Prospect Global Resources and Sichuan Chemical Sign
$2-Billion-Plus, 10-Year Purchase and Sale Agreement for Potash
DENVER and CHENGDU, China, Oct.
22, 2012 /PRNewswire/ -- Prospect Global Resources,
Inc. (NASDAQ: PGRX) and Sichuan Chemical Industry Holding (Group)
Co., Ltd. today jointly announced a more than $2-billion agreement, over a 10-year period,
under which Sichuan will purchase
at least 500,000 metric tons of potash annually, or 25% of the
projected output of Prospect Global's American West Potash field in
Holbrook, AZ.
The conservative deal valuation reflects current market prices
of about $475 per metric ton for a
total of 5 million metric tons. The contract is take-or-pay, backed
by a letter of credit. The agreement also provides an option for
American West to sell and Sichuan Chemical to purchase an
additional amount of potash.
It is believed to be the largest-ever purchase and sale contract
– in price and volume – for a potash mine under development in
the United States. It is also
believed to be one of the largest potash export contracts in U.S.
history.
Prospect Global believes that this bankable offtake agreement
enhances the attractiveness of the project to lenders. The current
timetable calls for the American West site to be in production by
late 2015 or early 2016.
Pat Avery, Chief Executive
Officer of Prospect Global, said: "This agreement is a major vote
of confidence both in the long-term potential of our American West
Potash site as a mineral resource and in Prospect Global's ability
to create a state-of-the-art mining operation to capitalize on that
potential. Bankable offtake contracts are a top priority in our
detailed strategic plan, and we continue to execute on key
drivers."
From the perspective of Sichuan Chemical, a state-owned
enterprise that is one of China's
largest fertilizer manufacturers and its third-largest chemical
company, the accord provides a large – and independent – new source
of a commodity that is critical to meeting the challenge of feeding
the world's largest nation. This year's record drought in
North America and Europe has cut grain harvests, squeezing
global food reserves and raising prices. In that context, obtaining
dependable supplies of potash, which raises agricultural
productivity without depleting soil nutrients, is vital to
China's food security.
Xiaojun Chen, Chairman of Sichuan
Chemical, said: "This agreement with Prospect Global has important
long-term strategic benefits for Sichuan Chemical and
also will make a significant contribution to the economic
development of Sichuan Province
and the Chinese potash industry. We are honored to work with
Prospect Global and look forward to a prosperous future."
Devon Archer, a Prospect Global
director who acted as Prospect Global's lead negotiator, commented:
"Today's agreement is the product of six months of negotiation and
due diligence carried out in China
and the United States. That
process has resulted in a high level of trust and respect on the
part of both parties. As we look forward to a long
relationship with Sichuan Chemical, we are proud of the role that
Prospect Global can play in helping to bring food security to
China while meaningfully impacting
the US/China trade balance over
the next decade."
The American West Potash field is located in the Holbrook Basin of eastern Arizona. A new interim engineering report by
the international engineering firm of Tetra Tech Inc. shows
Prospect Global to be on track to meet key targets within previous
expectations as to capital and operating expenses, infrastructure,
permitting, and site plan for its American West Potash project in
Holbrook. Prospect Global's next major developmental step is
a bankable feasibility study, scheduled for the first half of
2013. Further information on Prospect Global's estimated
potash reserves can be found at www.prospectGRI.com.
Once the mine is in production, it will create an estimated 700
U.S. domestic jobs in mining, transportation and logistics, located
mainly in eastern Arizona but also
at warehouses and North American ports. Its
multi-generational economic presence will spill over into the
community and promote the development and growth of local
businesses for many years.
"Today's announcement is another step in bringing much-needed,
high-paying jobs to a region of Arizona where incomes are usually low and
unemployment is chronically high," Pat
Avery said. "It's a refreshing change to see money
from overseas creating jobs in the United
States. And from an environmental perspective, any large
potash agreement is welcome news because increasing agricultural
yields per acre means improving quality of life and decreasing the
carbon footprint."
This Press Release may include forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from projections or estimates contained herein.
Factors that could cause actual results to differ materially from
projections or estimates include, among others, potash prices,
economic and market conditions, as well as the additional risks
described in our filings with the SEC, including our Annual Report
on Form 10-K for the year ended March 31,
2012 and our Prospectus dated June
29, 2012. Most of these factors are beyond our ability
to predict or control. The forward looking statements are made as
of today's date and, except as required under applicable securities
legislation, we do not assume any obligation to update any
forward-looking statements. You are cautioned not to put undue
reliance on forward-looking statements.
About Prospect Global Resources,
Inc.
Prospect Global Resources, Inc. is a
Denver-based company engaged in
the exploration and development of a large, high-quality potash
deposit located in the Holbrook
Basin of eastern Arizona. The
company's stock is traded on the NASDAQ Stock Exchange under the
ticker symbol PGRX.
About Sichuan Chemical Industry Holding (Group) Co.,
Ltd.
Sichuan Chemical Industry Holding (Group) Co.,
Ltd. (SCIHC) is a provincial state-owned enterprise with
assets of RMB 20
billion. It is a large-scale conglomerate
involved in production and
marketing of fertilizers and chemical products,
including phosphorite and coal. Additional business lines include
international commodities trade and chemical and technical
services. SCIHC has 24,300 full-time employees, more than
5,000 of whom are technical professionals. Sichuan
Chemical has been a leader of China's chemical industry for more than 50
years.
SOURCE Prospect Global Resources, Inc.