Here’s why the BCI Minerals (ASX:BCI) share price just jumped 5%

The BCI Minerals Ltd (ASX: BCI) share price is up by 5% today after the company announced it has awarded up to $90 million in contracts to construction companies and support infrastructure arrangements for its Mardie Salt and Potash Project.

Despite securing a large loan, the contracts are currently funded from BCI’s existing strong cash reserves and continuing royalty income from its Iron Valley holdings.

The contract for initial ponds is awarded to WBHO Infrastructure, the Australian subsidiary of international civil construction expert, WBHO Construction. The contract for the Project Management Contractor (PMC) role awarded to reputable WA-based
project and construction management company, Engenium.

Engenium brings local expertise to the role, with offices and teams currently based in Perth and Karratha. Neither of these companies are ASX listed. All of these contract prices fall within BCI’s July 2020 Definitive Feasibility Study (DFS) cost estimates.

BCI Minerals share price strong on Mardie project

The BCI Minerals share price has risen over 100% over the past 12 months on strong iron ore prices, but the potash industry allows the company to further diversify.

Mardie is a West Australian region just south of Karratha, which BCI earned a $450 million loan from the Northern Australia Infrastructure Facility to mine in December last year, for a period of 15 years.

 The construction contracts include initial construction of the large-scale trial pond scheduled to commence in April, as well as construction of evaporation ponds 1 and 2. The total earthworks volume in this scope is approximately 800,000 cubic metres over an area of 24 square kilometres. 

Commenting on the contracts, BCI’s managing director Alwyn Vorster said:

The award of the initial earthworks contract in particular represents a key milestone in BCI’s progress toward main construction and demonstrates Board confidence in Mardie’s development pathway. These contracts will be initially funded from BCI’s healthy cash balance and strong Iron Valley royalty income.

Salt and potash

Potash is expected to become a particularly valuable industry for Australia due to its use in horticulture. BCI believes Mardie “will be a globally significant Tier 1 salt and sulphate of potash project that is forecast to generate robust cash flows over an operating life of at least 60 years.”

The Northern Australia Infrastructure Facility launched an independent assessment, which forecasted significant benefits to the northern Australian region over Mardie’s construction and operating life. Mardie will have a peak construction workforce of approximately 500 people and a permanent operating workforce of around 200 people.

At the time of writing, the BCI Minerals share price is sitting at 32 cents a share.

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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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