Australian Potash gets free carry for Lake Wells gold hunt

Australian Potash has a new 70 per cent JV partner in the hunt for gold beneath its 100 per cent-owned Lake Wells Sulphate of Potash, or “LSOP”, project after St Barbara Ltd met expenditure commitments to earn its interest. Australian Potash now has a 30 per cent, free-carried interest through to a definitive feasibility study for any non-potash ore body St Barbara may find on its tenements.

In a move designed to allow the sulphate of potash developer to “focus on its knitting”, Australian Potash can simply sit back and watch St Barbara’s geologists get boots on the ground and chase hard rock minerals under the guise of the Lake Wells gold project.

Perth-based Australian Potash’s management said the two partners had formed an unincorporated JV to explore, develop and mine any non-potash minerals the JV finds across its ground.

Importantly, Australian Potash will not have to put its hands in its pockets until a bankable feasibility study is tabled by St Barbara.

Just one year ago, Australian Potash appeared to be sitting pretty with a 70 per cent interest in the Lake Wells gold project and St Barbara holding the balance of 30 per cent in the JV.

At that time, the company reported some modest gold air core drill intercepts on its ground which straddles the Yamarna Shear Zone around 130km northeast of Laverton in Western Australia – then the COVID-19 pandemic hit, effectively shutting down the hunt for gold at Lake Wells.

Australian Potash said the Yamarna region had been enjoying ongoing exploration success since the discovery of Gruyere in 2013. Adjacent tenement holder, Gold Road Resources continues to demonstrate the underexplored nature of the Yamarna Belt and the potential to delineate deposits of commercial scale.

With almost 6 million ounces of gold currently delineated at the Gruyere project along the Yamarna Shear Zone, Gold Road and its operating partner, Gold Fields are now looking to produce around 300,000 ounces per year from the Gruyere mine which commenced gold production in 2019.

No doubt St Barbara has seen enough encouragement on its JV ground to take the reins and carry hard rock mineral exploration forward in the hope of finding look-alikes to Gruyere. St Barbara’s heightened focus now leaves Australian Potash free to finish off development planning for its Lake Wells potash development.

Australian Potash’s LSOP project is still on track for a final investment decision this year after it locked in multiple offtake agreements to cover its forecast output of 150,000 tonnes per annum of premium-grade fertiliser. The company is marketing the product under its registered trademark brand, K-Brite.

The LSOP project’s DFS was tabled back in 2019 and its proposed 30-year mine life pointed to average annual free cash flow after tax of $70 million and average EBITDA of $114 million per annum. Life-of-mine numbers rounded out to a pre-tax NPV of $665 million for an IRR of 25 per cent, according to Australian Potash.

Just last month, Australian Potash’s LSOP project received a healthy shot in the arm from the Federal Government’s $5b Northern Australia Infrastructure Facility fund, or “NAIF”, after it gave the nod to $140 million in debt financing for the Lake Wells fertiliser project.

Importantly, the debt term for the funding is 17 years with interest-only payments required for an initial period before principal and interest payments kick in down the track.

With offtake agreements locked away, debt financing secure and environmental approvals getting closer with every step, Australian Potash cannot be far away from ‘turning over the first sods of dirt’ for real at Lake Wells.

Is your ASX listed company doing something interesting? Contact: matt.birney@wanews.com.au