Why the Australian Potash (ASX:APC) share price leapt 9% this morning

The Australian Potash (ASX:APC) share price jumped by 9% this morning following news the government has approved its $140 million loan.

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Australian Potash Ltd (ASX: APC) shares were on the rise this morning after the company announced its government loan has been approved. At one point during intraday trade, the Australian Potash share price jumped by more than 9% to 18 cents.

However, at the time of writing, the mineral explorer's shares have retreated back to 16.5 cents, flat for the day so far. 

What caused the Australian Potash share price to jump?

The Australian Potash share price surged ahead in morning trade after the company announced that the Northern Australia Infrastructure Facility (NAIF) had approved its $140 million loan.

The company will use the funds to develop its Lake Wells Sulphate of Potash (SOP) project near Laverton in Western Australia.

The company advised the 17-year loan will be interest-only "until such time as other tranches are repaid". The loan will then convert to principal and interest. The security for the loan is the Lake Wells Project itself. Australian Potash did not disclose the interest rate.

The loan facility is still subject to commercial and project conditions, as well as state and federal ministerial approval.

The company also declared that it expects to receive a tranche of the senior debt facility from Export Finance Australia.

Australian Potash claims the Lake Wells Project will be the lowest CO2 emitting SOP project in Australia.

Words from the CEO

Australian Potash managing director and CEO Matt Shackleton said the following regarding the financing:

We are very pleased to advise the first major step in financing the development of Lake Wells, with the board of NAIF resolving to support this regionally important project that returns strong social and economic benefits…

We continue to enjoy strong relationships with stakeholders in the local community of Laverton, most importantly with senior traditional owners.

He added:

We now turn our attention to closing out the balance of the development financing pathway, and to moving into the pre-mobilisation phase of the development of the Lake Wells Sulphate of Potash Project.

Lake Wells is a substantially de-risked, technically sound, low cost and socially responsible project that will deliver a premium product for at least 30 years.

What does Australian Potash do?

Australian Potash is a mineral exploration company primarily focused on, you guessed it, potash. Beyond the Lake Wells Potash Project, its other endeavours include the Lake Wells Gold Project, and Laverton Downs Project.

According to the company's website, potash is described as "potassium-bearing minerals or compounds." Potassium is mainly used to aid plant growth. Some of the element's benefits include thickening plant cell walls and protecting plants from drought and diseases.

What is NAIF?

According to the agency's website, "NAIF is a Commonwealth Government agency established to facilitate economic growth by lending to infrastructure projects and businesses in northern Australia and helping to catalyse private sector investment."

NAIF is focused on the mining and energy sectors, tourism, agriculture, and education. Its purpose is to drive economic growth in Northern Australia. The Commonwealth defines the region as areas in Queensland and Western Australia north of the Tropic of Capricorn, as well as the entire Northern Territory.

Australian Potash share price snapshot

In March last year, the company's shares were selling at 7 cents each. With today's Australian Potash share price currently sitting at 16.5 cents, this puts its gains at more than 135% over the past twelve months. Year to date, the company's shares have also jumped by 25%.

Based on the current share price, the company has a market capitalisation of around $91 million.

Motley Fool contributor Marc Sidarous 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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