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Potash Ridge to buy Valleyfield Fertilizer to fast-track SOP production

11th August 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Project developer Potash Ridge has agreed to buy all of the issued and outstanding common shares of Valleyfield Fertilizer, to advance its goal of becoming a sulphate of potash (SOP) producer.

Over the last two years, Valleyfield, a privately owned corporation registered in Quebec, had advanced development of a SOP project, in Quebec, using the Mannheim process, under the leadership of Jay Hussey.

"Acquiring Valleyfield brings a new dimension to the corporation's strategy of becoming a premier producer of SOP. While we remain committed to the development of Blawn Mountain, in Utah, the Valleyfield project will allow Potash Ridge to become a producer of SOP in an accelerated timeline and at a very manageable capital cost. The Valleyfield project is also strategically located to supply SOP to currently underserved markets in North America,” Potash Ridge president and CEO Guy Bentinck explained.

For nine years, Hussey was a VP at Migao, a TSX-listed company that produced SOP in China using the same process.

Under the terms of the transaction, he would receive 200 000 common shares of TSX-listed Potash Ridge, together with a royalty from future revenue generated by the corporation using the Mannheim process. Hussey had agreed to become an employee of Potash Ridge and to continue work on the development of the Valleyfield project, other potential Mannheim opportunities already identified and other activities.

Developed in Germany over a century ago, the Mannheim process was one of the most commonly used SOP production processes in the world, mainly occurring in China and Europe. The process combined muriate of potash (potassium chloride) with sulphuric acid at high temperatures to produce SOP and hydrochloric acid as a by-product.

In the financial year ended March 31, Migao's full-year SOP output capacity in China was about 360 000 t from four facilities in China and, according to market analyst CRU, Tessanderlo Chemia, Yara and other European producers had a combined annual SOP production capacity using the Mannheim process of 930 000 t/y.

Potash Ridge said Hussey's knowledge and experience of the Mannheim process from his time at Migao had enabled him to advance development of the Valleyfield project.

A preliminary internally developed financial study on the Valleyfield project using this information estimated an after-tax/royalty net present value of $40.9-million, assuming a 10% discount rate, with an unlevered internal rate of return of 32%, based on a preliminary capital cost estimate of $25-million, operating costs of $495/t, net of acid credit, and a realised SOP price of C$750/t.

The project economics would need to be confirmed with the next stage of engineering. It was expected that construction of the facility could start within six months of raising the capital necessary to complete engineering and permitting, with construction expected to take one year.

A fully serviced property had been chosen to develop the Valleyfield project. The property was close to sources of the input of sulphuric acid as well as markets for the by-product of hydrochloric acid, with a memorandum of understanding for the offtake of the hydrochloric acid already in place.

Potash Ridge was moving forward with its efforts to raise capital, with initial proceeds to be mainly focused on completing engineering and permitting on the Valleyfield project.

Closing the deal was subject to all mandatory regulatory and others steps, and was expected to occur on or before the end of the month.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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