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Salt Lake Potash boosts finances with $10 million strategic investment and convertible note placement

The funding will allow the company to continue the rapid development of Lake Way SOP Project as construction activities ramp-up through July 2020.

Salt Lake Potash Ltd - Salt Lake Potash boots finances with $10 million strategic investment and successful placement
A final debt financing agreement expected to be executed within weeks

Salt Lake Potash Ltd (ASX:SO4) has received a major boost to its finances with a A$10 million strategic investment from Equatorial Resources Ltd (ASX:EQX) as part of a A$15 million placement of convertible notes to corporate and institutional investors.

Equatorial has subscribed for A$10 million of unsecured convertible notes in the company following a detailed review by Equatorial focused on investigating opportunities related to Salt Lake’s current financing requirements and operational progress.

Salt Lake Potash is in the final stages of completing a significant project financing that will support the development of its Lake Way Sulphate of Potash (SOP) Project in the Goldfields region of Western Australia.

The convertible note funds will allow the company to continue the rapid development of Lake Way as construction activities ramp-up through July 2020.

“Funding rapid development”

The Lake Way project could produce 245,000 tonnes of SOP for capital expenditure of A$264 million and with operating costs of A$302 per tonne, placing it in the first quartile of global SOP operations.

Construction of the Lake Way evaporation pond network and brine abstraction trenches began in quarter one 2019 and the project is now substantially progressed with plant practical completion and first revenues expected in quarter one 2021.

Salt Lake chief executive officer Tony Swiericzuk said: “We are pleased to complete this financing with the support of existing and new shareholders.

“These funds will enable the company to continue the rapid development of the Lake Way project on schedule, as site construction activity accelerates through July.

“Significant progress has been made on the debt financing in recent weeks and we expect to be in a position to deliver full project financial close in the weeks ahead.”

Opportunistic investment

Equatorial believes Salt Lake Potash is undervalued and considers the timing of its investment in Salt Lake opportunistic.

The convertible notes provide Equatorial with a discounted investment entry price at a time when a number of near-term value catalysts have the potential to drive a significant re-rating of Salt Lake Potash’s share price.

These catalysts include completion of project funding, completion of process plant construction, and commencement of production in quarter one 2021.

Convertible note placement

Salt Lake Potash has received commitments to raise A$15 million through the placement of unsecured and unlisted zero-coupon convertible notes, including Equatorial’s subscription.

Key terms include:

  • The conversion of the convertible notes to be issued to Equatorial is subject to Salt Lake Potash shareholder approval at a meeting expected to be held in August 2020;
  • The convertible notes have been structured as deferred equity and convert into ordinary shares in the event of a future equity raising by Salt Lake of at least A$10 million at the lower of 45 cents per share or a 5% discount to the equity capital raising price;
  • If no equity raising for greater than A$10 million is completed prior to the maturity date of June 30, 2021, then the convertible notes will mandatorily convert at 90% of the average of the five lowest daily VWAPs during the 20 days prior to the maturity date;
  • Holders will also have the right to convert at any time after September 30, 2020, but prior to mandatory conversion at a 5% discount to 5-day VWAP by providing notice to Salt Lake Potash; and
  • A floor price of 30 cents per share applies to all conversions.

Quick facts: Salt Lake Potash Ltd

Price: 30.5 GBX

AIM:SO4
Market: AIM
Market Cap: £112.59 m
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