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Reward Minerals Ltd

Reward Minerals sets foundation for low capital intensity potash giant

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Reward Minerals (ASX:RWD) is primed for a low capital intensity capital cost project development after its LD property in Western Australia ramped up resources to 564 million tonnes  of sulphate of potash (SOP).

SOP is high-quality strain of the fertiliser ingredient which is exceptionally marketable due to its practicality for farming in low-rainfall regions.

LD now has the largest and highest-grade undeveloped SOP brine resource in the world.

The resource is characterised by a 359 million tonne component in the higher-confidence indicated category, an average brine grade of 13.7 kilograms per cubic metre, a 1,241-square-kilometre flat dry lake surface area and high evaporation rates.

These attributes firmly establish the project as a tier-1 asset and are underpinning prefeasibility work at the site which is expected to outline an efficient operational model at a time when supply-demand dynamics in the potash space are becoming increasingly favourable to producers.

LD’s Scoping Study results have established the project as globally significant with a pre-tax net present value of A$534 million and a pre-tax internal rate of return of 37%.

Adjusted annual earnings are expected to be A$154 million at full production.

Importantly, the project is potentially the lowest capital intensity SOP development in the world, with total capex calculated at A$320 million.

Mine gate operating costs have been estimated at a low A$204 per tonne of SOP, thanks to a well-established SOP production process and the availability of logistics options in existing accessible roads and ports.

These metrics were based on conservative SOP price assumption of A$750 a tonne, while recent sales of the commodity have exceeded $1,000 a tonne.


Analysis

Reward’s recent resource update at LD is a major milestone for the company and sets up potential price catalysts as work progresses defining the extractability parameters of the resource brine.

Results from on-lake pumping trials are also expected to enhance the company profile in the short term.

LD’s cost metrics are a major factor in the company’s investment appeal, with the project seen as the lowest capital SOP development in the world with strong operational cost number set for further improvement in upcoming feasibility results.

Supply-demand dynamics in this space are favourable as market trends suggest few additional projects will be constructed in coming years despite demand tailwinds in the form of growing populations and food security issues.

Demand for potash has grown 2.8% per annum compounding over the past 10 years.

Reward is particularly well placed to grow in this context with a strong management team and a cash and equivalents balance of A$6.7 million as of the end of November – which offers a strong footing for ongoing advancements and optimisations of the LD plan.

Investor support for the macro potash story as well as for LD’s increasingly evident competitive advantages has been seen in price momentum for Reward shares, which have gained 12% in value since the start of the month and 30% year on year.

Upcoming catalysts could see further upside for the stock from updates that may include improved costs and de-risking progress from feasibility work as well as the announcement of results from ongoing testing of the newly enlarged resource’s processing characteristics.



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Quick facts: Reward Minerals Ltd

Price: $0.09

Market: ASX
Market Cap: $14.47 m
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Reward Minerals focused on resource update and permitting at significant SOP...

Greg Cochran, chief executive of Reward Minerals Ltd (ASX:RWD), spoke to Proactive London's Andrew Scott while at Mines and Money 2018. The company's looking to develop a large sulphate of potash (SOP) resource in Western Australia. Reward's primary focus is the Lake Disappointment...

on 28/11/18

3 min read