THE BOURSE WHISPERER: Australian Potash (ASX: APC) announced the signing of a non-binding Memorandum of Understanding (MoU) for the supply of sulphate of potash (SOP) to one of China’s largest fertiliser companies.
Australian Potash has struck the deal with a subsidiary of CNAMPGC Holding Limited Corporation, namely Sino-Agri Holding Company Limited (Sino-Agri).
The company said the MoU envisages high level commercial terms for sales volumes of up to 30 per cent of estimated production, being up to 100,000 tonnes per annum of SOP from Stage 2 of the company’s Lake Wells project in Western Australia.
APC sees the MoU as a strong foundation as the company seeks to develop strong relationships with key players in the world’s largest fertiliser market.
Australian Potash’s stated marketing strategy is focused on identifying potential customers in key markets, building relationships to ensure potential customers are engaged and the Lake Wells product specifications and volumes are tailored to market requirements.
Although the MoU is non-binding and as such presents no guarantee of a binding agreement on the proposed terms or at all, APC considers its ability to secure sales volumes into larger regional markets as an key component to its marketing strategy, while also aiming to secure market share of prevailing SOP volumes in the Australian market.
The company anticipates, an opportunity to expand the Australian market may exist in time through driving increased awareness of the scientific and commercial value of the SOP product.
For now, however, APC will focus on strengthening its relationship with Sino-Agri in parallel with the project advancement at Lake Wells as the Lake Wells study is progressed and the technical parameters are de-risked.
APC will maintain a constructive dialogue with Sino-Agri, facilitate product trials, optimise product specifications and ultimately seek to progress to a binding commercial agreement.
Sino-Agri is one of China’s largest fertiliser corporations with 60 years of operating history as both a domestic producer, trader and distributor of a range of domestic and imported fertiliser products.
“We have been developing our relationships within the Chinese potash and fertiliser industries for some time and it is very gratifying to commence the formal pathway to securing customers in the world’s largest fertiliser market,” Australian Potash executive chairman Matt Shackleton said in the company’s announcement to the Australian Securities Exchange.
“I look forward to continuing to develop our relationship as our project develops, and to working towards formal off-take agreements.”
Australian Potash has a great deal of activity planned for Lake wells, including the commissioning of pilot evaporation ponds, commencement of Stage 2 test-pumping program, installation of Stage 2 test-production bores, continuing Resource upgrade and expansion program, and a feasibility study.