JOHANNESBURG (miningweekly.com) – Canadian potash miner Pacific Potash on Thursday said it had signed an ‘arms-length’ letter of intent to acquire Moonraker, which holds an option over an 80% stake in Western Potash’s Brazilian assets.
The move signals Pacific Potash’s intention to join the likes of Potassio do Brasil, Petrobras, and Vale, among others, to explore for potash in the Amazonas basin.
Western Potash’s property comprises several claim parcels that extend from the Amazon river to the centre of the Amazonas basin, an area that had seen a significant amount of capital and investor interest in recent times.
Rio Verde announced in May that it had set up a nonbrokered private placement for up to $15-million to finance exploration and prefeasibility studies at its Sergipe potash project, to continue exploration of its portfolio of phosphate prospects, for development of the Fosfatar phosphate project, and for working capital purposes.
Potassio do Brasil also announced in May that it had completed a $58.66-million capital raising to further the exploration for potash at their Amazon basin project, which is next to Petrobras' Fazendinha and Arari potash deposits.
Potassio do Brazil, which currently has contracts with two Brazilian drilling companies, had indicated that it would continue drilling until a potash resource of sufficient size to merit economic studies had been outlined. Once this is completed, a prefeasibility study would be undertaken, which would be followed by a definitive feasibility study. It is Potassio do Brazil’s intention to raise between $300-million to $500-million for its initial placement offer on Bovespa in the first quarter of 2013.
The transaction between Pacific Potash and Moonraker is expected to take place by way of a share-purchase agreement, whereby the shareholders of Moonraker would sell all of the issued and outstanding shares to Pacific Potash and Moonraker would become a wholly owned subsidiary of Pacific Potash.
Pacific Potash would acquire Moonraker by issuing 4.98-million common shares to Moonraker.
The transaction and the option are subject to the approval of the TSX.
In order to earn the 80% interest in Western Pacific’s properties, Moonraker or Pacific Potash must make a cash payment of $100 000 on taking up the option, which had already been paid; pay a further $150 000 and issue 500 000 common shares of Pacific Potash within five days after TSX-V approval of the agreement with Pacific Potash.
On or before the first anniversary of the agreement, Moonraker or Pacific Potash must pay an additional cash payment of $250 000, and issue a further 500 000 common shares of Pacific Potash. On or before the third anniversary of the agreement, a further 500 000 common shares of Pacific Potash must be issued to Western Potash.
The option also calls for $2-million in exploration expenditures over three years with a minimum exploration expenditure of $300 000/y being required.
Once the cash payments, share issuance and exploration commitments had been completed an 80:20 joint venture would be formed, with Pacific Potash paying 80% of costs going forward and Western Potash paying 20%.
Western would also be granted back-in rights to earn an additional 29% interest in the project by providing a bankable feasibility study. On closing, it is also expected that a member of the Western Potash team would join the Pacific Potash board.