TIDMSO4
RNS Number : 0626G
Salt Lake Potash Limited
13 March 2020
13 March 2020 AIM/ASX Code: SO4
SALT LAKE POTASH LIMITED
Interim Results
--------------------------
AIM and ASX listed company Salt Lake Potash Limited ("SO4" or
the "Company"), announces its interim results for the half-year
ended 31 December 2019.
The full version of the Interim Financial Report can be viewed
at www.so4.com.au .
OPERATING AND FINANCIAL REVIEW
The Company is focused on rapidly progressing the development of
its Lake Way Project (the Project), which is on-track for
commissioning in December 2020 and first shipment in the March
quarter of 2021. Lake Way's location and logistical advantages make
it the ideal location for the Company's first Sulphate of Potash
(SOP) operation.
The Company's long-term plan is to develop an integrated SOP
operation, producing from several of its nine salt lakes. SO4 will
progressively explore each of its lakes with a view to estimating
resources and determining development potential. Exploration of the
lakes will be prioritised based on likely transport costs, scale,
permitting pathway and brine chemistry.
HIGHLIGHTS
Achievements during and subsequent to the half year ended 31
December 2019 included:
Completion of the Bankable Feasibility Study (BFS) for Lake
Way
-- Study for the development of a 245kt per annum SOP operation
at Lake Way over 20 years demonstrated outstanding economic
returns
-- A (real) NPV8 of A$479m, IRR of 28% (post-tax) and a 3.5 year capital payback period
-- Steady state EBITDA of A$111m per annum and after tax Free Cash Flow of A$78m
-- First quartile operating costs for global SOP producers with
a C1 cash cost estimate of A$302/t (US$205/t)
Debt and equity financing secured
-- In August 2019 project financing for the Lake Way Project of
up to US$150m was agreed with Taurus Funds Management, staged as
follows:
o Stage 1 Facility: Initially US$30m, subsequently extended to
US$45m, to finance early construction work
o Project Development Facility: US$150m, upon fulfilment of
conditions precedent, which will be used to refinance the Stage 1
Facility and for project development and working capital
-- Two equity capital raisings were also completed in the period:
o In August 2019, 10.58 million shares to Fidelity International
at A$0.70 each to raise A$7.4 million before costs
o In December 2019, 33.6 million shares to a number of new
Australian institutional investors and existing institutional
shareholders at A$0.70 each to raise A$23.5 million before
costs
Continued rapid project development
-- Stage 1 ponds continued to operate in line with expectations,
precipitating salts to be harvested in the December 2020
quarter
-- Stage 2 pond construction commenced and subsequently
completed (in February 2020), taking the total operating pond size
to 400ha
-- 35km of trenches were completed
-- Ground clearing and early civil construction commenced at the
process plant and village sites from January 2020
Key marketing agreements signed for 91% of planned
production
-- The Company has signed binding term sheets for the sale of
224,000t per annum of premium SOP from the Lake Way Project
including:
o HELM AG - 50,000t per annum for 10 years in South East Asia
and the Middle East
o Unifert - 60,000t per annum for 5 years in the Middle East and
Africa
o Indagro - 50,000t per annum for 5 years in North America and
Europe
o Fertisur - 60,000t per annum for 5 years in South America
o Mitsui & Co. (Asia Pacific) - 4,000t per annum for 5 years
in Asia
Lake Way reserve estimate completed
-- High-grade Probable Ore Reserve Estimate of 5.4Mt SOP (2.4Mt
contained potassium at an initial grade of 6.8kg/m(3) ) underpins a
20-year life of mine
-- Increase in the paleochannel basal sands Mineral Resource
Estimate of 57% to 6.0Mt SOP in Total Porosity at 6.1kg/m(3) of
potassium (2.2Mt in Drainable Porosity) supports additional
production bores
High product quality specification confirmed
-- Very high-grade potassium (>53% K(2) O) product confirmed,
with a low chloride (<0.1% Cl) and insoluble particle content
(<0.1%), and dissolution rate of >95% in one minute
-- Premium grade specifications from independent pilot plant
test-work supports premium pricing
-- CRU estimates water-soluble SOP trades on average at a 20% premium to standard SOP
Acquisition of strategic tenement package from Blackham
Resources
-- In July 2019, SO4 and Blackham entered into a Sales Agreement
whereby SO4 acquired a package of tenements and other key assets
for the Lake Way Project
-- SO4 has exercised its option under the Sales Agreement to
acquire Blackham's southern water borefield infrastructure outright
(for $3m), securing long term water supply.
Native Title approval
-- In November 2019, the Company executed the Native Title Land
Access Agreement (LAA) with Tarlka Matuwa Piarku (Aboriginal
Corporation) RNTBC (TMPAC) for the whole of the Lake Way
Project.
-- The landmark LAA provided for the continuing development of
the Lake Way Project and significant benefits to TMPAC and the
broader community.
-- TMPAC have entered into the LAA with SO4 on behalf of the
Wiluna People who are the recognised Native Title Holders of the
land covering the Lake Way Project area. The LAA provides tenure
and native title approval security to SO4 for the duration of the
Project and covers the whole of the Lake Way Project area.
Exploration at Lake Marmion
-- The Company continued to progress its assessment of the other
lakes in its portfolio in order to prioritise future potential
development.
-- During Q4 2019 exploration activities commenced at Lake
Marmion with a view to reporting a maiden mineral resource
estimate.
-- Work at Lake Marmion consisted of drilling, installation of
piezometers, slug tests for hydraulic conductivity estimation,
digging of trenches, sampling and testing for porosity, hydraulic
conductivity and specific yield determination.
LAKE WAY PROJECT
Lake Way is located in the Northern Goldfields Region of Western
Australia, less than 15km south of Wiluna. The Lake Way Project
tenements comprise approximately 386km(2) .
SO4 currently holds nine Mining Leases and seven Exploration
Licences which cover the whole of the Lake Way surface and key
strategic areas off-lake, including the extensive paleochannel and
proposed process plant and village area. The Company has secured
various Miscellaneous Licenses within the surrounding Lake Way area
to support key infrastructure including process water bore fields,
gas pipelines and access roads.
The recently completed transaction with Blackham Resources Ltd
(Blackham), the owner of the adjacent Matilda-Wiluna Gold
Operation, has secured access to process water rights in the
Southern Borefield, in addition to key tenement acquisitions.
The October 2019 Bankable Feasibility Study for the commercial
scale development of a 245,000t per annum Sulphate of Potash (SOP)
operation at Lake Way demonstrates that the Project will generate
outstanding returns with low operating costs and capital
intensity.
Fast-tracked construction progressing on schedule
The Company has now completed both the Stage 1 and Stage 2
evaporation pond networks, an area totalling 400ha.
In addition to the high-grade brine from Williamson Pit, the
ponds have also been filled with brine from 35km of brine
abstraction trenches that have been completed to date. Following
completion of Stage 2, the construction team shifted focus to the
process plant and village where clearing and early civil work has
commenced.
The Project remains on-track to commence plant commissioning in
December 2020, with first SOP sales in the March quarter of
2021.
Offtake for >91% of output secured
SO4 will initially produce two products from Lake Way:
-- A high potassium low-chloride standard powder SOP grading >53% K(2) O
-- A fertigation grade, high potassium low-chloride and
water-soluble SOP, used in micro irrigation
During Q4 2019 and moving into Q1 2020 the Company secured
binding offtake for 224kt of SOP with five partners who will
distribute the product across six continents.
