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Corporate Spotlight

ABR’s Fort Cady Project in California hosts a multi-generational borate resource where boric acid, gypsum, potassium sulfate and potentially lithium will be produced for the large North American specialty fertiliser market and new high end technologies like electric vehicles.
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Interview with Michael Schlumpberger from ABR


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ABR Completes Process Optimisation Works to Deliver High Purity Boric Acid 

ASX Announcement 12 April 2019


  • High purity +99.9% pure boric acid crystals produced 
  • Technical specifications have been met with minimal impurities which is expected to attract customers seeking a premium quality borate product 
  • Financing process in-progress with formal financing related engagements targeted to commence in Q2 CY2019 
  • All substantive permit applications now lodged for Fort Cady Borate Project 
  • Targeting the commencement of construction in Q4 CY2019 on a fully permitted basis subject to financing

American Pacific Borate and Lithium Limited (ASX:ABR) (“ABR” or the “Company”) is very pleased to announce it has delivered a high purity +99.9% pure boric acid crystal with minimal impurities from process optimisation works completed on 10 April 2019. The works were designed to ensure consistent delivery of a technical grade quality boric acid crystal from the Company’s Fort Cady Borate Project (“Fort Cady” or “the Project”). Table 1 summarises the outstanding results.

American Pacific Borate and Lithium Ltd, CEO, Michael Schlumpberger commented, 

“This is another hurdle completed in our aspiration to commence production of borates from our flagship Fort Cady Borate Project and ultimately to become a globally significant producer of high purity borate products. 

Our focus now turns to the completion of detailed engineering and securing the modest financing for the low capital starter project. 

Importantly, we have delivered a very low capital starter project with brilliant financial metrics that sees us on the pathway to becoming a globally significant producer of borates targeting an EBITDA of over US$340m per annum. When you consider borates are a vital input into new world technologies including electric vehicles, clean energy and food security related micro nutrients for optimal plant growth, we are sure the demand for borates will only continue to grow.” 

Table 1: Fort Cady Boric Acid Assay Results, 8 April 2019 

Click here to view the full announcement


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American Pacific Borate and Lithium, ABR.AX
Supplying the critical element

This report was commissioned by the Company. 

American Pacific Borate and Lithium (ABR.AX) is developing the Fort Cady borate and lithium project in California, USA. ABR acquired the project in May 2017. A Scoping Study was completed in December 2017, and a Definitive Feasibility Study (DFS) in December 2018, just 19 months after the acquisition. In January 2019, ABR released a low-capex ‘enhanced’ version of the DFS, that split Phase 1 into two parts, and is now considered ‘base case’. Phase 1A comprises the Phase 1 sulphate of potassium (SOP) line plus a commercial scale boric acid plant. Phase 1B is the full 82,000 tpa Phase 1 boric acid plant.

Looks like a 10-bagger: Based on the January 2019 DFS, the project has a post-tax, unlevered NPV10 of US$1,083m, with an IRR of 41% and an initial capex requirement for Phase 1A of just US$37m. This is an incredibly low capex figure to get a project of this scale up and running. Despite these strong metrics, ABR’s current market capitalisation is about 2% of NPV. Assuming total initial capital (including working capital) for Phase 1A of US$50m, debt financing, 50m warrants at A$0.50 per share offered as an incentive to debt providers, a further US$80m in debt to fund Phase 1B, and a fair EV valuation 12 months from now of 30-50% of NPV, ABR could attract an EV valuation of US$325m to US$542m. This equates to a valuation of A$1.10-A$2.21 per share, 7-14x the current share price.

Lower capex, much lower dilution: Junior companies with big projects often end up heavily diluting shareholders when the real money needs to be spent. The brilliance of splitting Phase 1 into two parts is that this should now be avoided. At US$50m all in, Phase 1A is financeable with debt plus warrants. With 1A in production, financing Phase 1B will be easier and cheaper. By splitting Phase 1 into two, management have been greedy on behalf of shareholders. That’s a good thing.

Opportunity knocks: ABR shares are still trading at levels seen in 4Q18, the tail end of a horrible year in junior mining. So far, the market has failed to recognise the opportunity in ABR that this presents.

