Toronto-based Stonegate Agricom Ltd. has announced proposed private placement equity financing to raise between $1.5 million and $2.185 million for its Paris Hills Phosphate Project in southeastern Idaho. The offering, open to participation by existing shareholders, consists of the sale of at least 100 million units and a maximum 145,680,000 units at a price of 15 cents per unit.
Stonegate announced on Jan. 26 that permitting activities had been temporarily suspended at Paris Hills due to financial constraints, saying the company would need to raise additional funds.
If minimum gross proceeds are raised, approximately $500,000 will be used to conduct additional groundwater flow testing required for permits, about $450,000 will be used to cover property payments and overhead costs, and the balance will be used for general corporate purposes. If maximum gross proceeds are raised, Stonegate also plans to initiate a feasibility study on the project’s upper zone.
The offering is subject to Toronto Stock Exchange approval and approval by shareholders, who will vote at the company’s annual/special meeting set for April 24. Closing of the transaction would occur immediately if shareholder approval is obtained.
Ian McDonald, Stonegate co-founder, co-chairman, and acting chief executive, said he intends to subscribe for up to $500,000 of the units, depending on unit availability. Sprott Resource Corp., which owns 36.5 percent of Stonegate’s shares, has informed the company that while it will not participate in the offering, it will vote in favor.
Stonegate acquired the Paris Hills property in 2009 and carried out exploration drilling and engineering work, subsequently completing a positive feasibility study for an underground phosphate mine in December 2012. It commenced permitting activities in September 2012, and initially had expected to apply for and receive all required permits for construction and production by the end of 2014.
However, while most of the permitting work had been successfully completed, the final groundwater model, report, and related permit applications were delayed by uncertainties concerning the estimates of expected groundwater flow rates into the planned underground mining area.
The groundwater flow testing had been conducted according to recommendations made by third-party consultants. However, upon further evaluation, Stonegate determined that additional groundwater flow tests are required prior to completing the groundwater model and report.
If the offering is completed as planned, the water flow testing is expected to be conducted in the second quarter and a final groundwater model and report are expected to be completed in the third quarter, following which the company expects to submit final permitting applications to state regulators.
The Paris Hills Phosphate Project is projected to cost $140 million to complete. Ramp up of mining production has been expected to take two years to reach the designed production rate of 1.1 million tons per year. The mine’s life is estimated to be 19 years.
Dave Kramer, Stonegate’s general manager and vice president, told Green Markets that Stonegate finished the project’s last drilling operation for hydrology work a year ago.
“Our intentions are to go forward with the project. We just need additional testing,” Kramer said. “We are in a position to raise additional funds. … We are at the point we need to submit permit applications.”
Kramer said co-chairmen McDonald and Kerry J. Knoll, who co-founded Stonegate, continue to jointly carry out CEO responsibilities following Mark Ashcroft‘s resignation last September as Stonegate’s president, CEO, and director. Ashcroft was with the company for more than six years.
Last July, Paris Hills Agricom, a Stonegate sub