Potash One and Potash North Resource have entered into a binding letter of intent (LOI) containing the principal terms by which, subject to satisfaction of certain conditions, Potash One will acquire all of the issued and outstanding common shares of Potash North through a Plan of Arrangement or other form of business combination. This will create one of the strongest junior potash development companies in Canada. Potash One will be fully funded through to completion of feasibility on its solution mining amenable potash development property located in southern Saskatchewan (the Legacy Project). Current cash of the resulting company would be approximately $50 million.
Potash North Resource is a junior resource company focused exclusively on the exploration, evaluation and potential development of two subsurface potash permit areas (KP416 and KP417) in the Saskatchewan Potash Basin. Located immediately adjacent to Mosaic’s Esterhazy operations and 45 km north of Potash Corp’s Rocanville mine, the company’s permit areas are well situated in one of Saskatchewan’s most established potash producing regions.
Potash One is engaged in the exploration and development of advanced potash properties amenable to solution mining. It owns 100% of more than 330,000 acres of contiguous Potash Subsurface Exploration Permits in Saskatchewan. It includes the 97,240 acre Legacy project which has a 43-101 compliant Inferred mineral resource of 391.5 Mt of K20 and Indicated mineral resource of 40.8 Mt of K20 and is adjacent to the largest producing solution mine in the world.
The LOI contemplates that each Potash North shareholder will receive 0.3125 common shares of Potash One for each common share of Potash North. In addition, all outstanding convertible securities of Potash North will be exchanged for comparable convertible securities of Potash One in an amount and at exercise prices adjusted in accordance with the same exchange ratio. The exchange ratio represents an approximate 29% premium for the shares of Potash North over the 20-trading day period prior to the execution of the LOI.
Paul F. Matysek, President and CEO of Potash One, stated, “I am very pleased that Potash One has been able to execute this binding LOI with Potash North as this transaction strengthens our balance sheet, further consolidates the potash junior industry and positions the company with over 500,000 acres of subsurface Potash permit holdings, in Saskatchewan. This includes a very prospective exploration stage potash property adjacent to the largest potash mine in the world. In addition, we are pleased to have the support of a number of significant shareholders who together with our present shareholders are committed to the continued development and progress of the Legacy Project. This Business Combination further strengthens our exploration and development position in the Potash industry, bringing us closer to our goal of becoming the first greenfield potash producer in Canada in decades.”
Craig A Angus, President and CEO of Potash North, stated; “I am very excited with the opportunity that this transaction presents to our shareholders. As a result of the turmoil in world capital markets, it is increasingly apparent that the successful companies in the junior potash space will be those that have large cash treasuries and advanced stage projects moving toward feasibility and development. This business combination will create the best capitalised Canadian Junior potash development company working in the Saskatchewan basin. Our shareholders will have the opportunity to participate in the advancement of the Legacy Project to completion of feasibility and potentially through to production in the coming years while maintaining the exploration exposure to our KP 416 and 417 Permit areas near Esterhazy”.