Koch invests $252M in Compass Minerals to support development of lithium brine project in Utah; ESM for DLE
Koch Minerals & Trading, LLC (KM&T), a diverse global trading, logistics and investment company and subsidiary of Koch Industries, Inc. (KII), is making a $252-million investment in Compass Minerals, a leading global provider of essential minerals, to support phase-one development of its previously identified 2.4 mMT lithium carbonate equivalent (LCE) Great Salt Lake resource and debt reduction.
Approximately $200 million of the investment are expected to be used to advance the first phase of the company’s sustainable lithium development project. This figure represents approximately 75% of total phase-one funding needs, according to the company’s FEL-1 level project cost estimates, including the full funding required through calendar year 2024 toward the construction of a commercial scale, direct lithium extraction (DLE) and lithium conversion plant at the company’s Ogden, Utah, solar evaporation facility.
Compass Minerals has selected EnergySource Minerals (ESM) as the DLE technology provider following three years of extensive testing of multiple DLE technologies. In pilot tests to date, ESM’s proprietary ILiAD adsorption technology has proven successful in processing Compass Minerals’ brine resource across four key assessment categories: lithium recovery; magnesium rejection; minimized environmental impact; and commercial readiness.
Adsorption is a proven DLE technology already in use for commercial production at several lithium brine operations globally. Additionally, early conversion testing of Compass Minerals’ brine across a wide range of operating parameters has provided confidence in the scalability of the planned DLE facility to be located at Compass Minerals’ operations in Ogden, Utah.
Compass Minerals previously engaged Veolia to conduct lithium chloride to lithium hydroxide conversion testing as the first-known conversion to battery grade lithium hydroxide of lithium brine originating from the Great Salt Lake. The resulting conversion sample met established battery-grade specifications for the US domestic electric vehicle and energy storage markets.
Compass Minerals expects the project’s annual commercial production capacity to ultimately be approximately 35 kMT LCE, with an initial phase-one capacity of approximately 11 kMT LCE coming online by 2025.
As part of the agreement, the companies will also explore value creation opportunities across Compass Minerals’ broader operational platform by leveraging the expansive capabilities of KII’s many operating subsidiaries, including in the areas of supply and procurement of fuel and raw materials, freight and logistics synergies, and project engineering and development support.
Compass Minerals expects to use the remaining $52 million of proceeds from the KM&T investment, less transaction expenses, to reduce debt, representing a significant step toward aligning the company’s capital structure with its corporate growth strategy.
Under the terms of the investment agreement, KM&T has agreed to purchase 6,830,700 shares of Compass Minerals common stock at a price of $36.87 per share, resulting in proceeds to Compass Minerals of $252 million. The issuance price represents a 6.2% discount to the closing price and an 8.0% discount to the 5-day volume weighted average price as of 13 September 2022. The private placement of shares is subject to the satisfaction of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 review. The private placement of shares is expected to close in the fourth quarter of calendar year 2022, subject to the satisfaction of customary closing conditions.
After the transaction closes, KM&T will own approximately 17% of Compass Minerals’ outstanding shares of common stock and will have the ability to appoint two additional members to the Compass Minerals board of directors.
Perella Weinberg Partners LP acted as sole financial advisor to Compass Minerals in the transaction and Cleary Gottlieb Steen & Hamilton LLP acted as the company’s legal advisor. Jones Day acted as legal advisor for KM&T.