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PotashRidge to spin out Quebec assets; Encanto secures C$100m for Muskowekwan work

21st September 2017

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – Despite a potash glut, junior project developers are making steady progress developing the next generation of mines that will provide plant nutrients needed to cater for exploding food demand across the globe.

TSX-listed PotashRidge announced on Wednesday that it would spin out its Quebec assets to better focus on the flagship Blawn Mountain project, in Utah.

Despite the Toronto-based company’s two main projects being expected to produce sulphate of potash (SOP), Blawn Mountain and the strategically located Valleyfield project, in Quebec, are fundamentally different in size and scope, the company advised.

While the Blawn Mountain project is a large-scale mining operation and the Valleyfield project is a smaller-scale manufacturing plant, the variances between the projects makes them appeal to different investor groups on a regional, national and international level, PotashRidge stated.

PotashRidge said that, after a thorough review of its assets and operations in both Utah and Quebec, the company has determined that its valuation does not reflect the combined value of its two assets and that it is in the best interest of its shareholders that the Valleyfield Fertilizer Corporation be spun out into a separate publicly traded vehicle – a change that management feels would better reflect the value of the company's assets moving forward.

“By separating Valleyfield from Blawn Mountain, both projects will be given the priority and the valuation they deserve,” the company said in a statement.

To date, PotashRidge has unlocked significant value in Valleyfield by advancing the project's engineering, regulatory approval and permitting process to a high level of completion and has further de-risked the project by arranging several successful commercial agreements. Valleyfield is now at an advanced stage of development awaiting financing for site acquisition, final permitting and construction.

The company advised that it has observed a “very high level” of local interest for its Valleyfield project in Quebec and, to capitalise on this strong regional support, management believes that the project will be best served as a standalone entity based in and focused on the Quebec market.

The format and mechanics of spinning the Valleyfield project out as a separately traded vehicle may take many forms and the company said it is reviewing several options, including an equity spin-out in favour of shareholders, a sale for cash and equity, or a joint venture. The company is currently in discussions regarding each of these options.

This separation of projects will allow it to focus all its resources and effort on advancing its world-class Blawn Mountain project, which has a proposed development plan in place for 255 000 t/y. The project has a calculated after-tax net present value of $482-million and it is in the final stages of completion, with all major environmental and regulatory permits in place. Blawn Mountain has the potential to become a significant and the lowest-cost SOP producer in North America, where it intends to target sales.

ENCANTO UPDATE
Meanwhile, TSX-V-listed junior Encanto Potash announced on Wednesday that it had secured a C$100-million funding facility with GEM Investments America and GEM Global Yield over the next three years.

Under the terms of the facility accord, Encanto said it would issue shares at 90% of the market price, subject to a C$0.05 per share minimum, upon issuing a drawdown notice to the financiers.

The proceeds will be used to start the engineering and design phase of the Muskowekwan potash mine, in Saskatchewan, in anticipation of a shovel-ready construction date of September 2019.

Under a joint venture agreement with Muskowekwan Resources and Chief Reginald Bellerose of the First Nation's Muskowekwan tribe, Encanto has secured the mineral rights for the mine and completed preliminary studies.

In the interim, proceeds will also be used to procure and supply third-party potash under the terms of a 20-year, five-million-metric-tons-a-year potash offtake agreement, signed in December, with the National Federation of Farmers' Procurement, Processing and Retailing Cooperatives of India.

"This commitment secures funding for Encanto's mining and supply plan over the next three years. We will continue working closely with our land partners at Muskowekwan Resources to ensure First Nation's involvement in the project. GEM's commitment validates our strategy to seek long-term strategic partners,” stated CEO Stavros Daskos.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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