Distributor Volume Region Term
Unifert 60,000 tpa Middle East and Africa 5 years
----------- --------------------------- ---------
Indagro 50,000 tpa North America and Europe 5 years
----------- --------------------------- ---------
Fertisur 60,000 tpa South America 5 years
----------- --------------------------- ---------
Helm 50,000 tpa South East Asia and Middle 10 years
East
----------- --------------------------- ---------
Mitsui & Co. (Asia Pacific) 4,000 tpa Asia 5 years
----------- --------------------------- ---------
Total production covered 224,000 >91% of planned production
by offtake tpa
----------- --------------------------- ---------
SO4's marketing strategy for the sale and distribution of its
premium grade SOP is to work with selected industry leading
partners targeting high growth markets and focussing on
geographical areas with the highest concentration of crops which
benefit from SOP fertilisers. SO4 has been working with each of the
offtake counterparties to execute final purchase agreements, based
upon the binding terms sheets.
Approvals continue to progress
Lake Way is located in an area with a long history of minerals
exploration and associated environmental assessment. SO4 has taken
advantage of existing environmental knowledge to support the
permitting of its early works programme and focus additional
investigations required for permitting of full-scale
operations.
Environmental work to date has not identified any social or
environmental factors that could constitute fatal flaws or
insurmountable obstacles to gaining necessary statutory approvals.
The final outstanding approvals for the Lake Way Project are
currently being progressed.
The pond and trench construction activities for Stage 2 Project
development works commenced in Q4 2019 after receipt of the Project
Management Plan approval from Department of Mines, Industry
Regulation and Safety (DMIRS). These construction activities were
determined by the Environmental Protection Agency (EPA) to not
require formal assessment under Part IV of the Environmental
Protection Act 1986 and have an approved Mining Proposal from the
Department of Mines, Industry Regulation and Safety (DMIRS) and a
Works Approval from the Department of Water and Environmental
Regulation (DWER).
Further approvals are required for the full scope of the Project
with allowance for these approvals included in the Project
schedule. The EPA has determined that the full project scope
requires formal assessment with no public review. This assessment
process is progressing well with a draft scoping document accepted
and the commencement of the supplemental studies required. Field
work for the supplemental studies have been completed and reports
are expected to be finalised in the current quarter.
In respect of the Processing Plant construction, the Company
received a Works Approval from the Department of Water and
Environmental Regulation, a Mining Proposal approval from
Department of Mines, Industry Regulation and Safety and a Native
Vegetation Clearing Permit. These approvals have allowed the bulk
earthworks and civil works for the plant site to commence.
The Company has continued to obtain Ministerial consent to use
the land under section 18 of the Aboriginal Heritage Act 1972, for
additional development as needed to meet ongoing project
requirements.
SO4 has obtained the necessary water licences to extract process
water and for brine extraction from the lake. Final brine
extraction licences are being sought. Project approvals for the
construction of the initial paleo bores to obtain brine from the
paleo channel have been received and drilling has commenced.
Native Title & Heritage
In November 2019, the Company executed the Native Title Land
Access Agreement (LAA) with Tarlka Matuwa Piarku (Aboriginal
Corporation) RNTBC (TMPAC) for the whole of the Lake Way Project.
The landmark LAA will provide for the continuing development of the
Lake Way Project and significant benefits to TMPAC and the broader
community.
TMPAC have entered into the LAA with SO4 on behalf of the Wiluna
People who are the recognised Native Title Holders of the land
covering the Lake Way Project area. The LAA provides tenure and
native title approval security to SO4 for the duration of the
Project and covers the whole of the Lake Way Project area. In line
with customary industry standards, TMPAC and the broader
Wiluna Community will receive significant economic, social and
environmental benefits, including:
-- Royalty payments;
-- Community support programs;
-- Employment & training;
-- Aboriginal business development and contracting opportunities;
-- Heritage protection and land management opportunities.
The LAA includes an agreed procedure for the grant of any
necessary statutory Aboriginal heritage consents for project
operations as well as exclusion zones to protect areas of
particular cultural sensitivity, all of which sit outside the
footprint of proposed operations.
The execution of the LAA is a major milestone for the Lake Way
Project and ensures remaining Mining Leases and associated tenure
will be granted to support the rapid development of the Lake Way
Project.
SO4 has been actively engaging with TMPAC and the broader Wiluna
community for over 18 months as part of its commitment to establish
early consultation and engagement into the design and
implementation of the Lake Way Project.
CORPORATE & FINANCING
In August 2019, SO4 announced that it had mandated Taurus Funds
Management (Taurus or the Lenders), to provide up to US$150m
project financing for the Lake Way Project. The Stage 1 Facility
(Facility) provided initial access to US$30m funding for early
construction works for the Lake Way Project and enabled completion
of the BFS prior to drawdown of the main Project Development
Facility (PDF). The Facility also funded civil works including the
second stage of trenches and key evaporation ponds currently under
construction, which will provide the initial harvest salts to
enable the feed for plant commissioning.
In December 2019 the facility was extended by a further US$15m
on terms consistent with the original Stage 1 terms. The extended
Facility will be refinanced upon drawdown of the PDF. Following
completion of the BFS, SO4 has been working with Taurus to complete
documentation and satisfy the conditions precedent to the PDF. In
addition to the PDF, the Company is assessing a range of
alternative and complementary funding options to ensure that it is
fully funded in the coming months to complete construction in line
with the Project schedule.
In addition to extending the Taurus facility, the Company raised
A$30.9 million before costs in two placements during the half year.
In August 2019, the Company placed 10.58 million shares to Fidelity
International at A$0.70 each to raise A$7.4 million before costs
and in December 2019 the Company placed approximately 33.6 million
shares to a number of new Australian institutional investors and
existing institutional shareholders at A$0.70 each to raise A$23.5
million before costs. The Placements contributed to the continued
rapid development of the Lake Way Project, including the
acquisition of strategic tenement package from Blackham,
construction of Stage 2 on-lake infrastructure and commencement of
site works for the process plant in early 2020, along with ongoing
exploration of other lakes and general working capital.
EXPLORATION
The Company continued to progress its assessment of the other
lakes in its portfolio in order to prioritise future potential
development. In the half year to December 2019 exploration
activities commenced at Lake Marmion with a view to reporting a
maiden mineral resource estimate. Work at Lake Marmion consisted of
the following:
-- Drilling, completion and development of 37 100mm diameter
auger holes as piezometers between 3m and 7m depth;
-- Installation of 17 piezometers with pressure transducers to
monitor long term water level variations;
-- Carrying out of Slug Tests for hydraulic conductivity estimation on 19 piezometers;
-- Installation of 20 piezometers at the test trench location to
monitor the change in water level due to the trench test
pumping;
-- Digging of 2 trenches and 5 test pits with an amphibious excavator for test pumping;
-- 36 insitu core samples from the piezometers, 20 of which have
been sent to a laboratory for porosity, hydraulic conductivity and
specific yield determination;
-- 21 grab samples for soil analysis;
-- 8 Column samples of which 6 were sent to a laboratory to
assess the impact of dilution in response to recharge events;
-- 62 brine samples for grade analysis, including duplicates,
collected from piezometers, pits and hand dug pits. Results from
this program are pending and will be reported when available.
HEALTH AND SAFETY
The Company has taken active precautionary measures in response
to the novel coronavirus (COVID-19) to protect the health and
wellbeing of its people, contractors, visitors and community that
it works in. SO4 has adopted all relevant recommendations from the
health authorities to help protect against the spread of COVID-19
and is monitoring the situation daily, while at the same time
continuing to deliver the construction of the Lake Way Project.