Compelling project with substantial cash flows: Based on the DFS, Fort Cady will ultimately produce ~408,000 tpa of boric acid and ~109,000 tpa of SOP. ABR will become only the second major producer of calcium-based borates globally, and only the second producer of SOP in the US. The project is expected to generate EBITDA of US$345m in the first full year of production.

Splitting Phase 1 is valuable risk mitigation: ABR will run a five-well commercial scale boric acid operation in Phase 1A to assess various wellfield injection and brine recovery options. This will reduce technical and engineering risks in the larger scale Phase 1B. There is scope to reduce the total number of wells meaning potential savings in both capital costs from fewer wells and operating costs from more efficient brine recovery.

Fort Cady is a past producing asset: Project risks are also mitigated by the fact there has been extensive historical development. There was limited-scale solution mining in 1981, and pilot scale operations in 1987-1988. The project was fully approved for commercial scale operations in 1994. Feasibility studies, detailed engineering and test works occurred in the late-1990s and early-2000s. This included a second pilot plant from 1996 to 2001. More than US$60m (about 3x ABR’s market cap.) has been spent on project development to date.

Fort Cady hosts a strategically important asset: Colemanite is a calcium-based borate that does not contain sodium. This is important because in applications such as E-glass, the most common form of glass fibre, and some types of borosilicate glass, such as those used in TFT-LCDs, low- or no-sodium borates are used. Colemanite resources are rare and vital. At present, Turkish state-owned entity Eti Maden has a virtual monopoly in mining colemanite on a commercial scale. Fort Cady hosts the only other major, commercially viable colemanite deposit in the West, and thus offers a vital alternative source of supply.

Cooperation agreements with the Chinese majors: In May 2018, ABR secured cooperation agreements with Sinochem Hebei Corp, a subsidiary of China’s state-owned Sinochem Group, and with China National Fiber Corp, a subsidiary of China National Machinery Industry Corp (usually known as ‘Sinomach’). These are substantial groups; in 2018, Sinochem Group was ranked 98th in Fortune Global 500. Sinomach was ranked 334th. (For comparison, Rio Tinto was ranked 278th). It is no surprise the Chinese were quick off the mark; China is the largest market for borates and a significant net importer. That two of China’s largest and most established state-owned enterprises have entered into these agreements is a testament to the strategic value of the Fort Cady project.

Strategic possibilities abound: Hosting the only meaningful colemanite resource in the West, and as only the second producer of SOP in the US, ABR is strategically significant. Borates are so pervasive in modern society – they are used in many industries and applications – that ABR could effectively partner with a number of major US and European based groups highlighted in this report. One example might be for ABR to partner with a group involved in glass or glass fibre. Another possibility would be to secure some type of offtake financing with one of the existing Chinese partners. Another might be to finance the SOP project separately, with ABR benefiting from US distribution. Strong interest in the project is expected from both industrial minerals, and speciality fertilisers groups.

Fort Cady could be worth US$3.3bn to a strategic: A range of major industrial minerals and fertiliser companies are trading at an average of ~9.5x 2018 EV/EBITDA. Applying this average multiple to ABR’s expected EBITDA in the first full year of production suggests a longer-term valuation to a US or European group of as much as US$3.3 bn. That is, more than 150x ABR’s current market cap.

Robust outlook for boron demand: Boron and borates are used in a multitude of modern applications from abrasives to water treatment, and from soap to nuclear power plants, and in lithium ion batteries and hydrogen fuel cells. The global market for boric acid (H3BO3) reached 3.9m tonnes in 2017, with the market expected to continue growing at ~4% pa. Borates demand is being driven by the ‘big picture’ trends of urbanisation, energy efficiency, and food security. It may come as a surprise to learn that in US dollar terms, the global borates market is about the same size as the lithium market, at ~US$3.0bn.

Few new projects expected to come on stream: The borates market is essentially a duopoly with Eti Maden and Rio Tinto (RIO.L) together controlling ~80% of the world demand. Globally, there are few occurrences of commercially viable borate deposits; visibility on new projects other than Fort Cady is poor. Some projects plan to mine borates as a by-product to lithium, but these are earlier stage, and rely on processing new minerals, something that will take time to learn. The Fort Cady processing route is based on prior feasibility study level work, well-established chemistry and standard processing equipment. ABR offers the purest exposure to the boron market, the most advanced project, and the lowest capex.

