Kalium Lakes Secures “Historic” Binding Offtake Deal

Australian potash company Kalium Lakes (ASX:KLL) has penned a binding offtake agreement for as much as 90,000 tonnes per annum of sulfate of potash (SOP) from its Beyondie project.

The deal, which was signed with German fertilizer producer K+S (ETR:SDF), is expected to last 10 years and raise AU$650 million in revenues for Kalium.

K+S is considered to be the largest SOP producer in the world, with annual potash revenues of roughly 1.9 billion euros.

SOP is used to produce a higher-priced specialty fertilizer ideal for growing specific fruits such as mango and pineapple as well as vegetables and tobacco.

Kalium’s Beyondie SOP project, located in the East Pilbara region of Australia, will be the first of its kind on the continent, with initial production targeted for 2020.

“We are extremely pleased to have reached [an] agreement with one of the world’s pre-eminent SOP producers and distributors,” Kalium Lakes Managing Director Brett Hazelden said in thepress release. “It further strengthens our desire to be the first commercial SOP production facility in Australia, supplying Australian and overseas farmers with a locally produced premium fertilizer.”

Kalium’s management is now working to finalize final investment decisions, which it expects to complete during the second quarter of this year.

The offtake deal will allow K+S to serve a larger customer base and is also a key step in the company’s new business-wide strategy aimed at streamlining productivity and increasing efficiency.

“The agreement with Kalium Lakes fits perfectly into ourShaping 2030 strategy, which, among other things, provides for the expansion of the specialty business,” Alexa Hergenröther, CEO of operating unit Europe+, said in theK+S announcement. “The additional quantities of potassium sulfate will supplement our product range from our own SOP production in Germany.”

The German fertilizer company is expecting the first SOP shipment from the Australianagricultural miner to be ready by the end of 2020 or beginning of 2021.

Shares of Kalium Lakes were flat on Tuesday (March 26), trading at AU$0.495.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.