Results of Operations
Net loss after tax for the half year ended 31 December 2019 was
$13,325,505 (31 December 2018: $ 5,809,606 ). This result is
attributable to the following:
(i) Exploration and evaluation expenses totalling $12,249,743
(31 December 2018: $4,696,515). During the six month reporting
period, the Company rapidly progressed its Lake Way Project by
conducting significant exploration activity, process testwork,
completion of a bankable feasibility study (BFS) and obtaining
Native Title approval. Under the Group's accounting policy, the
Group expenses all exploration and evaluation expenditure
subsequent to the acquisition of the rights to explore and up to
the successful completion of a bankable feasibility study for each
separate area of interest;
(ii) Pre-development expenses of $12,850,219 (31 December 2018:
Nil) relating to the construction of the first phase of the
commercial scale SOP brine evaporation ponds and dewatering of the
Williamson Pit. These pre-development costs have been expensed in
accordance with the Group's accounting policy of expensing
exploration and pre-development expenditure incurred by the Group
up to the successful completion of a BFS.
Following completion of the BFS for the Lake Way Project in
October 2019, the Group has recognised a mine development asset and
commenced capitalising mine development expenditure with effect
from 1 November 2019.
(iii) Share based payments expense of $3,563,842 (31 December
2018: $43,762), which are attributable to the Group's accounting
policy of expensing the value (estimated using an option pricing
model, and performance rights valued using the underlying share
price) of incentive securities issued to key employees and
consultants. The value is measured at grant date and recognised
over the period during which the option/rights holder become
unconditionally entitled to the options and/or rights.
(iv) Business development expenses of $1,790,686 (31 December
2018: $481,343) which are attributable to additional business
development activities and investor relations activities required
to support the growth and development of the Lake Way Project and
the Company's broader portfolio of Lakes.
(v) Income tax benefit of $18,793,903 (31 December 2018: Nil)
due to the Group recognising previous tax losses for the first time
as the Company is anticipated to make future profits from the Lake
Way Project.
Financial Position
At 31 December 2019, the Group had cash reserves of $36.2
million (30 June 2019: $19.3 million) and net assets of $38.6
million (30 June 2019: $14.7 million). In addition, the Taurus
Stage 1 Facility had US$15 million available to draw down as at 31
December 2019. The Group is in a financial position to conduct its
current and planned exploration and development activities.
SIGNIFICANT POST BALANCE DATE EVENTS
Other than as disclosed below, at the date of this report there
were no significant events occurring after balance date requiring
disclosure.
On 25 February 2020, the Group announced it had completed Stage
2 of the on-lake construction of its evaporation pond and trench
network. This milestone represents the completion of construction
of a total 400ha of evaporation ponds and 35km of brine abstraction
trenches providing the Group with the platform to provide feed
salts to the process plant in 2021.
AUDITOR'S INDEPENCE DECLARATION
Section 307C of the Corporations Act 2001 requires our auditors,
Ernst & Young, to provide the directors of Salt Lake Potash
Limited with an Independence Declaration in relation to the review
of the half year financial report. This Independence Declaration is
attached to and forms part of this Directors' Report.
Signed in accordance with a resolution of the Directors.
TONY SWIERICZUK
CEO & Managing Director
13 March 2020
Competent Persons Statement
The information in this announcement that relates to Production
Targets and Ore Reserves for Lake Way is extracted from the
announcement entitled 'Outstanding Bankable Feasibility Results for
Lake Way' dated 11 October 2019. This announcement is available to
view on www.so4.com.au. The information in the original ASX
Announcement that related to Production Targets and Ore Reserves
was based on, and fairly represents, information compiled by Mr Ben
Jeuken, who is a member of the Australasian Institute of Mining and
Metallurgy and a member of the International Association of
Hydrogeologists, and Mr Robert Kinnell, who is a member of the
Australasian Institute of Mining and Metallurgy and a Fellow of the
Geological Society of London. Mr Jeuken is employed by Groundwater
Science Pty Ltd, an independent consulting company. Mr Kinnell is a
full time employee of Salt Lake Potash Limited. Mr Jeuken and Mr
Kinnell have sufficient experience, which is relevant to the style
of mineralisation and type of deposit under consideration and to
the activity, which they are undertaking to qualify as a Competent
Person as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Salt Lake Potash Limited confirms that it is not aware
of any new information or data that materially affects the
information included in the original market announcement. Salt Lake
Potash Limited confirms that the form and context in which the
Competent Person's findings are presented have not been materially
modified from the original market announcement.
The information in this announcement that relates to Exploration
Results and Mineral Resources for Lake Way is extracted from the
announcement entitled 'Outstanding Bankable Feasibility Results for
Lake Way' dated 11 October 2019. This announcement is available to
view on www.so4.com.au. The information in the original ASX
Announcement that related to Exploration Results and Mineral
Resources was based on, and fairly represents, information compiled
by Mr Ben Jeuken, who is a member of the Australasian Institute of
Mining and Metallurgy and a member of the International Association
of Hydrogeologists. Mr Jeuken is employed by Groundwater Science
Pty Ltd, an independent consulting company. Mr Jeuken has
sufficient experience, which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity, which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Salt Lake Potash Limited confirms that it is not aware
of any new information or data that materially affects the
information included in the original market announcement. Salt Lake
Potash Limited confirms that the form and context in which the
Competent Person's findings are presented have not been materially
modified from the original market announcement.
The information in this announcement that relates to Process
Testwork Results is extracted from the announcement entitled
'Premium Grade Water Soluble Sulphate of Potash Produced from Lake
Way Salts' dated 18 September 2019. This announcement is available
to view on www.so4.com.au. The information in the original ASX
Announcement that related to Process Testwork Results was based on,
and fairly represents, information compiled by Mr Bryn Jones,
BAppSc (Chem), MEng (Mining) who is a Fellow of the AusIMM. Mr
Jones is a Director of Salt Lake Potash Limited. Mr Jones has
sufficient experience, which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking, to qualify as a Competent Person
as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Salt Lake Potash Limited confirms that it is not aware
of any new information or data that materially affects the
information included in the original market announcement. Salt Lake
Potash Limited confirms that the form and context in which the
Competent Person's findings are presented have not been materially
modified from the original market announcement.
The information in this announcement that relates to Processing
and the Process Plant is extracted from the announcement entitled '
Outstanding Bankable Feasibility Results for Lake Way' dated 11
October 2019 . This announcement is available to view on
www.so4.com.au. The information in the original ASX Announcement
that related to Processing and the Process Plant was based on, and
fairly represents, information provided by Mr Kevin Martina,
Professional Engineer, who is a Member of the Association of
Professional Engineers and Geoscientists of Saskatchewan (APEGS), a
'Recognised Professional Organisation' (RPO) included in a list
promulgated by the ASX from time to time. Mr Martina is employed by
Wood Canada Limited, Saskatoon. Wood is engaged as a consultant by
Salt Lake Potash Limited. Mr Martina has sufficient experience,
which is relevant to the style of mineralisation and type of
deposit under consideration and to the activity which he is
undertaking, to qualify as a Competent Person as defined in the
2012 Edition of the 'Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves'. Salt Lake Potash
Limited confirms that it is not aware of any new information or
data that materially affects the information included in the
original market announcement. Salt Lake Potash Limited confirms
that the form and context in which the Competent Person's findings
are presented have not been materially modified from the original
market announcement.
Production Target
The Lake Way 245ktpa Production Target stated in this
presentation is based on the Company's Bankable Feasibility Study
as released to the ASX on 11 October 2019. The information in
relation to the Production Target that the Company is required to
include in a public report in accordance with ASX Listing Rule 5.16
and 5.17 was included in the Company's ASX Announcement released on
11 October 2019. The Company confirms that the material assumptions
underpinning the Production Target referenced in the 11 October
2019 release continue to apply and have not materially changed.
Forward Looking Statements
This announcement may include forward-looking statements. These
forward-looking statements are based on Salt Lake Potash Limited's
expectations and beliefs concerning future events. Forward looking
statements are necessarily subject to risks, uncertainties and
other factors, many of which are outside the control of Salt Lake
Potash Limited, which could cause actual results to differ
materially from such statements. Salt Lake Potash Limited makes no
undertaking to subsequently update or revise the forward-looking
statements made in this announcement, to reflect the circumstances
or events after the date of that announcement.
