This morning’s agreement with Daelim subsidiary DL Trading follows the granting of a state government licence last month allowing access for Adelaide-based NeuRizer to use a network of offices, sheds and warehouses at the former Leigh Creek mine site for the life of the project.
Last month, Korean company DL E&C, a sister company to Daelim, took a nine per cent stake in NeuRizer.
The $14.4 million investment (US$10 million) and offtake agreement are major coups for NeuRizer as it progresses the front-end engineering design (FEED) stage of the $2.6 billion project.
Daelim will buy 500,000 tonnes of granular urea from NeuRizer for the first five years of operation with a contract value of $1.5 billion on forecast prices.
The listed SA company, formerly known as Leigh Creek Energy, already has significant Korean involvement.
Last year it awarded the Engineering, Procurement, Construction, Commissioning and Finance contract for the project to DL E&C Co.
The project has also received a letter of support from a major Korean bank for debt finance of up to $1.5 billion or 70 per cent of the turnkey price of the DL E&C construction contract.
It aims to become the largest underground coal gasification site in Australia and a globally significant producer of nitrogen-based fertiliser for agriculture.
The project, 550km north of Adelaide, will use unconventional technology to extract syngas from beneath the ground at the former coalfield and convert it into a million tonnes of urea a year for agricultural and industrial use.
A final investment decision is expected next year.
The project aims to create 1200 jobs with about 1000 of those on site. The former coal mine, which ceased operation in 2015, is serviced by a 250km rail line to Port Augusta.
The rail line was previously used to haul coal from the site to the coal-fired Playford power station, which was decommissioned in 2016.
NeuRizer managing director Phil Staveley said the Daelim agreement secured significant revenue for the company.
“A further 50 per cent uncontracted urea supply allows us to remain agile to support domestic demand and take advantage of market pricing,” he said in a statement this morning.
“The continued global fertiliser crisis made a compelling case for DL Trading to shore up domestic supply from a reliable and cost-controlled source.”
The price of urea fertiliser has skyrocketed to about $1600 a tonne in the past year or so due to a number of factors including the war in Ukraine.
Making urea from gas is a three-step process: Sourcing the gas; converting it to ammonia (NH3) and then adding carbon dioxide to the ammonia to make urea.
NeuRizer’s share price was up more than 10 per cent in the first hour of trade this morning to $0.20, giving it a market capitalisation of almost $190 million.
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