Osborne-based soda ash manufacturer Penrice has completed a key part of its transition from manufacturer to supplier with an equity and land fill deal.
Penrice decided earlier this year it couldn’t compete with cheaper soda ash imports and would move to become an importer in its own right.
The end of soda ash production at Osborne, however, required a negotiated termination of long-term supply arrangements with Ridley Corporation which owns the Dry Creek salt fields.
The salt is one of main ingredients in the soda ash manufacturing process and Ridley had a contract to supply Penrice until 2019.
Ridley decided earlier this year it would keep the salt fields, negotiate a compensation deal with Penrice and pursue an assessment of Dry Creek for housing development.
The 5000ha site between the Barker Inlet and Salisbury Highway is about 12km from Adelaide.
“Upon reaching suitable agreement… we will be able to use previous property development feasibility studies as the basis with which to move forward with the redevelopment of the site,” Ridley said in statements earlier this year.
Ridley and Penrice announced today they had reached a deal, where Penrice offered about the only asset they have left – mountains of rubble at its Angaston limestone mine.
“The consequences have been challenging for both companies, and the agreement reached represents a sensible commercial outcome,” Penrice CEO Guy Roberts said today.
Penrice has given Ridley an option over 4.5 million tonnes of landfill at its Angaston mine. Penrice said the landfill may “assist Ridley accelerate plans for the development of the Dry Creek site relative to what might otherwise have been possible”.
As part of the agreement, Penrice has granted Ridley an option, exercisable over a five year period, to be issued 16,122,621 ordinary shares in Penrice, representing 15 per cent of the current issued capital in Penrice.
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The strike price for the options is 7 cents per share.
Ridley has agreed not to exercise any blocking vote of these shares should a future change of control be in prospect, but rather to support a recommendation to shareholders made by the Penrice board.
“As a result, the existence of the option will not inhibit any possible change of control discussions, while the exercise of the option will contribute additional capital to Penrice”, Roberts said.
Penrice shares closed yesterday at 5.8 cents.
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