in and take the same role at the potash junior.

Through 2014 and 2015, Shackleton spent five months understanding SOP's macroeconomics and now says the 4% compound annual growth rate for SOP demand globally, which was forecast in 2015, has not only materialized but, in some metrics, is actually above that level.

Australian Potash also announced Dec. 28 that the University of Western Australia's School of Agriculture and Environment would start a greenhouse research project into the efficacy of Lake Wells' SOP on local soil types in the second quarter of 2019.

Field trials will also compare SOP with muriate of potash in terms of yield, quality and soil biology in conjunction with that program.

Meanwhile, about 2.5 tonnes of magnesium chloride-rich bitterns have been retained for a road construction trial on the Lake Wells access road through the first quarter of 2019.