DIRECTORS' DECLARATION
In the opinion of the Directors of Salt Lake Potash Limited:
1. the interim consolidated financial statements comprising the
statement of profit or loss and other comprehensive income,
statement of financial position, statement of cash flows, statement
of changes in equity and notes set out on pages 12 to 29 are in
accordance with the Corporations Act 2001 including:
i) giving a true and fair view of the financial position of the
consolidated entity as at 31 December 2019 and of its performance
and cash flows for the six months ended on that date; and
ii) complying with Australian Accounting Standard AASB 134
Interim Financial Reporting and Corporations Regulations 2001;
and
2. Subject to matters stated in Note 1(b) of the interim
financial report, there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they become due
and payable.
Signed in accordance with a resolution of Directors:
TONY SWIERICZUK
CEO & Managing Director
13 March 2020
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE HALF YEARED 31 DECEMBER 2019
31 December 2019 31 December 2018
Notes $ $
------ ----------------- -----------------
Finance income 98,377 38,800
Research and development rebate 912,766 -
Exploration and evaluation expenses (12,249,743) (4,696,515)
Pre-development expenses (12,850,219) -
Corporate and administrative expenses (2,206,500) (626,786)
Business development expenses (1,790,686) (481,343)
Share based payments expenses (3,563,842) (43,762)
Loss on disposal of asset (11,036) -
Unrealised/Realised foreign exchange gains 516,375 -
Finance costs (974,900) -
Loss before tax (32,119,408) (5,809,606)
Income tax benefit 3 18,793,903 -
------------------------------------------------------------------------ ------ ----------------- -----------------
Loss for the period (13,325,505) (5,809,606)
======================================================================== ====== ================= =================
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising during the period - -
Other comprehensive income for the period, net of tax - -
------------------------------------------------------------------------ ------ ----------------- -----------------
Total comprehensive loss for the period (13,325,505) (5,809,606)
======================================================================== ====== ================= =================
Basic and diluted loss per share attributable to the ordinary equity
holders of the company
(cents per share) (5.18) (3.18)
The above Consolidated Statement of Profit or Loss and other
Comprehensive Income
should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
31 December 30 June
2019 2019
Notes $ $
ASSETS
Current Assets
Cash and cash equivalents 36,235,244 19,304,075
Trade and other receivables 2,577,085 923,036
Total Current Assets 38,812,329 20,227,111
---------------------------------------- ------ -------------- --------------
Non-Current Assets
Security deposits 126,121 -
Property, plant and equipment 1,123,138 763,566
Right of use assets 855,451 -
Exploration and evaluation expenditure 4 2,276,736 2,276,736
Mine development 5 40,911,204 -
Deferred tax assets 3 19,523,763 -
Total Non-Current Assets 64,816,413 3,040,302
---------------------------------------- ------ -------------- --------------
TOTAL ASSETS 103,628,742 23,267,413
---------------------------------------- ------ -------------- --------------
LIABILITIES
Current Liabilities
Trade and other payables 22,761,438 7,709,590
Interest bearing liabilities 6 39,159,015 -
Non-interest bearing loans 9,571 -
Lease liabilities 201,023 19,030
Provisions 7 232,355 79,368
---------------------------------------- ------ -------------- --------------
Total Current Liabilities 62,363,402 7,807,988
---------------------------------------- ------ -------------- --------------
Non-Current Liabilities
Non-interest bearing loans 8,402 -
Lease liabilities 657,293 39,166
Provisions 7 1,997,412 711,885
---------------------------------------- ------ -------------- --------------
Total Non-Current Liabilities 2,663,107 751,051
---------------------------------------- ------ -------------- --------------
TOTAL LIABILITIES 65,026,509 8,559,039
---------------------------------------- ------ -------------- --------------
NET ASSETS 38,602,233 14,708,374
======================================== ====== ============== ==============
EQUITY
Contributed equity 8 186,832,740 155,917,578
Reserves 9 10,333,211 4,273,967
Accumulated losses (158,563,718) (145,483,171)
---------------------------------------- ------ -------------- --------------
TOTAL EQUITY 38,602,233 14,708,374
======================================== ====== ============== ==============
The above Consolidated Statement of Financial Position should be
read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEARED 31 DECEMBER 2019
CONSOLIDATED
Share- Based Shares to be
Contributed Equity Payment Reserve Issued Accumulated Losses Total Equity
$ $ $ $ $
Balance at 1 July
2019 155,917,578 4,273,967 - (145,483,171) 14,708,374
Net loss for the
period - - - (13,325,505) (13,325,505)
Total
comprehensive
loss for the
period - - - (13,325,505) (13,325,505)
Transactions with
owners, recorded
directly in equity
Deferred tax asset
recognised in
equity 729,860 - - - 729,860
Shares issued from
placement 30,415,501 - - - 30,415,501
Shares issued in
lieu of fees 12,000 - - - 12,000
Shares issued to
employees 430,827 - - - 430,827
Shares issued in
connection to
conversion of
performance
rights 227,814 (227,814) - - -
Performance rights
expiry - (244,958) - 244,958 -
Share based
payment expense - 6,532,016 - - 6,532,016
Share issue costs (900,840) - - - (900,840)
Balance at 31
December 2019 186,832,740 10,333,211 - (158,563,718) 38,602,233
=================== =================== ================== =================== =================== ==============
Balance at 1 July
2018 123,501,153 2,105,886 - (118,587,050) 7,019,989
Net loss for the
period - - - (5,809,606) (5,809,606)
Total
comprehensive
loss for the
period - - - (5,809,606) (5,809,606)
Transactions with
owners, recorded
directly in equity
Shares issued from
placement 12,285,000 - 715,000 - 13,000,000
Shares issued in
lieu of fees 134,300 - - - 134,300
Share based
payment expense - (90,538) - - (90,538)
Share issue costs (714,858) - - - (714,858)
Balance at 31
December 2018 135,205,595 2,015,348 715,000 (124,396,656) 13,539,287
=================== =================== ================== =================== =================== ==============
The above Consolidated Statement of Changes in Equity should be
read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEARED 31 DECEMBER 2019
31 December 31 December
2019 2018
$ $
Cash flows from operating activities
Payments to suppliers and employees (34,842,969) (5,768,638)
Interest received 78,223 52,851
Interest paid and on leases (980,225) -
Payments for security deposits (126,121) -
Net cash outflow from operating activities (35,871,092) (5,715,787)
-------------------------------------------- ------------- ------------
Cash flows from investing activities
Payments for property, plant and equipment
and mine development (19,679,459) (244,662)
Proceeds from the sale of property, 35,455 -
plant and equipment
Net cash outflow from investing activities (19,644,004) (244,662)
-------------------------------------------- ------------- ------------
Cash flows from financing activities
Proceeds from borrowings 44,043,406 -
Transaction costs relating to loans (1,504,545) -
and borrowings
Proceeds from the issue of shares 30,415,500 13,000,000
Transaction costs from the issue of
shares (859,172) (714,858)
Payment of lease contracts (131,992) (5,914)
Net cash inflow from financing activities 71,963,197 12,279,228
-------------------------------------------- ------------- ------------
Net increase in cash and cash equivalents
held 16,448,101 6,318,778
Cash and cash equivalents at the beginning
of the half year 19,304,075 5,709,446
Effect of exchange rate fluctuations
on cash held 483,068 -
-------------------------------------------- ------------- ------------
Cash and cash equivalents at the end
of the half year 36,235,244 12,028,224
-------------------------------------------- ------------- ------------
The above Consolidated Statement of Cash Flows should be read in
conjunction with the accompanying notes.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEARED 31 DECEMBER 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of Compliance
The interim condensed consolidated financial statements of the
Group for the half year ended 31 December 2019 were authorised for
issue in accordance with the resolution of the directors on 12
March 2020.
