Gensource Potash (TSXV:GSP) has signed a non-binding memorandum of understanding (MOU) with Essel Group Middle East Ltd. to form a joint venture company (JV) that will be tasked with advancing one of Gensource’s small-scale potash projects through to production. The objective of EGME and Gensource is to create and deliver a new and independent supply of potash to the potash market.
The MOU defines a clear path to creating the JV, which brings together technical innovation, management expertise and international logistics, and capital. The synergies gained in the JV will allow for expedient construction and operation of a new potash production facility.
The JV will be set up as a private corporation into which Gensource will vend a project/resource from its Vanguard area near Eyebrow and Tugaske, as well as its project execution team, including technology and techniques relating to selective solution mining and specialized processing. For its part, EGME will provide business and logistic expertise to the JV and will provide financing in two stages — firstly, to complete the current feasibility study and, secondly, to finance the construction of the project. Ultimately, when the construction financing has been committed, the JV will be owned 70 per cent by EGME and 30 per cent by Gensource.
Under the terms of the MOU, a definitive agreement or JV operating agreement will be negotiated to define the detailed aspects of how the JV will operate. Initial terms are for a jointly appointed board of directors for the company and a jointly appointed management team to lead the development of the new potash facility. Gensource will maintain control of the JV through to the commitment of construction financing.
Gensource’s president and chief executive officer, Mike Ferguson, said: “This is an exciting milestone for Gensource. Our fundamental business plan has been to create a joint venture with a strategic partner who wants the potash product for its own use and is capable of bringing the required financing to the project. We are so pleased to be working with a strategic and forward thinking group like Essel Group Middle East. With a presence in Europe, Middle East and North Africa, EGME understands the potash business very well, and has positioned itself to strategically enter the industry. The global business acumen and financing ability of EGME, coupled with Gensource’s experienced potash development team, rich potash resources and novel small-scale technologies, creates a combined entity that has all the required components to successfully enter the highly controlled potash industry. We are excited to use this MOU as a foundation, and move our business and project development plans to the next stage in partnership with EGME.”
As a reminder, Gensource is currently in the detailed development stage of its Vanguard project. A two-well resource confirmation drilling program is currently drilling on the first well near Tugaske, Sask., and the detailed feasibility study is under way, and expected to be complete by March or April 2017. Until the completion of the feasibility study, the technical and economic viability of the project remains unconfirmed.
The scientific and technical information contained in this news release was reviewed and approved by Mr. Ferguson, PEng, the president and CEO of Gensource, and a qualified person under National Instrument 43-101.