MagIndustries Corp. said Aug. 26 that its subsidiary, MagMinerals Potash Corp., has filed a preliminary prospectus in all provinces of Canada to qualify the distribution of common shares issuable in connection with the amalgamation of MagPotash and MagMinerals Holdings Corp. These common shares will be issued to MagIndustries (currently the sole shareholder of MagPotash) and the purchasers of the common shares of MagMinerals Holdings issued in connection with the April 2008 private placements and the strategic investment completed in July 2008. Through these private placements of equity completed in April 2008 (25,250,000 shares at $4.00 per share) and June 2008 (15,000,000 shares at $5.00 per share), MagPotash has raised $176 million.
The prospectus will also qualify the issuance from treasury of common shares as a part of the initial public offering of the post-amalgamation MagPotash. Upon clearance of a final prospectus, MagPotash will become a reporting issuer in each province of Canada.
The preliminary prospectus discloses that the previously announced C$35 million financing with Portonovo, an entity controlled by Socofran CDE’s Director General Hubert Pendino, is intended to be restructured as a C$12 million private placement by Interco Potash (formerly Portonovo) and a C$23 million equity arrangement with Socofran.
Under the agreement with Socofran, a Congolese company retained by MagPotash, Socofran is to provide civil engineering and construction services and will receive 4,568,157 common shares of MagPotash at a deemed issue price of C$5.00 per common share as consideration for its services. It is anticipated that the common shares to be issued in consideration for Socofran’s services will be issued from time to time as services are rendered by Socofran, and that they will be subject to applicable resale restrictions imposed under Canadian securities laws.
The private placement to Interco Potash is expected to be completed prior to the amalgamation, in which case the common shares issuable to Interco Potash under the amalgamation will also be qualified by the prospectus.
In addition, MagIndustries has subscribed for an additional two million MagPotash common shares at a price of C$5.00 per common share. As a result of this subscription, and following the completion of the amalgamation and the investment by Interco Potash, MagIndustries will hold an aggregate of 96 million common shares of MagPotash, representing 69.7 percent of the common shares outstanding (62.9 percent on a fully-diluted basis).
The proceeds of the treasury offering, the size of which will be subject to a minimum and maximum amount to be determined when the final prospectus is filed, will be used to fund additional equity requirements for the construction of Phase I of MagPotash’s potash project near Mengo in the Kouilou province of the Republic of the Congo. MagPotash’s planned Kouilou Potash mining and processing plant is located 25km from the port city of Pointe Noire, Republic of Congo. The project is intended to be built in two phases with each module specified at 600,000 mt/y, for a total capacity of 1.2 million mt/y of potash.
The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the U.S. absent registration or exemption from the registration requirements.
In other news, MagIndustries says a new technical report indicated more potash reserves than earlier believed. In the original report, proven reserves were estimated to be 17.9 million mt of KCl, with probable reserves estimated at 3.1 million mt. The revised estimate of proven and probable reserves is 33.5 million mt of KCl, which is sufficient to support 28 years of production at a rate of 600,000 mt of K60 potassium chloride (KCl) for the first two years of production and 1,200,000 mt of K60 KCl per year for the remaining 26 years. At a production rate of 600,000 mt of K60 per year, the KCl reserves are adequate for a project lifetime of 54 years. At a production rate of 1,200,000 mt of K60 per year, the KCl reserves are adequate for a project lifetime of 27 years. These reserves lie within a 25 square kilometer (sq km) portion of the 136 sq km Mengo Exploitation Permit, which was granted in March 2008. The study area represents approximately 18 percent of MagPotash’s Mengo Exploitation Permit area of 136 sq km. MagPotash retains exclusive rights to a further 1,472 sq km of potentially developable area through the Makola Exploration Permit.
In the meantime, MagIndustries has named Norbert Grueschow to the positions of chief technical advisor – solution mining and member of the technical advisory board of MagMinerals Potash Corp. He has over 30 years of international experience in research and development in potash mining, with a particular focus on solution mining technology and evaporite ore chemistry, as well as project management. His experience includes advising on carnallite solution mining projects in Germany, Russia, The Netherlands, Thailand, Brazil, and Ethiopia. Grueschow will be available to MagPotash for the execution of the US$723 million Kouilou potash mining and processing project. He has been working for MagIndustries and MagPotash as a consultant since 1998, and laid the foundation for the Kouilou process flow sheet. Grueschow, who was granted Bachelors and Masters degrees in chemical engineering by the Technische Hochschule für Chemie, Merseburg, Germany, has filed over 50 patents related to solution mining processes and operations.