The interim condensed consolidated financial statements for the
half year reporting period ended 31 December 2019 have been
prepared in accordance with Accounting Standard AASB 134 Interim
Financial Reporting and the Corporations Act 2001.
This half year financial report does not include all the notes
of the type normally included in an annual financial report.
Accordingly, this report is to be read in conjunction with the
annual report of Salt Lake Potash Limited for the year ended 30
June 2019 and any public announcements made by Salt Lake Potash
Limited and its controlled entities during the half year reporting
period in accordance with the continuous disclosure requirements of
the Corporations Act 2001.
(b) Basis of Preparation of Half Year Financial Report
The financial statements have been prepared on an accruals basis
and are based on historical cost. All amounts are presented in
Australian dollars.
The interim condensed consolidated financial statements for the
half year have been prepared on a going concern basis which assumes
the continuity of normal business activity and the realisation of
assets and the settlement of liabilities in the ordinary course of
business.
For the half year ended 31 December 2019, the Consolidated
Entity incurred a net loss of $13,325,505 (31 December 2018:
$5,809,606) and experienced net cash outflows from operating and
investing activities of $55,515,096 (2018: $5,960,449). As at 31
December 2019, the Group had cash and cash equivalents of
$36,235,244 (30 June 2019: $19,304,075) and had received
$30,415,500 from shareholder participants. In addition, a further
US$15 million was available for drawdown under the Taurus Stage 1
Facility as at 31 December 2019. The Group has net current
liabilities of $23,551,073 as at 31 December 2019 due primarily to
the Taurus Stage 1 Facility being repayable 2 August 2020 (2019:
net current assets of $12,419,123).
The Company is developing the Lake Way Project and will require
additional funds from the second stage Taurus Project Development
Facility and complementary or alternative funding sources in order
to continue to complete the development and construction of the
Project.
In August 2019, the Company mandated Taurus Funds Management
(Taurus) to provide US$150m staged project financing for the Lake
Way Project. The Stage 1 Facility documentation has been executed
and conditions satisfied, which has enabled the Company to draw
down the initial facility of US$45m. The Project Development
Facility (PDF) for up to US$150m will be used for refinancing the
Stage 1 Facility and for project development and working capital
associated with the development of the Lake Way Project. The PDF
will become available upon completion and satisfaction of
conditions precedent. Conditions precedent are customary for a
project financing of this nature and include execution of financing
agreements, satisfying the equity requirement based upon a Cost to
Complete analysis and offtake agreements being finalised.
Negotiations on the PDF are substantially advanced, and
Directors are confident that they will be able to agree
documentation and satisfy the conditions precedent for initial
utilisation to fund the ongoing development of the Lake Way Project
in the next month. The Directors expect to repay the Taurus Stage 1
Facility prior to the repayment date from the draw down of the
PDF.
In addition to the PDF, the Company is assessing a range of
alternative and complementary funding options, including debt,
royalty and equity to ensure that it is fully funded in the coming
months to complete construction in line with the Project
schedule.
The Company has a strong institutional shareholder base and the
Directors have been involved in a number of recent successful
capital raisings for the Company and for other listed resource
companies. Accordingly, they are satisfied that they will be able
to raise additional capital when required to enable the
Consolidated Entity to meet its obligations as and when they fall
due, and consider that it is appropriate to prepare the financial
statements on the going concern basis.
In the event that the Consolidated Entity is unable to achieve
the matters referred to above, uncertainty would exist that may
cast doubt on the ability of the Consolidated Entity to continue as
a going concern.
(c) New Standards, Interpretations and amendments adopted by the Group
In the current period, the Group has adopted all of the new and
revised standards, interpretations and amendments that are relevant
to its operations and effective for annual reporting periods
beginning on or after 1 July 2019. The adoption of new and revised
standards and amendments has not affected the amounts reported for
the current or prior half-year periods, with the exception of AASB
16 Leases.
AASB 16 Leases
During February 2016, the AASB issued AASB 16, which replaces
the leases guidance in AASB 117 Leases and related interpretations.
Lessor accounting under AASB 16 is substantially unchanged from
AASB 117. Lessors will continue to classify leases as either
operating or finance leases using similar principles as in AASB
117. Therefore, AASB 16 did not have an impact for leases where the
Group is the lessor.
The Group has applied AASB 16 for the first time on 1 July 2019,
using the modified retrospective approach. Thus, no restatement of
comparative information. The Group elected to use the transition
practical expedient allowing the standard to be applied only to
contracts that were previously identified as leases applying AASB
117 and related interpretations at the date of initial application.
The Group also applied the practical expedients wherein it applied
the short-term leases exemptions to leases with a lease term that
ends within 12 months at the date of initial application. The Group
has also elected to use the recognition exemptions for lease
contracts that, at the commencement date, have a lease term of 12
months or less and do not contain a purchase option ('short-term
leases'), and lease contracts for which the underlying asset is of
low value ('low-value assets').
The Group has lease contracts over office leases and car bays.
Before the adoption of AASB 16, the Group classified each of its
leases (as lessee) at the inception date as either a finance lease
or an operating lease. A lease is classified as a finance lease if
it transferred substantially all of the risks and rewards
incidental to ownership of the leased asset to the Group otherwise
it was classified as an operating lease. Finance leases are
capitalised at the commencement of the lease using the inception
date fair value of the motor vehicle or, if lower, the present
value of the minimum lease payments. Lease payments are apportioned
between interest (recognised as finance costs) and reduction of the
lease liability. In an operating lease, the leased property was not
capitalised and the lease payments were recognised as rent expense
in the statement of profit or loss on a straight line basis over
the lease term. Any prepaid rent and accrued rent were recognised
under prepayments and trade and other payables, respectively.
Upon adoption of AASB 16, the Group applied a single recognition
and measurement approach for all leases that it is the lessee,
except for short term leases and leases of low value assets. The
standard provides specific transition requirements and practical
expedients, which has been applied by the Group.
Leases previously classified as finance leases
The Group did not change the initial carrying amounts of
recognised assets and liabilities at the date of initial
application for leases previously classify as finance leases (i.e.
the right-of-use assets and lease liabilities equal the lease
assets and liabilities recognised under AASB 117). The requirements
of AASB 16 were applied on these leases from 1 July 2019.
Leases previously accounted for as operating leases
The Group recognised right-of-use assets and lease liabilities
for those leases previously classified as operating leases, except
for short-term leases and leases of low value assets. The Group has
elected to present right-of-use assets and lease liabilities
separately. On transition, the right-of-use assets were recognised
based on an amount equal to the lease liabilities. Lease
liabilities were recognised based on the present value of the
remaining lease payments, discounted using the incremental
borrowing rate at the date of initial application. The discount
rate applied was at the range of 3.80% - 3.95%. The Group also
applied the available practical expedients wherein it excluded the
initial direct costs from the measurement of the right-of-use asset
at the date of initial application.
