Gensource Potash Corp. President and CEO Michael Ferguson told shareholders in an Aug. 31 call that the company is confident of reaching its equity financing goals this fall, which will allow the company to launch the Tugaske Project in Saskatchewan to construction.
The junior producer provided the update to shareholders after saying that turmoil in the global financial markets, exacerbated by Russia’s invasion of Ukraine, caused delays in completing the equity financing during the first half.
“With the significant improvement in potash price and an unprecedented visibility of potash and other fertilizers in the global press, there is increased interest for private equity in the fertilizer space and in the potash market particularly,” Ferguson told shareholders.
“The company is currently in detailed discussions with both domestic and international equity investors. These discussions have been constant over the past several months, but now with the heightened focus on potash as a truly strategic commodity, the discussions have now progressed to a serious negotiation level, well past a letter of intent (LOI) stage,” he continued.
“With the five largest players accounting for more than 75% of the market, and each of those five players relying on large and in many cases old producing assets, it only takes a problem at one asset to have a global impact,” said Ferguson, who noted three recent examples – flooding that closed Mosaic’s K1 and K2 mines, sanctions against Belarus, and the Russian invasion of Ukraine. He said the Russia situation puts a cloud over whether Russian potash producers can expand in the near term as planned.
“Russian and Belarusian product will find ways to get out to some markets and the situation will even out a bit, but the supply will remain constrained,” he added. “And we are of the view that the potash industry will never really return to its previous state.”
Ferguson noted that Helm AG, a future equity and offtake partner in the Tugaske Project, has worked shoulder-to-shoulder with Gensource to structure an equity solution that will complete the financing picture. He added that Helm has supported the project in significant ways by guaranteeing accounts included in the debt financing package, by providing short-term financial input to the company, and by investing further of their own resources and personnel, and has rolled up their sleeves and helped negotiate and complete the financing of the project.
Ferguson said plans announced in June to double the size of the Tugaske Project (GM June 24, p. 1), located 170 km south of Saskatoon, from 250,000 mt/y to 500,000 mt/y under a second phase of the project by adding a second module, continue.
Ferguson is upbeat despite the additional headwind of inflation. He also noted that a second phase of the project would only cost about 80% of the first phase, as infrastructure will already be in place.
Asked by a shareholder as to whether some of the delay has been due to technology, Ferguson reiterated that there is no issue on that front. He said it has had three or four independent technical reviews and has been reviewed by banks and equity investors. “And the results of every technical review is that the techniques used are robust…” he said.
Gensource shares closed at C$0.21 on Sept. 1, down 22% from the Aug. 30 close of C$0.27.