Penrice signs JV with world's largest soda ash distributor

Penrice will continue to operate its kilns at its Osborne chemical facility to provide the necessary carbon dioxide to the sodium bicarbonate plant. In the process, Penrice will produce low cost quicklime for sale into the Australian market.

Penrice and Cheetham Salt are parties to a long term ‘take or pay’ supply agreement for supply of salt to Penrice’s soda ash plant. If the plant is closed as planned, Penrice’s requirements for salt will cease. Recognizing the importance of the contract to both parties, the parties are in discussions regarding the proposed JV and the impact of the proposed closure of the plant on the agreement.

They are working constructively to manage the contract in a manner which advances the best interests of both parties. Further announcement on the matter will be made as and when the JV is formed.

Benefits of the switch to the JV

Chemicals are a core business for Penrice, with its profitable sodium bicarbonate business growing in Asian markets. Its profitable SSR business, which is being well supported by the coal seam gas industry, leverages innovative unique technology and is another growing business.  By entering this new soda ash JV for the Australian soda ash market, Penrice will eliminate its only loss making business by better aligning domestic demand with a flexible and competitive cost structure which can be maintained through demand cycles. 

Penrice’s soda ash business is making a loss. Following plant closure and formation of the JV in FY2013, forecast earnings in FY2014 are expected to be materially improved, returning the soda ash business to profitability. 

Penrice expects to book an impairment charge against soda ash manufacturing assets when the JV is formed, which is expected to be in the next couple of months. The proposed JV provides for improved environmental outcomes.

The closure of soda ash production will mean around two thirds less carbon is produced reducing the liability for the payment of the carbon tax by a similar proportion.  It will also mean the cessation of ammonia and calsilt discharge to the adjacent Port River from mid 2013, both of which have created a steeply increasing cost burden in the past several years.

About Penrice

Penrice Soda Holdings Limited is Australia’s only manufacturer of soda ash and sodium bicarbonate and one of the world’s largest sodium bicarbonate marketing companies. It also operates a limestone mine, supplying industrial minerals and civil products. The Company is committed to driving shareholder value through the manufacture and supply of a range of world-class products across a variety of industries and countries including packaging, building and construction, mining, detergents, food and personal care, stock feed and environmental control/water purification.

Penrice