The effect of adoption AASB 16 as at 1 July 2019 is as
follows:
$
---------
Assets
Non-current: Right-of-use assets 940,767
Property, plant and equipment previously a finance
lease reclassified to right-of-use assets (47,852)
Total assets 892,915
---------------------------------------------------- ---------
Liabilities
Current: Lease liabilities 177,187
Non-current: Lease liabilities 715,728
---------------------------------------------------- ---------
Total liabilities 892,915
---------------------------------------------------- ---------
(i) Reconciliation of operating lease commitments
The lease liabilities as at 1 July 2019 can be reconciled to the
operating lease commitments as of 30 June 2019 as follows:
$
Operating lease commitments as at 30 June 2019 236,026
Assessment of option periods on leases at 30 June 2019
reasonably certain to be exercised 771,563
Weighted average incremental borrowing rate as at 1
July 2019 3.95%
Discounted operating lease commitments as at 1 July
2019 911,500
Less:
Commitments relating to short-term leases (18,585)
Commitments relating to leases of low-value assets -
Add:
Commitments relating to leases previously classified
as finance leases 38,991
-------------------------------------------------------- ---------
Lease liabilities as at 1 July 2019 931,906
-------------------------------------------------------- ---------
(ii) Amounts recognised in the statement of financial position
and profit or loss
Set out below are the carrying amounts of the Group's
right-of-use assets and lease liabilities and the movements during
the period:
Right-of-use Lease liabilities
assets
$ $
--------------- ------------------
Recognised at 1 July 2019 on adoption of
AASB 16 940,768 931,906
Additions 56,441 56,441
Disposals (47,353) -
Depreciation expense (94,405) -
Interest expense - 1,961
Payments - (131,992)
------------------------------------------ --------------- ------------------
As at 31 December 2019 855,451 858,316
------------------------------------------ --------------- ------------------
(iii) Summary of new accounting policies for leases (applied
from 1 July 2019)
Below are the new accounting policies of the Group upon adoption
of AASB 16 which have been applied from the date of initial
application:
Leases
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identifiable asset for a period of time in
exchange for consideration.
Right-of-use Assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset
at the end of the lease term, the recognised right-of-use assets
are depreciated on a straight line basis over the shorter of its
estimated useful life and the lease term. Right-of-use assets are
subject to impairment.
Lease Liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees and do not include non-lease components of a
contract. The lease payments also include the exercise price of a
purchase option reasonably certain to be exercised by the Group and
payments of penalties for terminating a lease, if the lease term
reflects the Group exercising the option to terminate. The variable
lease payments that do not depend on an index or a rate are
recognised as expense in the period on which the event or condition
that triggers the payment occurs. In calculating the present value
of lease payments, the Group uses the incremental borrowing rate at
the lease commencement date if the interest rate implicit in the
lease is not readily determinable. After the commencement date, the
amount of lease liabilities is increased to reflect the accretion
of interest and reduced for the lease payments made. In addition,
the carrying amount of lease liabilities is remeasured if there is
a modification, a change in the lease term, a change in the
substance of fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of low value assets
The Group applies the short term lease recognition exemption to
its short term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also
applies the lease of low value assets recognition exemption to
leases of office equipment that are considered of low value (i.e.
below $5,000). Lease payments on short term leases and leases of
low value assets are recognised as an expense on a straight line
basis over the lease term.
Significant judgement in determining the lease term of contracts
with renewal options
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the
assets for additional terms of one to four years. The Group applies
judgement in evaluating whether it is reasonably certain to
exercise the option to renew. That is, it considers all relevant
factors that create an economic incentive for it to exercise the
renewal. After the commencement date, the Group reassesses the
lease term if there is a significant event or change in
circumstances that is within its control and affects its ability to
exercise (or not to exercise) the option to renew (e.g. a change in
business strategy).
AASB Interpretation 23 Uncertainty over Income tax treatment
The Interpretation addresses the accounting for income taxes
when tax treatments involve uncertainty that affects the
application of AASB 112 Income Taxes ("AASB 112"). It does not
apply to taxes or levies outside the scope of AASB 112, nor does it
specifically include requirements relating to interest and
penalties associated with uncertain tax treatments. The
Interpretation specifically addresses the following:
- Whether an entity considers uncertain tax treatments separately
- The assumptions an entity makes about the examination of tax
treatments by taxation authorities;
- How an entity determines taxable profit (tax losses), tax
bases, unused tax losses, unused tax credit and tax rates; and
- How an entity considers changes in facts and circumstances.
An entity must determine whether to consider each uncertain tax
treatment separately or together with one or more other uncertain
tax treatments. The approach that better predicts the resolution of
the uncertainty needs to be followed.
The Group applies significant judgment in identifying
uncertainties over income tax treatments. For the 31 December 2019
period, the Group has used significant judgement over the following
areas:
Deferred Tax Asset Recognition
Following completion of the Bankable Feasibility Study for the
Lake Way Project that demonstrated the technical feasibility and
commercial viability of the Project in October 2019, the Group has
determined that it is appropriate for the Company to transfer the
Lake Way Project 'Exploration and evaluation assets' to 'Mine
Development' with effect from 1 November 2019.
Due to the Group entering the phase of Mine Development, it is
has been deemed probable that future profits will be able to be
offset against available prior year tax losses and other deferred
tax assets. The Group has recognised a deferred tax asset of
$19,523,763 and income tax benefit for the 31 December 2019 period
totalling $18,793,903.
2. OPERATING SEGMENTS
AASB 8 requires operating segments to be identified on the basis
of internal reports about components of the Consolidated Entity
that are regularly reviewed by the chief operating decision maker
in order to allocate resources to the segment and to assess its
performance.
The Consolidated Entity operates in one segment, being Sulphate
of Potash exploration and mine development in the Northern
Goldfields Region on Western Australia. This is the basis on which
internal reports are provided to the Directors for assessing
performance and determining the allocation of resources within the
Consolidated Entity.
3. INCOME TAX EXPENSE
31 December 30 June
2019 2019
$ $
--------------- ---------------
(a) Recognised in the statement of comprehensive
income
Current income tax
Current income tax benefit in respect of
the current year - -
Deferred income tax
Deferred income tax 18,793,903 -
Income tax benefit reported in the statement
of Profit or Loss and other Comprehensive
income 18,793,903 -
=================================================== =============== ===============
(b) Recognised in the equity
Deferred income tax related to items charged
or credited to equity
Deferred tax assets not previously brought
to account 459,608 -
Deferred tax assets recognised in equity 270,252 -
--------------------------------------------------- --------------- ---------------
Income tax benefit reporting in equity 729,860 -
Total deferred tax asset recognised at
31 December 2019 19,523,763 -
(c) Reconciliation between tax expense
and accounting loss before income tax
Accounting loss before income tax (32,119,408) (26,896,121)
=================================================== =============== ===============
At the domestic income tax rate of 30.0%
(2019: 30.0%) 9,635,822 8,068,836
Expenditure not allowable for income tax
purposes (1,945,582) (691,952)
Income not assessable for income tax purposes 273,830 491,903
Capital allowances - 380,363
Change in tax rate - -
Adjustment in respect of current income
tax of previous years - 13,971
Deferred tax assets brought to account* 10,829,833 -
Deferred tax assets not brought to account - (8,263,121)
Income tax benefit reported in the statement
of Profit or Loss and other Comprehensive
income 18,793,903 -
=================================================== =============== ===============
*Following completion of a Bankable Feasibility Study for the
Lake Way Project in October 2019 that demonstrated the economic
returns of the Project, the Group has determined that it is now
considered probable that sufficient taxable income will be
generated in future periods and therefore deferred tax assets have
been recognised for the first time during half-year ended 31
December 2019 for temporary differences and unused tax losses.