Strong US demand for SOP: US SOP demand is expected to grow at ~4.8% pa over the next few years, having grown at almost 5% pa since 2009. A number of factors are driving this growth including the use of newer, higher-yielding crops that extract more sulphur from the ground, the recent popularity of planting in cold soils, and global emission controls which have meant less sulphur deposition from precipitation. SOP is primarily consumed in states that grow high-value or chlorine sensitive crops. California, which has significant areas of chloride sensitive crops such as citrus fruits, avocado, and berries, accounts for more than 35% of US consumption.

In summary, Fort Cady is a hugely valuable project. It hosts a strategically important mineral, is in an excellent jurisdiction, and boasts very low capex costs. It is the most advanced borates project in the market. This, combined with the fact that ABR will be only the second producer of SOP in the US, means the company has a multitude of strategic options. The current share price, being ~2% of NPV, offers investors a great opportunity.


Simon Francis - March 2019

The Author

 Simon Francis is a UK qualified chartered accountant with significant experience in the natural resources and minerals sector. Simon led research in the sector in various roles at major financial institutions including Macquarie, Samsung and HSBC, in a career spanning more than 20 years. He has been involved in approximately US$4bn of capital raising, for a number of natural resources companies. Simon has been engaged in the financing of early stage companies using production agreements, and has privately funded exploration companies in various metals and jurisdictions. Simon seeks to deploy capital in undervalued mining and resources opportunities that have been missed by the market.


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ABR Delivers Low Capex Starter Project with Exceptional Financial Metrics for Fort Cady Borate Project 

ASX Announcement 31 January 2019 


  • Fort Cady Borate Project Definitive Feasibility Study (DFS) enhanced to include a low capex starter project achieved by splitting Phase One into Phase One A and Phase One B 
  • Phase One A will target the production of 40k stpa of SOP (K2SO4) and 6k stpa of boric acid (H3BO3) 
  • Phase One B will increase boric acid production to 90k stpa using learnings from initial 6k stpa operation 
  • Exceptional financial metrics for starter project (Phase One A) include 
    • Capex of only US$36.8m inclusive of a 13% contingency 
    • C1 Opex for SOP of US$85.89 (C3 Opex of US$143.84) 
    • Unlevered, post tax NPV10 of US$224.7m (A$315m) and IRR of 58.3% 
    • EBITDA in first full year of production US$26.7m 
  • Phase One A substantially lowers targeted financing but still delivers a pathway to full project targeted EBITDA of US$345m in first full year of operation 
  • Financing discussions to focus on debt funding of Phase One A

American Pacific Borate and Lithium (ASX:ABR) (“ABR” or the “Company”) is pleased to announce it has enhanced the Fort Cady Borate Project DFS released on 17 December 2018 to include a low capex starter project.

American Pacific Borate and Lithium Ltd, CEO, Michael Schlumpberger commented

“We are delighted with the enhancements of the DFS to include a low capex starter project that works on a standalone basis. We now have pre-production capex of only US$36.8m and a pathway to Phase Three that has an annual EBITDA in the first full year of production of over US$340m. 

We have made the Fort Cady Project easier to finance, whilst limiting likely share dilution and preserving a massive EBITDA target in full production. Our ability to include such a low capex starter project emphasises how unique the Fort Cady project is in the world of mining. ” 

Fort Cady Borate Project DFS 

The starter project has been achieved by splitting Phase One into Phase One A and Phase One B. Phase One A (starter project) will target the production of 40k stpa of SOP (potassium sulphate or K2SO4) and 6k stpa of boric acid (H3BO3). Phase One B will increase boric acid production to 90k stpa.

Importantly the starter project has many benefits including: 

1. The project substantially reduces pre-production capex from US$138m to only US$36.8m 

2. The project delivers exceptional financial metrics meaning it is financeable on a standalone basis 

3. Financing the project is likely to mean lower share dilution whilst preserving the targeted larger project and valuation 

4. The project enables the Company to use learnings for the small scale commercial boric acid operation to ensure the larger boric acid operation is optimised from both a construction and operational perspective

In splitting Phase One into two distinct projects, pre-production capex has been reduced by around 75% whilst total capex has only increased by around 7%. Importantly the standalone financial metrics for Phase One A are robust per the table below.

Table 1 | Key Financial Metrics for the Fort Cady Borate Project on a Phase by Phase Basis 

Click here to view the full announcement


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