Gensource Potash Corp., Saskatoon, on May 22 unveiled a second potash project for its Vanguard area in Saskatchewan that includes both an offtake/equity agreement and a third-party investor. Gensource said it has entered into nonbinding Memoranda of Understanding (MOU) with a large and well-respected international fertilizer manufacturing and distribution company to form a joint venture company to develop the Maverick Project.
The jv will construct, own, and operate the potash production facility. The parties have reached an agreement in principal on an offtake amount of 250,000 mt/y for ten years, with an option to renew, typical take or pay offtake, product sale and title transfer at the mine site, a market-based pricing formula, equity contribution, and jv operating structure.
As for the equity, the party would make a direct equity investment, along with Gensource and a third-party investor. The investment will be in the form of cash and equal to 25 percent or more of the jv ownership. In addition to this investment, the offtaker has also introduced senior debt financing relationships to the project that will help further accelerate project finance activities.
There is also a nonbinding MOU for the largest equity investment of about 33 percent from a third-party investor, identified as a private investor strategically invested in and owner of a highly respected and established shipping and commodity transportation group that is internationally active in the field of shipping chemicals, oil, and agricultural product for world-wide active commodity producers and trading houses.
Gensource said the group also owns real estate and has development interests, going back to the 1950s. It said the investor wishes to become actively involved in the project as part of its strategic plan to further diversify its investments on a long-term basis.
“We are extremely pleased to see Maverick advance as quickly and decisively as it has,” said Gensource President and CEO Mike Ferguson. “The fact that Maverick has received formal interest on offtake as well as equity investment as a “bundle” is significant; significant not only because it underscores the commitment to the project by Maverick’s offtaker and the third-party investor, but also because of the accelerating effect it will have on the completion of the senior financing package for Maverick.
“Further, Gensource is pleased to have formal commitment now for two of its small-scale, efficient, and environmentally sustainable projects, a situation that speaks to the validity of the company’s business model and overall approach to the required change in the potash industry, added Ferguson.”
The Maverick project is being developed alongside Gensource’s other project, Vanguard One (GM Oct. 19, 2018). Gensource said this agreement is with a senior North American agriculture industry leader. It is also for an offtake of 250,000 mt/y. Gensource said while it continues to advance the financing, that under the circumstances, due to its recent and significant advancement, Maverick may be implemented ahead of Vanguard One.
Gensource is working with Roc Global LLC, New York, as its exclusive financial advisor.