31 December 30 June
2019 2019
$ $
-------------- ---------------
(d) Deferred Tax Assets and Liabilities
Deferred income tax at end of period relate
to the following:
Deferred Tax Liabilities
Accrued income (4,397) (3,370)
Exploration and evaluation assets (47,137) (47,137)
Mine development (510,094) -
Interest bearing loans and borrowings (629,514) -
Right of use assets (256,635) -
Deferred tax assets used to offset deferred
tax liabilities 1,447,777 50,507
------------------------------------------------ --------------- ---------------
- -
================================================ =============== ===============
Deferred Tax Assets
Mine development (3,855,065) -
Accrued expenditure - (9,900)
Right of use liabilities (257,495) -
Provisions (668,930) (213,566)
Capital allowances (624,101) (463,242)
Tax losses available for offset against
future taxable income (15,565,949) (16,974,847)
Deferred tax assets used to offset deferred
tax liabilities 1,447,777 50,507
Deferred tax assets not brought to account - 17,611,048
------------------------------------------------ --------------- ---------------
(19,523,763) -
================================================ =============== ===============
4. EXPLORATION AND EVALUATION ASSETS
31 December 30 June
2019 2019
$ $
(a) Areas of Interest
SOP Projects 2,276,736 2,276,736
Carrying amount at end of period (1) 2,276,736 2,276,736
======================================= ============ =========
(b) Reconciliation
Carrying amount at start of period 2,276,736 2,276,736
Additions
* Lake Way Project(2) 10,000,000 -
Transferred to Mine development assets
* Lake Way Project(2) (10,000,000) -
Impairment losses - -
Carrying amount at end of period (1) 2,276,736 2,276,736
======================================= ============ =========
Note:
(1) The SOP Projects, including Lake Wells and Lake Ballard,
were acquired in 2015. The ultimate recoupment of costs carried
forward for exploration and evaluation is dependent on the
successful development and commercial exploitation or sale of the
respective areas of interest. In accordance with the Group's
accounting policy for exploration and evaluation expenditure, the
acquisition costs of these tenements remain as an exploration and
evaluation asset.
(2) The Company completed the acquisition of tenements from
Blackham Resources Limited on 8 October 2019. The cost of
acquisition was initially recognised as an 'Exploration and
evaluation asset' before being transferred to Mine Development
assets following completion of a bankable feasibility study for the
Lake Way Project with effect from 1 November 2019.
5. MINE DEVELOPMENT
31 December 30 June
2019 2019
$ $
Mine Development
Mine properties 10,000,000 -
Capitalised borrowing costs 1,504,546 -
Capitalised assets under construction 10,595,993 -
Mine development 18,810,665 -
-------------------------------------- ------------ --------
40,911,204 -
-------------------------------------- ------------ --------
Expenditure is distinguished between 'Exploration and evaluation
assets' and 'Mine Development' once the work completed to date
supports the future development of the project and such development
receives appropriate approvals. Following this point, all
subsequent expenditure on the construction, installation or
completion of infrastructure facilities is capitalised in 'Mine
Development'. Development expenditure is net of proceeds from the
sale of ore extracted during the development phase to the extent
that it is considered integral to the development of the mine. Any
costs incurred in testing the assets to determine if they are
functioning as intended, are capitalised, net of any proceeds
received from selling any product produced while testing. After
production starts, all assets included in the 'Mine Development'
are then transferred to 'Producing mines' and amortisation
commences.
Borrowing costs that are directly attributable to the
acquisition, construction or production of mine development assets,
are also capitalised. Capitalisation of borrowing costs ceases once
productions starts and assets included in 'Mine Development' are
transferred to 'Producing Mines' or are otherwise ready for their
intended use or sale.
Following completion of the bankable feasibility study on the
Lake Way Project in October 2019, the Group has determined that it
is appropriate to transfer the Lake Way Project from 'Exploration
and evaluation assets' to 'Mine Development' with effect from 1
November 2019 and for all subsequent expenditure on the
construction, installation or completion of infrastructure
facilities to be capitalised in 'Mine Development'. This date marks
the first month-end post completion of the BFS and the commencement
of the second stage of on-lake construction at Lake Way.
5. INTEREST BEARING LIABILITIES
31 December 30 June
2019 2019
$ $
Interest Bearing Liability
Face value drawn down 42,820,440 -
Transaction and establishment fees net (3,661,425)
of interest amortisation -
Carrying Amount of Interest Bearing Liabilities 39,159,015 -
------------------------------------------------ ------------ --------
Non-derivative financial liabilities other than financial
guarantees are subsequently measured at amortised cost. Transaction
costs that relate to these instruments are included in the
calculation of the amortised cost using the effective interest
method. Any gains or losses are recognised in profit or loss
through the amortisation process and when the financial liability
is derecognised.
On 5 August 2019, the Company announced that it had secured up
to US$150m in project financing for the Lake Way Project from
Taurus Funds Management (Taurus) with a staged facility. The first
stage for early construction works was extended in December 2019
from US$30m to US$45m at an interest rate of 9.75% per annum (Stage
1 Facility). As at 31 December 2019, the Company had drawn down
US$30m of the US$45m facility.
The second stage Project Development Facility (PDF) of up to
US$150m at an interest rate of 9.0% per annum will be used to
refinance the Stage 1 Facility and fund project development.
Following completion of the BFS, SO4 has been working with Taurus
to complete documentation and satisfy the conditions precedent to
the PDF.
The Stage 1 Facility is repayable on or before 1 August 2020.
Taurus have security over the Lake Way assets.
6. PROVISIONS
31 December 30 June
2019 2019
$ $
(a) Current Liabilities - Provisions
Annual leave 232,355 79,368
Total Current Liabilities 232,355 79,368
----------------------------------------- ----------- -------
(b) Non-Current Liabilities
Mine Rehabilitation 1,997,412 711,885
----------------------------------------- ----------- -------
Total Non-Current Liabilities 1,997,412 711,885
----------------------------------------- ----------- -------
7. CONTRIBUTED EQUITY
31 December 30 June
2019 2019
$ $
(a) Share Capital
289,611,231 (30 June 2019:245,137,865)
Ordinary Shares 186,832,740 155,917,578
---------------------------------------- ------------ ------------
186,832,740 155,917,578
---------------------------------------- ------------ ------------
(b) Movement in Share Capital during the past six months
Number of
Ordinary Issue Price
Shares $ $
1 Jul 19 Opening Balance 245,137,865 155,917,578
Shares issued in lieu of
vested performance rights
6 Aug 19 that have expired 266,258 0.80 213,550
6 Aug 19 Placement 10,582,857 0.70 7,408,000
Shares issued on conversion
11 Nov 19 of performance rights 472,500 0.48 227,814
Share issued in lieu of consultant
11 Nov 19 fees 17,635 0.68 12,000
11 Nov 19 Shares issued to employees 266,258 0.82 217,277
13 - 18 Dec
19 Placement 32,867,858 0.70 23,007,501
Jun 19 to
Dec 19 Placement costs - - (900,840)
Deferred tax asset recognised
31 Dec 19 in equity - - 729,860
31 Dec 19 Closing balance 289,611,231 - 186,832,740
------------- ------------------------------------ ------------ ------------ ------------
8. RESERVES
31 December 30 June
2019 2019
Notes $ $
Share-based payment reserve 9(a) 10,333,211 4,273,967
------------------------------- ------- ------------- ------------
10,333,211 4,273,967
=============================== ======= ============= ============
(a) Movement in share-based payment reserve during the past six months
Number of Number of Number of Unlisted
Date Details Performance Rights Performance Shares Options $
1 Jul 19 Opening Balance 20,945,016 17,500,000 11,100,000 4,273,967
Expiry of
31 Jul 19 Performance Rights (532,516) - - (244,958)
Issue of Unlisted
5 Aug 19 Options - - 9,000,000 3,411,000
11 Nov 19 Issue of Incentive
Options - - 5,200,000 -
11 Nov 19 Issue of
Performance Rights 5,140,398 - - -
Performance rights
converted to
11 Nov 19 shares (472,500) - - (227,813)
Cancellation of
31 Dec 19 Performance Rights (150,000) - - (47,067)
Expiry of
31 Dec 19 Performance Rights (250,000) - - (115,000)
31 Dec 19 Expiry of
Performance Shares - (7,500,000) - -
Share Based
Jul 19 to Dec 19 Payments Expense - - - 3,283,082
31 Dec 19 Closing Balance 24,680,398 10,000,000 25,300,000 10,333,211
================== ==================== =================== ==================== ==================== ===========
9. SHARE-BASED PAYMENTS
For the six months end 31 December 2019, the Group recognised
$3,563,842 in share-based payments expenses in the statement of
profit or loss (31 December 2018: $43,762) including the issue of
shares to employees in lieu of vested performance rights that
expired, issue of shares to consultants in lieu of payment of fees
totalling $442,827, and expensing the fair value of equity
instruments (options and performance rights) over the vesting
period totalling $3,283,082. This expense was partially offset by
the expiry/cancellation of unvested performance rights and
performance shares totalling ($162,067).
