Junior developer Gensource Potash Corp., Saskatoon, on Sept. 2 announced that Tugaske Project offtaker Helm has committed to invest C$50 million into the 250,000 mt/y project. As offtaker, Helm is committed to purchasing 100 percent of the production for a period of 10 years, renewable thereafter.
Gensource has formed a Special Purpose Vehicle (SPV) called KClean Potash Corp., with Helm owning 33 percent and Gensource 67 percent. KClean is a Saskatchewan corporation and is the entity that will finance and ultimately own, construct, and operate the Tugaske Project, which is located 170 kilometers south of Saskatoon. Citing plentiful reserves, Gensource anticipates implementing several potash production modules over the course of the next decades. It believes that the cost of potash production from its modules will be within the lowest quartile of potash producers worldwide.
Helm’s investment is contingent upon the remaining equity and debt financing for the SPV being successfully completed and Helm’s Board approval. Gensource said the investment commitment represents an increase over previously discussed amounts and will occur at financial close.
The senior debt financing package for Tugaske, being arranged by joint lead arrangers KfW IPEX-Bank and Societe Generale, is expected to be for up to C$280 million.
“We are excited to achieve this next important milestone for the Tugaske Project,” said Mike Ferguson, Gensource CEO. “The equity investment commitment by the project’s offtaker, Helm, reaffirms Gensource’s fundamental business proposition of creating new and direct supply chains in the potash industry, to help begin the transition of the industry to more of a manufacturing model rather than the conventional “bulk mining” model.
“I’m very encouraged to see a robust fertilizer market as we continue to achieve our key milestones towards commencing the construction of the Tugaske Project,” added Ferguson. “The presence of today’s higher prices will, no doubt, bring additional new potential projects to the industry, however, it is important to note that Tugaske does not rely on the current high prices to be economically sound. Tugaske was developed under much lower potash pricing scenarios than we are seeing today and shows robust economics at both low and high pricing environments, this is one of many fundamental and differentiating strengths of the project.”
Gensource said the project involves selective solution mining and processing methods to create an efficient, modular, scalable and environmentally sustainable potash production facility, sized appropriately for local communities. It said it will have lower impact on air, water, and land compared to conventional potash mining methods, with significantly lower freshwater use, no salt tailings, and no brine ponds.
Gensource said Helm will market the potash directly to its customer base, providing KClean with the competitive advantage of a direct and efficient delivery network from the mine site to retail. It said Tugaske’s modular nature will also allow for nimble and capital-efficient future supply additions to meet market demand, without the need for the multi-billion-dollar mega-projects the industry has suffered from up to now.