Gensource Potash jumps 26% on financing news
By Peter Kennedy
Gensource Potash Corp. [GSP-TSXV] shares rallied strongly after the company said it has raised US$7.1 million from proceeds of a non-brokered private placement financing and the sale of a royalty stake in a Saskatchewan potash project.
The amount raised includes US$6 million from the sale of a royalty on the Tugaske Potash Project to a strategic investor. The balance came from a non-brokered private placement of 11.2 million common shares at 13 cents per share that raised $1.46 million.
Aggregate proceeds from the royalty sale and private placement will be used for the completion of a senior debt financing, completion of due diligence work, and further development of the Tugaske Potash Project, Gensource said in an October 15, 2019, press release.
Gensource shares rallied on the news, rising 26% or $0.03 to 14.5 cents on volume of 1.3 million. The shares are currently trading in a 52-week range of $0.08 and 16 cents.
Potash is an essential, irreplaceable nutrient that is required for plant development.
Gensource hopes to capitalize on expected demand for the fertilizer ingredient by building a series of solution mines that would be around one-tenth the size of a typical potash mine. It is using an approach, called selective solution mining, a process that the company says is much more environmentally friendly, from both a construction and operations perspective, than a conventional mine.
It involves the use of a nearly saturated NaCl (salt) brine, utilizing brackish formation water, that is injected into horizontal caverns where only KCl (potash) is dissolved. The potash-rich brine is pumped to a process plant, where a cooling crystallization process removes the potash, producing solid crystals of potassium nutrient (KCl). The remaining NaCl brine is returned to the horizontal caverns, where the cycle is repeated in a closed loop process.
Selective dissolution is not a new process. Gensource said it is merely perfecting the process for use in Saskatchewan.
It says the selective solution mining and enhanced recovery process allows the company to provide an economical, small-scale project, which is scalable and repeatable. The company has said each one of its projects (referred to as modules) is capable producing 250,000 tonnes of potash annually, has over 40 years’ worth of reserves, and will operate in the lowest quartile of costs when compared to all potash projects in the world.
The Tugaske Potash Project, which is named after a nearby town, is located in Gensource’s 100%-owned Vanguard Area project in central Saskatchewan (170 km south of Saskatoon). Covering 72,000 acres of Crown mineral leases, the property consists of two subsurface mineral leases, KL 244 and KL 245, which surround the villages of Tugaske and Eyebrow. The company said the property is large enough to support several projects or modules
Tugaske is the first project to be developed within the Vanguard Area. Gensource said the royalty owners are entitled to a 2% of gross revenue from the sale of commercial minerals (calculated and paid quarterly) extracted from the company’s mineral dispositions for the life of the project.
Under an agreement, the royalty applies to minerals produced and sold by the first module to be constructed on the leases.
It has previously been disclosed in a May 22, 2019 news release that the strategic investor and project off-taker have signed letters of intent to provide 33% and 25% respectively of the project equity required as part of the project financing package.
The strategic investor and Roc Global Investments both participated in the private placement. Roc Global is an affiliate of Roc Global of New York, a financial advisor to Gensource.
Gensource said the project off-taker is a large and well-respected international fertilizer manufacturing and distribution company. It said the group has significant infrastructure and a well-established distribution and logistics network within the North American fertilizer market place. The off-taker has developed a marketing plan to strategically place 100% of the production from the Gensource facility.
As a result of the October 15, 2019 announcement, Gensource said it has successfully sourced strategic support from sophisticated investors to advance the Tugaske Project to completion of the project financing stage.