(a) Options
During the current period 14,200,000 unlisted options were
granted consisting of 1,000,000 granted on 22 July 2019 (Series 1-
Series 2), 9,000,000 granted on 2 August 2019 (Series 3), 3,000,000
granted on 16 September (Series 4- Series 5), 200,000 granted on 14
October (Series 6- Series 7), 1,000,000 granted on 11 November 2019
(Series 8). The fair value of the equity-settled incentive options
granted is estimated as at the date of grant using the Binomial
option valuation model taking into account the terms and conditions
upon which the options were granted.
Inputs Series 1 Series 2 Series 3
Exercise price $0.60 $1.00 $1.20
Grant date share price $0.745 $0.745 $0.745
Dividend yield (1) - - -
Volatility (2) 50% 50% 50%
Risk-free interest rate 1.04% 1.04% 1.04%
Grant date 22-Jul-19 22-Jul-19 22-Jul-19
Expiry date 1-Nov-23 1-Nov-23 1-Nov-23
Expected life of option (3) 4.28 years 4.28 years 4.28 years
Fair value at grant date $0.354 $0.239 $0.201
----------------------------- ----------- ----------- -----------
Inputs Series 4 Series 5 Series 6
Exercise price $0.702 $1.00 $1.20
Grant date share price $0.79 $0.84 $0.840
Dividend yield (1) - - -
Volatility (2) 51% 51% 51%
Risk-free interest rate 0.85% 0.98% 0.98%
Grant date 2-Nov-19 16-Sep-19 16-Sep-19
Expiry date 4-Aug-24 1-Nov-23 1-Nov-23
Expected life of option (3) 5.01 years 4.13 years 4.13 years
Fair value at grant date $0.379 $0.296 $0.252
----------------------------- ----------- ----------- -----------
Inputs Series 7 Series 8 Series 9
Exercise price $1.00 $1.20 $0.70
Grant date share price $0.845 $0.845 $0.790
Dividend yield (1) - - -
Volatility (2) 50% 50% 48%
Risk-free interest rate 0.77% 0.77% 0.95%
Grant date 14-Oct-19 14-Oct-19 11-Nov-19
Expiry date 1-Nov-23 1-Nov-23 30-Jun-23
Expected life of option (3) 4.05 years 4.05 years 3.64 years
Fair value at grant date $0.291 $0.246 $0.316
----------------------------- ----------- ----------- -----------
Notes:
(1) The dividend yield reflects the assumption that the current
dividend payout will remain unchanged.
(2) The expected volatility reflects the assumption that the
historical volatility is indicative of future trends, which may not
necessarily be the actual outcome.
(3) The expected life of the options is based on the expiry date
of the options as there is limited track record of the early
exercise of options.
(b) Performance Rights
During the current period 4,890,398 performance rights were
granted subject to various milestones. The fair value of
performance rights granted is estimated as at the date of grant
based on the underlying share price. The table below lists the
inputs to the valuation model used for the performance rights
granted by the Group:
Inputs Series 1 Series 2 Series 3 Series 4 Series 5
Milestones Trench/Pond Plant Plant Plant Nameplate
Construction Construction Commissioning Commissioning Capacity
------------------ ------------------ ------------------ ------------------ ------------------
Exercise price - - - - -
Grant date share
price $0.840 $0.840 $0.840 $0.790 $0.840
Grant date 16-Sep-19 16-Sep-19 16-Sep-19 11-Nov-19 16-Sep-19
Expiry date 1-Nov-20 1-Nov-21 1-Nov-22 1-Nov-22 1-Nov-23
Expected life (1) 1.13 years 2.13 years 3.13 years 2.98 years 4.13 years
Fair value at
grant date (2) $0.862 $0.862 $0.862 $0.816 $0.862
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Inputs Series 6 Series 7 Series 8 Series 9 Series 10
Milestones Nameplate Capacity Nameplate Capacity Reduce Capex Short Term Short Term
Incentive Incentive
------------------- ------------------- ------------- ------------------- -------------------
Exercise price - - - - -
Grant date share
price $0.790 $0.845 $0.845 $0.760 $0.840
Grant date 11-Nov-19 14-Oct-19 14-Oct-19 1-Jul-19 16-Sep-19
Expiry date 1-Nov-23 1-Nov-23 31-Dec-21 30-Jun-20 30-Jun-20
Expected life (1) 3.98 years 4.05 years 2.22 years 1.00 year 0.79 years
Fair value at
grant date (2) $0.816 $0.800 $0.800 $0.745 $0.862
------------------- ------------------- ------------------- ------------- ------------------- -------------------
Inputs Series 11 Series 12
Milestones Short Term Incentive Marketing & Sales
--------------------- ------------------
Exercise price - -
Grant date share price $0.790 $0.745
Grant date 11-Nov-19 22-Jul-19
Expiry date 30-Jun-20 31-Dec-20
Expected life (1) 0.64 years 1.45 years
Fair value at grant date (2) $0.816 $0.748
------------------------------ --------------------- ------------------
Notes:
(1) The expected life of the Performance Rights is based on the
expiry date of the performance rights as there is limited track
record of the early conversion of performance rights.
(2) The fair value of Performance Rights granted is estimated as
at the date of grant based on the 5 day volume weighted average
share price prior to the date of issuance.
11. COMMITMENTS AND CONTINGENCIES
Management have identified the following material commitments
for the consolidated group as at 31 December 2019:
31 December 30 June
2019 2019
$ $
------------ ----------
Exploration commitments
Within one year 2,016,000 5,193,242
Later than one year but not later than five
years 14,148,417 4,713,776
--------------------------------------------- ------------ ----------
16,164,417 9,907,018
--------------------------------------------- ------------ ----------
12. DIVIDS PAID OR PROVIDED FOR
No dividend has been paid or provided for during the half year
ended 31 December 2019 (31 December 2018: nil).
13. FINANCIAL INSTRUMENTS
Fair Value Measurement
At 31 December 2019, the Group had no material financial assets
and liabilities that are measured at fair value on a recurring
basis and at 31 December 2019, the carrying amount of financial
assets and financial liabilities for the Group is considered to
approximate their fair values .
14. SUBSEQUENT EVENTS AFTER BALANCE DATE
Other than as disclosed below, at the date of this report there
were no significant events occurring after balance date requiring
disclosure.
On 25 February 2020, the Company announced it had completed
Stage 2 of the on-lake construction of its evaporation pond and
trench network. This milestone represents the completion of
construction of a total 400ha of evaporation ponds and 35km of
brine abstraction trenches providing the Company with the platform
to provide feed salts to the process plant in 2021.
The full version of the Interim Financial Report for the Half-Year
Ended 31 December 2019 Report is available on the Company's website
at www.so4.com.au
For further information please visit www.so4.com.au or
contact:
Tony Swierizcuk / Clint McGhie / Salt Lake Potash Limited Tel: +61 8 6559 5800
Richard Knights
Colin Aaronson/Richard Tonthat / Seamus Grant Thornton UK LLP (Nominated Adviser) Tel: +44 (0) 20 7383 5100
Fricker
Derrick Lee / Peter Lynch Cenkos Securities plc (Joint Broker) Tel: +44 (0) 131 220 6939
Rupert Fane / Ernest Bell Hannam & Partners (Joint Broker) Tel: +44 (0) 20 7907 8500
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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