EXPLORATION & DEVELOPMENT

American Pacific Borates strikes sales deal

Sulphate of potash (SOP) producer Compass Minerals has signed an agreement that could see it sell future SOP production from American Pacific Borates’ Fort Cady development in California, and partner on a programme to establish a boron-enriched fertiliser business.

Staff reporter
American Pacific Borates has taken another step toward derisking its Fort Cady development in California

American Pacific Borates has taken another step toward derisking its Fort Cady development in California

The letter of intent commits Compass to "progress negotiations" for SOP marketing and sales from Fort Cady and to "work together to progress crop trials and agronomy studies" for boron-enriched fertilisers.
 
Should the deal come to fruition, Compass would secure future supply of SOP and exposure to a specialty-borates fertiliser. American Pacific would secure seamless indirect entry into a tightly controlled potash industry and a strategic partner for its borates product.
 
Terms for an eventual sales agreement were yet to be negotiated. 
 
American Pacific executive director Anthony Hall said there was "strong alignment" between the two parties in targeting the "the growing North American agricultural market" and described Compass' customer base as "well established". He said the partnership would allow American Pacific to focus on its "rare borate business".
 
Fort Cady is in construction on the way to initial production of 18,000 tonnes per annum of SOP and 8,000tpa of boric acid. Production was targeted for next year. The operation was expected to ramp up over three phases for peak production of more than 360,000tpa of SOP and 405,000tpa boric acid.
 
Boron-enriched fertilisers are one avenue for the borates and complement the SOP production, however, American Pacific expected to sell into several ‘decarbonisation' markets including solar PV, wind turbines and permanent magnets. 
 
The overall operation has an NPV (post-tax, 8% discount) of more than US$2 billion and an IRR of 40%. Fort Cady has been in the top three best-rated assets in Mining Journal's Project Pipeline database of global development assets for the past four years.
 
It's been a busy few months for ASX-listed American Pacific, which updated its definitive feasibility study in early February before appointing a construction firm less than a week later. Last month, the company established a US advisory board to drive a planned US listing. That board included former Albemarle Lithium and Advanced Materials president John Mitchell. A week later, chief executive Michael Schlumpberger handed in his resignation. All the while, project development moves the company closer to production.
 
The market has generally reacted positively to news flow, particularly progress around a US listing, with shares in American Pacific up 54% since the start of February to A$2.34 (A$1.82) at close of trading in Australia this week.

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