- Leigh Creek Energy (LCK) enters a heads of agreement (HoA) with South Korea-based contractor Daelim
- The HOA includes an exclusivity period expiring in June next year to allow the companies to potentially finalise and form an offtake partnership
- Under the five-year contract, Leigh Creek will sell at least 500,000 metric tonnes of urea per year from its namesake urea project in South Australia
- Leigh Creek says this offtake is the only one it requires to secure its component of funding for the project, but it may still seek other potential offtake agreements
- Company shares are up 27.1 per cent to trade at 15.3 cents
Leigh Creek Energy (LCK) stock has risen after the company signed a heads of agreement (HoA) with Daelim, a South Korean contractor, for the offtake of granular urea.
The HOA has an exclusivity period that expires in June 2022, by which time the parties will decide whether they will finalise and form an offtake partnership.
Under the five-year deal, Leigh Creek will sell at least 500,000 metric tonnes of urea per year from a plant facility within its namesake urea project.
Leigh Creek said this offtake is the only one it requires to secure its component of funding for the project but it may still seek other potential offtake agreements.
Located in South Australia, the Leigh Creek Urea Project (LCUP) is being developed to produce low-cost, nitrogen-based fertiliser for local and export agriculture markets. The LCUP will initially produce one million tonnes per annum of urea with the potential to increase to two million tonnes.
Leigh Creek said the process of choosing an engineering, procurement and construction (EPC) contractor involved selecting a company able to engineer and build the ammonia and urea plant, as well as willing to form a partnership.
Executive Chairman Justyn Peters commented on the agreement.
“This HOA is important to our company as it sets out a clear process that mirrors the process used to sign the EPCC contract with Daelim,” he said.
“An HOA with an exclusivity period allows both parties to put in the time, energy and cost to come to a definitive agreement without the risk of, to be frank, Daelim being gazumped by another party.”
Early next year, LCK plans to announce its marketing plan for production, which is expected to include a new low-cost urea distribution to the Australian market.
Company shares were up 27.1 per cent to trade at 15.3 cents at 1:10 pm AEDT.