Gensource Potash CEO Mike Ferguson: Efficiency and Vertical Integration Key to Our Business Model

Potash Investing

Gensource Potash CEO Mike Ferguson joined INN at PDAC to discuss the company’s pair of Saskatchewan-based potash projects.

Gensource Potash CEO Mike Ferguson: Efficiency and Vertical Integration Key to Our Business

Gensource Potash (TSXV:GSP) CEO Mike Ferguson joined the Investing News Network at the Prospectors & Developers Association of Canada conference to discuss his company’s progress developing its pair of potash projects in Saskatchewan.

Gensource Potash has taken a careful approach to breaking into the potash industry, which Ferguson acknowledged is tightly controlled, putting pressure on major producers that need to be able to sell large orders. In an effort to differentiate from the competition, Ferguson and his team have followed a two-pronged approach to the development of the company.

“Gensource’s business plan was created six years ago to specifically become a new and independent potash producer that approaches potash production in a different way. We’re essentially turning every component of conventional potash production upside down. Our business plan has two pillars. The first is to be small and efficient. The second is to be vertically integrated,” said Ferguson.

“During the process of developing our last large potash project, it became very clear that the market is so highly controlled it would require different thinking to be successful. At that time we started to come up with new ideas on how we could be smaller and more efficient.”

In order to achieve efficiency at a low volume, Gensource has pursued the use of solution-mining techniques that enable the selective recovery of certain minerals. “Selective solution extraction is done with a fluid that is very highly concentrated in NaCl (or table salt). Instead of using freshwater, using a salt solution selectively dissolves only the KCL, or the potash, from the ore zone,” said Ferguson.

He continued, “You end up leaving all the salt underground. At a typical potash mine, for every tonne of potash produced there are 2 tonnes of waste salt that have to be dealt with. So the key is not to have to deal with it by leaving it in the ore zone where it is right now, which is done through selective solution extraction.”

Gensource’s Tugaske project is located in Saskatchewan, where Ferguson believes the geology is particularly amenable to the long, horizontal caverns necessary for selective solution extraction. Moving forward, Ferguson and his team are working towards securing financing to fund the project.

“Last fall we mandated KfW IPEX-Bank to be the lead arranger for our project finance,” he said. “They’re a large German bank based in Frankfurt that does project financing like this. They’re leading the debt effort for us. Right now it’s nominated at a US$180 million debt facility out of a US$280 million finance package. That leaves about US$100 million in equity to fill out the project cost requirement.”

Gensource is currently working through the bank-driven due diligence effort, including independent engineering reports, independent market assessment reports, independent legal reviews, independent insurance reviews and independent environmental and social reviews. Of those steps, Ferguson has come to recognize that the environmental and social reviews have emerged to become leading factors in the development and financing of any new project.

“Now that the financial institutions are on that same page, you can’t get financing without clearly and effectively addressing the environmental and social aspects of a project,” said Ferguson. “The first questions asked are about the environmental footprint and the community’s social acceptance. It doesn’t matter what the project is, if those aren’t in good shape, nobody is going to talk to you.”

According to Ferguson, Gensource intends to become an independent potash producer. However, to accomplish this, the right partners are needed. Aside from engaging KfW IPEX-Bank for the project debt financing, Gensource has attracted other partners — specifically Helm of Germany and its US subsidiary, Helm Fertilizers. Helm Fertilizers will be the offtaker for the project, committing to purchasing 100 percent of the production from Tugaske for a period of 10 years. In addition, Helm plans to become a significant equity partner in the project, thereby helping assemble the required equity.

“Our plan right from the very beginning was to become a new and independent producer of potash in Saskatchewan. That’s our goal, but you need the right partners to help you accomplish such a goal in this industry,” said Ferguson.

For a more comprehensive update from Gensource Potash CEO Mike Ferguson, watch the video above.

This interview is sponsored by Gensource Potash (TSXV:GSP). This interview provides information that was sourced by the Investing News Network (INN) and approved by Gensource Potash in order to help investors learn more about the company. Gensource Potash is a client of INN. The company’s campaign fees pay for INN to create and update this interview.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Gensource Potash and seek advice from a qualified investment advisor.

This interview may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, receipt of property titles, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The issuer relies upon litigation protection for forward-looking statements. Investing in companies comes with uncertainties as market values can fluctuate.

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