All Posts from October 22, 2012

Arizona K project signs contract with Chinese company

Prospect Global Resources Inc., Denver, and Sichuan Chemical Industry Holding (Group) Co. Ltd., Chengdu, China, today jointly announced a more than $2-billion agreement, over a 10-year period, under which Sichuan will purchase at least 500,000 mt tons of potash annually, or 25 percent of the projected output of Prospect Global’s American West Potash field in Holbrook, AZ.

The conservative deal valuation reflects current market prices of about $475/mt for a total of 5 million mt. The contract is take-or-pay, backed by a letter of credit. The agreement also provides an option for American West to sell and Sichuan Chemical to purchase an additional amount of potash.

The parties said they believe this to be the largest-ever purchase and sale contract – in price and volume – for a potash mine under development in the United States. It is also believed to be one of the largest potash export contracts in U.S. history.

Prospect Global believes that this bankable offtake agreement enhances the attractiveness of the project to lenders. The current timetable calls for the American West site to be in production by late 2015 or early 2016.

Pat Avery, Chief Executive Officer of Prospect Global, said: "This agreement is a major vote of confidence both in the long-term potential of our American West Potash site as a mineral resource and in Prospect Global’s ability to create a state-of-the-art mining operation to capitalize on that potential. Bankable offtake contracts are a top priority in our detailed strategic plan, and we continue to execute on key drivers."

From the perspective of Sichuan Chemical, a state-owned enterprise that is one of China’s largest fertilizer manufacturers and its third-largest chemical company, the accord provides a large – and independent – new source of a commodity that is critical to meeting the challenge of feeding the world’s largest nation. This year’s record drought in North America and Europe has cut grain harvests, squeezing global food reserves and raising prices. In that context, obtaining dependable supplies of potash, which raises agricultural productivity without depleting soil nutrients, is vital to China’s food security.

Xiaojun Chen, Chairman of Sichuan Chemical, said: "This agreement with Prospect Global has important long-term strategic benefits for Sichuan Chemical and also will make a significant contribution to the economic development of Sichuan Province and the Chinese potash industry. We are honored to work with Prospect Global and look forward to a prosperous future."

Devon Archer, a Prospect Global director who acted as Prospect Global’s lead negotiator, commented: "Today’s agreement is the product of six months of negotiation and due diligence carried out in China and the United States. That process has resulted in a high level of trust and respect on the part of both parties. As we look forward to a long relationship with Sichuan Chemical, we are proud of the role that Prospect Global can play in helping to bring food security to China while meaningfully impacting the US/China trade balance over the next decade."

The American West Potash field is located in the Holbrook Basin of eastern Arizona. A new interim engineering report by the international engineering firm of Tetra Tech Inc. shows Prospect Global to be on track to meet key targets within previous expectations as to capital and operating expenses, infrastructure, permitting, and site plan for its American West Potash project in Holbrook. Prospect Global’s next major developmental step is a bankable feasibility study, scheduled for the first half of 2013. Further information on Prospect Global’s estimated potash reserves can be found at www.prospectGRI.com.

Once the mine is in production, it will create an estimated 700 U.S. domestic jobs in

Agrium reports successful bid, doubling of dividend

Agrium Inc. announced today the preliminary results of its substantial issuer bid to repurchase up to C$900,000,000 of its shares. Agrium will take up and pay for approximately 8.72 million common shares at a price of C$103.00 per share under the offer. The shares purchased represent approximately six percent of the shares currently outstanding (undiluted). After giving effect to the repurchase, Agrium will have approximately 149 million shares issued and outstanding.

The purchase price paid per share is expected to be $103.00, a one percent discount to the closing price on the Toronto Stock Exchange of $103.95 on Oct. 19, 2012, the date the bid expired, and a 1.5 percent premium to the volume-weighted average price during the tender period of $101.47.

“The strong shareholder response and resulting successful completion of this significant share repurchase program demonstrates Agrium’s continued commitment to delivering superior shareholder returns. The Substantial Issuer Bid provided a means to return the excess capital from the agreement to sell the minority interest in the Medicine Hat nitrogen facility in a prompt and attractive manner, particularly for those shareholders with a preference for near-term liquidity. Meanwhile, all of our shareholders will continue to enjoy the benefits of our increased dividend and growth in the business,” said Mike Wilson, Agrium President and CEO.

Agrium’s board has also announced its intention to double Agrium’s dividend to U.S.$2.00 per share on an annualized basis and move to a quarterly payment schedule (U.S. $0.50 per quarter), as of the next scheduled dividend in January, 2013.

“This is the third significant increase to our dividend since December of last year. The increased dividend and $900 million substantial issuer bid are an indication of our confidence that our integrated business model will continue to deliver strong results for the benefit of shareholders. Agrium is committed to continuing to deliver value-added growth across the value chain and we remain confident we can achieve our future growth objectives while also continuing to grow our dividend over time,” said Wilson.

Agrium authorized the C$900 million substantial issuer bid on August 2, 2012 in conjunction with Agrium’s agreement for Glencore International plc to sell Viterra Inc.’s minority position in a nitrogen facility located in Medicine Hat, Alberta to CF Industries Holdings, Inc., on Agrium’s behalf, for C$915-million, subject to closing adjustments.
Agrium had agreed to purchase the minority position from Glencore following its acquisition of Viterra. The Medicine Hat nitrogen sales transaction is expected to leave Agrium with surplus capital when completed and is expected to enhance the attractiveness of Agrium’s prior agreement to acquire the majority of Viterra’s agri-retail business.

Agrium says it has been one of the best performing stocks in North America. The company’s share price in U.S. dollars has increased 56 percent year-to-date and by 87 percent over the past three years on the NYSE, versus 14 percent and 31 percent respectively for the S&P 500.

Morgan Stanley Canada Limited and Morgan Stanley & Co. LLC acted as dealer managers in connection with the offer in Canada and the United States, respectively, and as financial advisor to Agrium.

Shareholders had the opportunity to tender shares until 5:00 p.m. Eastern Time on Oct. 19, 2012, by electing an auction tender at a price of their choice between $95.00 and $107.00 per share or, alternatively, by electing a purchase price tender at which they could sell their shares at the purchase price determined by the corporation.