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Salt Lake Potash #SO4 – Interim results

OPERATING AND FINANCIAL REVIEW

The Company’s aim is to develop the first salt-lake brine Sulphate of Potash (SOP) operation in Australia, starting with a Demonstration Plant producing up to 50,000tpa of SOP, at the Goldfields Salt Lakes Project (GSLP) located in the Northern Goldfields of Western Australia. The Company’s multi-lake portfolio, and the comprehensive technical achievements to date, highlight the potential for a very economic, large scale and long term project.

LAKE WAY

Ø  Subsequent to the end of the period, the Company entered a Memorandum of Understanding (MOU) with Blackham Resources Limited (Blackham) to investigate the potential development of an SOP operation based at Lake Way, near Wiluna. Under the MOU, the Company will acquire Blackham’s brine rights and Blackham will acquire gold rights to the Company’s Lake Way holdings, with each company retaining a royalty on their respective holdings. 

The Company will investigate the development of an SOP operation at Lake Way, including initially a 40-50,000tpa Demonstration Plant.

LAKE WELLS

Evaporation Pond Testwork

Ø  The Company successfully completed field trials testing its on-lake, unlined evaporation pond model, which will result in significant capital cost advantages for the GSLP.

Ø  Comprehensive geological and geotechnical investigation confirms the widespread availability of ideal in-situ clay materials ideal for use in evaporation pond construction. Modelling based on geotechnical properties of the clays confirms the potential to build unlined, on-lake ponds with negligible seepage inefficiency.

Ø  Amec Foster Wheeler estimate that comparative costs for 400ha of on-lake ponds are $1.6m (unlined) and $42.2m (HDPE lined), highlighting a significant capex advantage for the Project.

Process Testwork

Ø  The Company completed a comprehensive testwork program at globally recognised potash process consultants, Saskatchewan Research Council (SRC) that validated and refined the parameters used in the process plant flowsheet for the GSLP. Importantly, the testwork was conducted on a 60kg representative sample of kainite harvest salt produced on site at Lake Wells.

Ø  SRC will conduct further optimisation tests followed by a continuous locked cycle operation, to produce significant quantities of flotation product and SOP for further testing and marketing.

Ø  The Site Evaporation Trial (SET) at Lake Wells has now processed approximately 357 tonnes of brine and produced over 8 tonnes of harvest salts.

Surface Aquifer Characterisation and Deep Aquifer Exploration

Ø  The Company continued sustained pump tests on test trenches across Lake Wells, providing reliable data for the surface aquifer hydrogeological model for Lake Wells. 

Ø  The Company mobilised an on-lake drill rig to test deep aquifer characteristics and identify potential high yield portions of the basal aquifer.

LAKE BALLARD

Ø  An initial surface aquifer exploration program was completed at Lake Ballard, comprising a total of 160 shallow test pits and 10 test trenches. This work provides preliminary data for the geological and hydrological models for the surface aquifer of the Lake, as well as brine, geological and geotechnical samples. 

LAKE IRWIN

Ø  An initial surface aquifer exploration program was completed at Lake Irwin, comprising a total of 27 shallow test pits and 2 test trenches. This work provides preliminary data for the geological and hydrological models of the surface aquifer of the Lake, as well as brine, geological and geotechnical samples. 

REGIONAL LAKES

Ø  The Company undertook initial surface brine sampling of the near surface aquifer and reconnaissance of access and infrastructure at all remaining Lakes held under the GSLP.

Results of Operations

Net loss after tax for the half year ended 31 December 2017 was $5,354,804 (31 December 2016: $4,969,027).

(i)         Exploration and evaluation expenses were $4,549,568 (31 December 2016: $4,282,810), which is attributable to the Group’s accounting policy of expensing exploration and evaluation expenditure incurred by the Group subsequent to the acquisition of the rights to explore and up to the final investment decision to commence construction for each separate area of interest; and

(ii)        Business development expenses increased to $374,784 (31 December 2016: $186,990) which is attributable to additional business development and investor relations activities required to support the growth and development of the Goldfields Salt Lakes Project.

Financial Position

At 31 December 2017, the Company had cash reserves of $10.5 million (30 June 2017: $15.6 million) and net assets of $12.3 million (30 June 2017: $17.0 million). The Company 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.

(i)         On 12 March 2018, the Company entered a Memorandum of Understanding (MOU) with Blackham Resources Limited (Blackham) to investigate the potential development of a Sulphate of Potash (SOP) operation based at Lake Way, near Wiluna. Under the MOU, the Company will acquire Blackham’s brine rights and Blackham will acquire gold rights to the Company’s Lake Way holdings, with each company retaining a royalty on their respective holdings.

AUDITOR’S INDEPENDENCE 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.

MATTHEW SYME

CEO

16 March 2018

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 9 to 13 are in accordance with the Corporations Act 2001 including: 

1.     giving a true and fair view of the financial position of the consolidated entity as at 31 December 2017 and of its performance and cash flows for the six months ended on that date; and

2.     complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001; and 

2.     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:

MATTHEW SYME

CEO

16 March 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2017 

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 2017

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 YEAR ENDED 31 DECEMBER 2017 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2017

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2017

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 2017 were authorised for issue in accordance with the resolution of the directors on 9 March 2018.

The interim condensed consolidated financial statements for the half year reporting period ended 31 December 2017 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 2017 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 financial statements for the half-year have been prepared on the basis of going concern, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. Certain comparatives have been reclassified to conform with current year presentation.

(c)        New Accounting Standards

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 2017. 

The adoption of new and revised standards and amendments has not affected the amounts reported for the current or prior half-year periods.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

2.       SEGMENT INFORMATION

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 mineral exploration. 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.       EXPLORATION AND EVALUATION

Notes:

¹ 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.

SOP Project

Salt Lake holds a number of large salt lake brine projects (Projects) in Western Australia, South Australia and the Northern Territory, each having potential to produce highly sought after Sulphate of Potash (SOP) for domestic and international fertiliser markets.

4.       CONTRIBUTED EQUITY

Movement in Share Capital during the past six months

Notes:

1.   Issued to an advisor of the Company in lieu of fees.

5.       RESERVES

Movement in share-based payment reserve during the past six months

6.       SHARE-BASED PAYMENTS

For the six months end 31 December 2017, the Group has recognised $583,972 of share-based payments expenses in the statement of profit or loss (31 December 2016: $188,422).

(a)      Options

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.

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

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

The fair value of performance rights granted is estimated as at the date of grant based on the underlying share price (being the five day volume weighted average share price prior to granting). The table below lists the inputs to the valuation model used for the performance rights granted by the Group:

7.       COMMITMENTS AND CONTINGENCIES

Management have identified the following material commitments for the consolidated group as at 31 December 2017 and 30 June 2017:

8.       DIVIDENDS PAID OR PROVIDED FOR

No dividend has been paid or provided for during the half year (31 December 2016: nil).

9.       FINANCIAL INSTRUMENTS

Fair Value Measurement

At 31 December 2017, the Group had no material financial assets and liabilities that are measured at fair value on a recurring basis and at 31 December 2017, the carrying amount of financial assets and financial liabilities for the Group is considered to approximate their fair values. 

10.     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.

(i)         On 12 March 2018, the Company entered a Memorandum of Understanding (MOU) with Blackham Resources Limited (Blackham) to investigate the potential development of a Sulphate of Potash (SOP) operation based at Lake Way, near Wiluna. Under the MOU, the Company will acquire Blackham’s brine rights and Blackham will acquire gold rights to the Company’s Lake Way holdings, with each company retaining a royalty on their respective holdings. 

For further information please visit www.saltlakepotash.com.au or contact: