Infrastructure funds in for long haul on Tellus NT salt project

Source: AFR; Published: September 26, 2014; Author: Angela Macdonald-Smith 

 Tellus has just completed the first stage of a detailed feasibility study. Photo: Michele Mossop

Ambitious plans by privately owned Tellus Holdings to develop an underground salt mine that will double-up as a secure waste storage site in remote central Australia have attracted interest from long-term ­infrastructure investors, lifting confidence in finding financial backing for the $464 million project.

Managing director Duncan van der Merwe said large infrastructure funds with a track record of investments ­overseas were taking a look at the ­Chandler project, 120 kilometers south of Alice Springs, which was granted Major Project Status by the Northern Territory government on Thursday.

Tellus, chaired by former global head of infrastructure for AMP Capital Investors Philip Garling, said the ­Chandler venture near Titjikala could become one of central Australia’s largest employers. It would mine a vast underground salt deposit, some 18 kilometers wide that could have a mine life of 500 years. Once depleted caverns would be available for secure disposal of mining and oil and gas industry waste, and for documents.

“We’ve received expressions of interest from parties wanting to finance the project through to construction and into operation,” Mr. van der Merwe said.

“Part of it is, this type of investor sees us as an infrastructure play, not as a mining play, so [offering] long-term annuity-style returns.”

Tellus plans to mine the salt ­reservoir, which lies about 800 meters underground in the Amadeus Basin, and rail salt to Darwin from where it would be shipped to customers in the edible and industrial salt market in Asia under long-term take-or-pay contracts.

However, the bulk of the revenues would come from the disposal part of the project, which would smooth out returns from an otherwise commodity cycle prone business.

Mr van der Merwe said the salt project could potentially be one of Australia’s longest life mines. “These things are long-term infrastructure plays and that’s what makes them quite unique from an investor’s perspective,” he said.

NT Chief Minister Adam Giles noted the project could employ 280 to 350 people during construction and 180 people once in operation.

He said an agreement signed on Thursday ­commits Tellus to maximising local benefits from the project, including training, employment and indigenous development.

Tellus has just completed the first stage of a detailed feasibility study for the Chandler project and is the final stages of preparing an environmental impact statement. It is about to lodge a mineral lease application.

Approvals and financing are expected to be secured to allow a final investment decision in 15-18 months’ time, Mr van der Merwe said.

Tellus is in the middle of raising $20 million from private investors in a share sale advised by Singapore based Grid Investment Capital.

On its website, Grid said Tellus’s underground mining would create voids capable of storing waste in isolation, generating “permanent isolation certificates” to waste emitters which can then remove contingent liabilities from their balance sheets.

Mr. van der Merwe said Tellus had received expressions of interest for salt off-take volumes from customers that exceeded the mine plan, while discussions with major players in the mining and oil and gas industries for waste disposal had been “very positive”. Tellus is targeting the start of storage sales by the third quarter of 2016 and salt sales by the December quarter of 2018.