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Penrice signs JV with world's largest soda ash distributor

18 Jan '13
7 min read

MOU signed for new soda ash JV

Penrice has signed a legally binding Memorandum of Understanding with SASS Victoria Australia Pty Ltd (SASS) to form a Joint Venture (JV) to import and market soda ash in Australia. The commencement of the JV is subject to satisfaction of conditions including final due diligence and signing definitive transaction documents. Assuming these conditions are satisfied as expected, JV sales are expected to commence in May 2013.

SASS is a subsidiary of Soda Ash Holding BV, a Dutch Holding Company, that controls a number of soda ash distributors globally, making it the world’s largest independent distributor of soda ash per year, reselling over 1 million tones of soda ash throughout South America, Russia, Ukraine and CIS countries and elsewhere.

The soda ash for the JV will be sourced from American Natural Soda Ash Corporation (“ANSAC”), which operates globally as the sales, marketing and logistics arm for three leading producers of natural soda ash in the United States - FMC, Tata Chemicals and OCI. ANSAC exports approximately 4 million tonnes of high quality natural soda ash per annum, making ANSAC the single largest soda ash exporter in the world.

Penrice proposes to transfer its soda ash sales to the JV, switching from supplying its customers with its own manufactured soda ash to the JV supplying those customers with imported soda ash sourced from ANSAC. Continuity of supply and quality of soda ash for Penrice’s existing customers shall be maintained. 

Switch to imported soda ash for resale from May 2013

The proposal means all of Penrice’s existing customers’ soda ash requirements will be imported and supplied through the JV from May 2013. Penrice’s cost base will be considerably reduced and flexibility to respond to changes in domestic demand will be enhanced.  The Osborne plant will continue to operate as, a sodium bicarbonate manufacturing facility and a quicklime manufacturing facility.

Key features of the JV include:
-The JV will be owned by SASS as to 67% and Penrice as to 33%
-The term of the JV will be a minimum of 6 years
-SASS will provide a loan to Penrice of $8 million to fund the cost of transitioning the existing Penrice operations along with the necessary modifications to Penrice’s sodium bicarbonate plant, with the loan repayable over the term of the JV
-Penrice and SASS will work together to maximize the benefit to the JV in the supply of inbound logistics, warehousing, packaging and transport services at commercial rates to earn fee income.
 
Sodium bicarbonate production continues as usual

Penrice has conducted trials with imported ANSAC soda ash and has produced sodium bicarbonate of the equivalent quality to current specification.  Therefore, customers can be assured that quality and reliability of supply will be maintained. Continuity of supply will be maintained and is unaffected by this change. Angaston mine production efficiency improved.

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