Ground Breakers: The next major salt producer in WA (yeah, you read that right) is chasing over $300m

BCI gets high roller backing for raising to complete first WA salt mine in 25 years
US Fed speak keeps gold bulls in check
Materials sector down 1.07% in morning trade

WA mogul Kerry Stokes and super giant AustralianSuper have plunged further cash into BCI Minerals (ASX:BCI), in the hope it can deliver on plans to become Australia’s first new salt producer since 1999.

The former iron ore play turned salt and potash hopeful is down ~5% over the past year, but has stabilised after a horror run in 2022 and early 2023 that corresponded to a massive escalation in costs for its Mardie salt and potash evaporation site in the Pilbara.

It expects the project to cost some $1.42 billion to construct along with a $208m contingency, targeting salt production of 5.35Mtpa and SoP output of 140,000tpa.

But after a series of setbacks for WA SoP proponents including project suspensions and company collapses, the company will take a more conservative approach, ramping up salt output before making a decision to build a potash plant down the line.

BCI entered a trading halt today to sew up $315m in equity, to help complete the project, which is expected to deliver first salt in the second half of 2026.

Canaccord was chasing bids for a $60m institutional placement along with a $255 million 1 for 1.19094 non-renounceable entitlement offer.

The latter has been backed by Kerry Stokes’ Wroxby Pty Ltd, which will take up its full entitlement of $100m, in line with its 39.2% BCI ownership stake. AussieSuper, which holds around 14% of BCI, will take up its full entitlement of $37.5m and sub-underwrite the retail offer to the tune of $112.5m.

With the SoP plant deferred, BCI says the equity raising will form the final component of its project funding after locking in $981m of debt finance. $650m of that is coming from taxpayers in the form of the Northern Australia Infrastructure Facility and Export Finance Australia.

BCI, which aims to be the first Aussie salt supplier to use capesize vessels for export (normally used for iron ore shipments), says it will be in the second quartile of the global cost curve with all in sustaining costs of $23.7/t for its salt only output, generating $286m in EBITDA a year at a forecast long term price of US$64.7/t.

The equity call is the second major investment in the Aussie salt market in 2024, after Resource Capital Funds’ Leichhardt Industrials Group agreed a $375 million deal to acquire Rio Tinto’s (ASX:RIO) 1.5Mtpa salt, 1Mtpa gypsum operation at Lake MacLeod near Carnarvon.

Leichhardt’s other shareholders include the Victor Smorgon Group, German group ConSalt and the family office of former Dow Chemicals boss Andrew Liveris.

BCI Minerals (ASX:BCI) share price today

Gold stocks hold breath after rates pause continues

The US Fed left gold bulls scratching their heads, keeping rates paused but dulling expectations of a quick return to cuts amid sticky US inflation numbers.

Chair Jez Powell made it clear getting inflation down to a long run goal of 2% was its aim, with cash rate still in the 5.25-5.5% range.

“We believe that our policy rate is likely at its peak for this tightening cycle and that, if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” he said.

“But the economy has surprised forecasters in many ways since the pandemic, and ongoing progress toward our 2 percent inflation objective is not assured.

“The economic outlook is uncertain, and we remain highly attentive to inflation risks. We are prepared to maintain the current target range for the federal funds rate for longer, if appropriate.”

US CPI rose 3.3% YoY in the December quarter.

Gold is sitting near record highs of US$2041/oz, but the uncertainty today’s comments leave around rate cuts saw a light sell off in gold stocks, with the ASX sub-index down 0.62% this morning.

Most were in the red, with Regis Resources (ASX:RRL) down 2.15% before calling a trading halt to update on a dispute over a potential royalty over its 30% owned Tropicana gold mine.

Most of the big gold miners were down outside of Northern Star (ASX:NST) and Newmont (ASX:NEM), with Resolute Mining (ASX:RSG) facing a sell off of over 7% despite announcing it expected to lift gold production in 2024 from 330,994oz at all in sustaining costs of US$1470/oz last year to 345,000-365,000oz at US$1300-1400/oz.

A big hit for battery metals stocks IGO (ASX:IGO) and MinRes (ASX:MIN) helped drag the materials sector to a 1.07% loss in morning trade.