Gensource Potash Corporation (TSXV:GSP) announced that, to-date; it has received signed Term Sheets with 12 end-user customers in Brazil through its Brazilian market partner. These specific orders represent an aggregate of close to 150,000 tonnes/year (t/y). Additional discussions are underway for the remaining 100,000 t/y of the initial plant’s planned 250,000 t/y production rate. These orders …
Gensource Potash Corporation (TSXV:GSP) announced that, to-date; it has received signed Term Sheets with 12 end-user customers in Brazil through its Brazilian market partner. These specific orders represent an aggregate of close to 150,000 tonnes/year (t/y). Additional discussions are underway for the remaining 100,000 t/y of the initial plant’s planned 250,000 t/y production rate. These orders are in the form of non-binding Terms Sheets and Letters of Intent. The Term Sheets define product details, tonnages, timing and pricing, as well will form the basis to negotiate full and binding off-take agreements with the end-user customers.
As quoted in the press release:
Gensource has been working with its Brazilian market partner, Arizona Agropuecaria, to bring together a group of forward-looking potash end-users. These customers clearly understand the advantages of controlling future crop fertilizer input costs, by contracting the direct manufacture and shipment of potash fertilizer from a scalable, dedicated mine in Saskatchewan to those forward-looking customers in Brazil.
The Company’s business plan is to create a vertically integrated business structure that will lock together a group of potash customers with a scalable potash fertilizer production plant in Saskatchewan. For customers who consume known quantities of potash fertilizer on an annual basis, the opportunity is to obtain surety of supply 2 of this vital crop input at a competitive and, most importantly, predictable, price into the future.
The objective of Gensource is to complete a state of the art production facility that will be easily scalable and use selective mining and enhanced processing techniques. See Gensource’s News Release of April 13th, 2015, for more details of the planned project.
1. Financing and Project Development:
Gensource will begin a new financing effort in September, both in Canada and Brazil. In order to advance the development of the Lazlo Project, it is estimated that Gensource will require two further tranches of development financing: 1) Resource Confirmation and Preliminary Economic Assessment: approximately $3M of Canadian Exploration Expenses (“CEE”) flow through financing will be required to fund drilling and 3D seismic work, as well as approximately $1M in additional financing to fund activities not classified as CEE; and, subject to a satisfactory preliminary economic assessment, 2) Feasibility Study: approximately $5-7M to complete the environmental and regulatory process, complete a detailed feasibility study and complete the required land control and leasing work. Gensource estimates that this work can be completed within a 6-8 month time span and, when complete, will allow for a construction decision to be made.
There are no commercial operations at the Lazlo Project at this time. The determination of the prospects for commercial operations at the Lazlo Project is dependent upon a feasibility study demonstrating economic and technical viability.
2. Formal Off-Take Agreements:
Gensource will begin negotiations with the identified end-users to convert the Term Sheets into formal off-take agreements.
There can be no assurance that the formal off-take agreements with the identified end-users can be completed on mutually satisfactory terms or at all. None of the Term Sheets are binding and definitive terms have not been settled.
Gensource Potash CEO, Mike Ferguson, stated:
We are very pleased to be able to make this announcement today. The receipt of these initial non-binding Term Sheets for future product validates the potential of Gensource’s business model. These particular customers, and the anticipated additional customers who, together, will represent the full allotment of the production from the initial plant, are pioneers in the potash industry. To date, agricultural producers have typically sourced potash fertilizer on a retail basis, without long term supply arrangements and at the prevailing retail price. The Gensource model allows agricultural producers to control potash fertilizer input costs in their operations. These first bold steps, Gensource believes, represent the beginnings of a changed potash industry, a first glimpse of potash industry of the future.