SASKATOON, SK, April 6, 2016 /CNW/ -Gensource Potash
Corporation ("Gensource" or the "Company")
(TSX.V: GSP) is pleased to announce that it has entered into
a definitive Asset Purchase Agreement ("APA") which includes
an off-take term sheet ("Term Sheet") for the sale of potash
dated effective today. Collectively, these transactions offer
Gensource the opportunity to advance its business plan of becoming
a future potash producer in Saskatchewan. The agreement is between
Gensource and Yancoal Canada Resources Co. Ltd. ("YCR").
The APA defines the terms for the purchase by Gensource of two
potash exploration permits ("Permit" or "Permits")
conditional upon their conversion into mineral production leases
("Lease" or "Leases") and also contains a Term Sheet
that defines key terms for the future sale of potash product from
the proposed facility. Key terms of the transaction include a
purchase price of $2,480,000, payable
as two installments: (i) $1,240,000
in cash at closing within 30 days of the effective date of the APA;
and, (ii) a convertible debenture to YCR in the principal amount of
$1,240,000 that is due on the later
of 90 days of the effective date of the APA and the close of the
transaction, payable in cash or convertible to shares in Gensource
if sufficient funds are not raised. The shares will be issued
at an exercise price equal to the 20 day VWAP prior to the maturity
date. Gensource will require a financing to close, which will
be completed as a private placement on terms to be
announced. Gensource has agreed to pay approximately
$300,000 for the Lease conversion
costs, which it understands may be refunded if the permits are not
converted to leases. The transaction is subject to regulatory
approval.
Gensource has been clear in previous news releases that its
business plan is focussed on ensuring that the product is
"pre-sold" before it develops the project to any great
extent. This approach is due to Gensource's understanding of
the potash industry, wherein it can be easier to make the product
than to sell it.
Gensource's President & CEO, Mike
Ferguson, said, "The APA and Term Sheet announced today fit
Gensource's business plan perfectly. The assets being
purchased, if the conditions are satisfied, are two Leases where
significant geological data has already been collected by YCR
through recent and professionally executed drilling and seismic
programs. The geological data collected may be the foundation
for a future formal resource definition on the
Lease(s). Additionally, the Term Sheet represents a key
aspect to the transaction, providing for 100% of the planned future
production to be purchased by YCR over a set period of time - one
of our key foundational business concepts. In fact, Gensource is
not just purchasing assets, it is entering into a business
relationship with a solid, reliable company which is, itself, in
the potash development business, and the value of the business
relationship is far greater than the value of the actual
assets. We look forward to advancing our business plan and
working with YCR to add value for both parties."
Particulars
The assets being purchased are two Saskatchewan potash exploration Permits,
specifically KP-483 and KP-363 comprising a total of some 63,800
acres of land. It is a condition to the transaction that both
Permits be converted to mining Leases. Significant geological
data has been collected on the KP's; including two wells (one well
cored and assayed through the full Prairie Evaporite, one cored and
assayed through the Patience Lake member of the Prairie
Evaporite.), and over 100 km of 2D seismic, covering all of KP-483
and a portion of KP-363. The data has been reviewed as part of
Gensource's due diligence process and has been found to be
potentially amenable to Gensource's selective dissolution
methods. The geological programs were undertaken by well known
and highly respected companies in the drilling, potash geology, and
seismic acquisition and interpretation fields.
The APA also includes an off take term sheet and specifies that
the parties will negotiate and complete a definitive off take
agreement as a condition to the closing of the transaction. The
Term Sheet, which forms an integral part of the APA, defines an
annual tonnage to be supplied by Gensource and purchased by YCR
(which is the full planned production rate of 250,000 t/a), minimum
product specifications and provides options for either CFR or FOB
delivery at any one of several possible port
locations. Product price is based on benchmark pricing for the
various port locations and delivery terms.
The transaction will close once the Permits are converted to
Leases and those Leases are delivered to Gensource in a
register-able form, the off take agreement is completed and all
necessary regulatory approvals are received and the financing is
closed.
The scientific and technical information contained in this news
release was prepared by or under the supervision of Mike Ferguson, P.Eng., who is the President and
Chief Executive Officer of Gensource and a Qualified Person under
National Instrument 43-101.
About Yancoal Canada Resources
Yancoal Canada Resources Co., Ltd. ("YCR") is a Saskatoon-based potash exploration and
development company which holds a number of potash permits situated
in Saskatchewan. YCR plans to
develop some of these potash permits after the completion of a
Feasibility Study on the proposed Southey 2.8 million tonnes solution potash
mine.
About Gensource
Gensource is based in Saskatoon,
Saskatchewan and is focused on developing the next potash
production facility in that province. Gensource's President and
CEO, Mike Ferguson, P.Eng., has
assembled a management and technical team with direct and specific
expertise and experience in potash development in Saskatchewan.
Gensource operates under a business plan that has two key
components - vertical integration with the market to ensure that
all production capacity built is directed to a specific market,
eliminating market-side risk; and, technical innovation which will
allow for a small and economic potash production facility,
the output of which can then be directed to a single, specific
market.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Caution Regarding Forward-Looking Statements
This news release may contain forward looking information and
Gensource cautions readers that forward looking information is
based on certain assumptions and risk factors that could cause
actual results to differ materially from the expectations of
Gensource included in this news release. This news release includes
certain "forward-looking statements", which often, but not always,
can be identified by the use of words such as "believes",
"anticipates", "expects", "estimates", "may", "could", "would",
"will", or "plan". These statements are based on information
currently available to Gensource and Gensource provides no
assurance that actual results will meet management's expectations.
Forward-looking statements include estimates and statements with
respect to Gensource's future plans, objectives or goals, to the
effect that Gensource or management expects a stated condition or
result to occur, including completion of the YCR transaction, the
expected timing for release of a resource estimate and a
preliminary economic assessment, as well as a feasibility study,
and the establishment of vertical integration partnerships and the
sourcing of end use potash purchasers. Since forward-looking
statements are based on assumptions and address future events and
conditions, by their very nature they involve inherent risks and
uncertainties. Actual results relating to, among other things,
completion of the YCR transaction, a refund of lease conversion
costs in the event that the YCR transaction does not proceed,
results of exploration, the economics of processing methods,
project development, reclamation and capital costs of Gensource's
mineral properties, Gensource's financial condition and prospects,
the ability to establish viable vertical integration partnerships
and the sourcing of end use potash purchasers, could differ
materially from those currently anticipated in such statements for
many reasons such as: an inability to complete the YCR transaction
on the terms as announced or at all, including the conditions for
regulatory approval and financing; denial by ministerial
authorities of a refund of lease conversion costs in the event that
the YCR transaction does not proceed; changes in general economic
conditions and conditions in the financial markets; the ability to
find distributors and source off-take agreements; changes in demand
and prices for potash; litigation, legislative, environmental and
other judicial, regulatory, political and competitive developments;
technological and operational difficulties encountered in
connection with Gensource's activities; and other matters discussed
in this news release and in filings made with securities
regulators. This list is not exhaustive of the factors that may
affect any of Gensource's forward-looking statements. These and
other factors should be considered carefully and readers should not
place undue reliance on Gensource's forward-looking statements.
Gensource does not undertake to update any forward-looking
statement that may be made from time to time by Gensource or on its
behalf, except in accordance with applicable securities
laws.
SOURCE Gensource Potash Corp