Shares in Australian Potash Ltd (ASX: APC) and Salt Lake Potash Ltd (ASX: SO4) have fallen heavily in the past week after the companies announced respective capital raisings.
Australian Potash has fallen 11.43% this week and is currently trading at 15 cents after the company announced a $10 million capital raise from investors. Meanwhile, Salt Lake Potash is down 8.75% this week trading at 36.5 cents as the company announced plans to raise $28 million.
About the potash industry
Potash is a naturally occurring substance containing large amounts of potassium that is utilised in making fertilisers. The potash these companies mine is predominantly used to manufacture sulphate of potash (SOP.)
Potassium sulphate is the second major form of potash and is seen as superior over the more abundant potassium chloride (known as MOP). Primarily, this is due to the toxic impact chloride has on many food plants and as such SOP demands up to a 40% premium.
According to a report in the Australian Financial Review recently, the potash industry is slowly coming back to life as money is being pumped into the sector thanks to the potential of SOP. Thus, the race is on between a number of small-cap potash producers to be the first to turn out SOP in Australia.
Other ASX-listed potash players include Kalium Lakes Ltd (ASX: KLL), Agrimin Ltd (ASX: AMN) and BHP Group Ltd (ASX: BHP). BHP said recently that potash was one of four projects under development this year.
Salt Lake Potash winning the race
This week, Salt Lake Potash announced it had completed an institutional placement to enable a final debt drawdown. The $28 million raised at 35 cents a share also enabled access to additional funding through a bank guarantee provided by Sequoia. However, the news has not stopped the Salt Lake Potash share price from plummeting as the company also provided a Lake Way update.
According to the company, the project is on schedule for production in June 2021 with the first sales coming shortly after. As such, plant commissioning is more than 50% complete. However, the capital budget for the works has now increased by $5 million to $269 million in order to de-risk the salt production.
Nonetheless, the company still looks like it will be the first Australian company to both produce and sell SOP across the world.
Australian Potash equity raising
The Australian Potash share price has also fallen significantly this week as the company announced a $10 million capital raise for institutional and sophisticated investors.
The funds similarly to above will be used to progress its Lake Wells SOP project. There are several pre-development activities including building the Lake Wells village.
Australian Potash managing director and CEO Matt Shackleton said:
The heavy institutional and sophisticated investor demand for the offer reflects well on the Lake Wells SOP Project's very robust financial metrics, and supports our transition into development. The LSOP (Lake Wells Sulphate of Potash) still carries the largest 100% measured JORC compliant SOP resource across the space, which speaks to the technically de-risked nature of the development.
In addition to the LSOP, we look forward to unlocking the inherent value in the Laverton Downs nickel sulphide targets with a maiden diamond program scheduled to commence in May.
