by Peter Kennedy, Stockhouse
The prospects look bright for IC Potash Corp. (TSX: T.ICP, Stock Forum), a company that aims to become a leading low cost producer of potassium sulfate after recently lining up a US$10 million strategic financing from a US$2 billion New York investment fund.
The strategic investment will allow IC Potash to complete vital engineering studies, enabling the junior to being the process of financing its flagship Ochoa Project in New Mexico, one of the world’s most advanced Sulfate of Potash (SOP) projects.
SOP is the second major form of potash, with a chemical formula of K2SO4 and a reputation for being particularly effective in the cultivation of fruits, vegetables, potatoes, tobacco and tree nuts.
ICP wants to become a primary producer of high quality (SOP) by mining and processing polyhalite from its property to supply regional and international markets.
The company hopes to benefit from the fact that SOP is currently selling at a 75% premium to regular Potash (MOP). SOP is in very high demand and there is a lack of sufficient supply in the international marketplace.
A NI 43-101 compliant technical report concluded that The Ochoa Property contains significant polyhalite mineralization in quantities and grade that are expected to be attractive for mining and processing under current market conditions.
ICP already has a committed off-take agreement with Yara International, a Norwegian conglomerate, which will buy from ICP 30% of the annual production from Ochoa. The term of the agreement is 15 years, with a provision for an automatic extension every five years thereafter.
However, as the estimated cap ex for the Ochoa Project is pegged at just over $1 billion, the company will soon be focusing heavily on securing the funds that are needed to put the project into production.
It is why the strategic investment by Cartesian Capital Group is being viewed in investment circles as a significant step forward. It was done at the operating company level.
Under the terms of Cartesian’s investment, the private equity firm is purchasing the 500,000 Intercontinental Potash Corp. preferred shares for US$10 million. The preferred shares accrue value through deferred dividends at an annual rate of 12% for two years.
At the end of the two-year period, the preferred shares may be converted into a 7.8% stake in ICP, or 13.5 million shares with an USD/CAD exchange rate implies a value of $0.75 or $0.80 a share.
IC Potash is trading at 23.5 cents, leaving a market cap of $40.6 million, based on 172.8 million shares outstanding. The 52-week range is 36.5 cents and 20.5 cents.
The company said 70% of the shares are held by strategic partners, institutional investors and management.
All State and Federal Permits and land leases are in place for the Ochoa Project, meaning that construction can begin this year. Government support for the project is strong, IC Potash says.