Gensource Provides an Update on the Tugaske Project
Gensource Provides an Update on the Tugaske Project
SASKATOON, Saskatchewan--(BUSINESS WIRE)--June 18, 2020--Gensource Potash
Corporation (“Gensource” or the “Company”) (TSX-V: GSP) is excited to provide a
comprehensive update on work to-date within the Company and specifically with respect to the
Tugaske Project. As shareholders will know, the Tugaske Project (“Project”) is the Company’s
first project in its wholly owned Vanguard Area (comprising mineral leases KL244 and KL245).
Gensource has positioned itself as a leader in the future of the potash industry through the
implementation of advanced technological and business solutions in the industry. It counts itself
amoung the first of the next generation of participants in potash production and distribution.
The Tugaske project (“Project”) has made significant advances in the last few months, and
Gensource considers it valuable to provide a clear and complete indication of the current project
development status.
The Company divides its efforts to realize its business plan into 3 distinct categories: Debt for
Tugaske financing; Equity for Tugaske financing; and, Gensource Corporate activities.
The Tugaske Project - General:
The Tugaske Project is the first of the Company’s small scale, environmentally friendly potash
production facilities. In operation, it will create no salt tailings (the major decommissioning
impediment for a potash facility) and will require no brine ponds (the major environmental
impact of a potash facility). The Project will nominally produce 250,000 tonnes per year of final
product and, even though it is so small (1/10th size of a typical potash project), it will do so at
very competitive capital cost (capex) per tonne and operating cost (opex) per tonne. The Project
is the first step in realizing the two pillars of Gensource’s business plan:
• “Small and Efficient” – evidenced by the small and efficient scale of the Project, and
• “Vertically Integrated” – evidenced by the partnership created with Helm AG as the
Project’s offtaker, marketer and future equity partner (announced January 30, 2020).
Tugaske Project Financing – Debt:
On October 18, 2019 Gensource announced that KfW-IPEX Bank had been engaged as the
mandated lead arranger for the debt component of the project finance package. On May 19,
2020, Gensource announced that Société Générale had been engaged as joint lead arranger for
the project debt. Together, KfW-IPEX and Société Générale (together, the “Senior Lenders”)
represent world-class financial institutions in the project finance world and Gensource is proud
to be working with such well respected institutions. Each of these institutions will support the
project with a significant take and hold commitment (see News Release dated May 19, 2020).
A major part of debt financing is the due diligence (“DD”) process. The DD is broken down into
the following subject areas:
1. Independent Engineer (IE) report: The IE work kicked off in March 2020. The initial IE
report has now been completed and submitted to the Senior Lenders. While the process is
not yet 100% complete, the draft report has not identified any fatal flaw in any technical,
costing or project implementation matter. Gensource is now working with the IE to
complete the final stage of this DD report.
2. Environmental and Social (“E&S”) independent review: The E&S independent review is
complete, and the final report has been submitted to the Senior Lenders. The E&S report
reviews the project against not only local Saskatchewan and Canadian environmental
assessment and project development regulations, but also against the global-scope
Equator Principles for project development. The report identifies no fatal flaws or
concerns that would impact continued development of the Project.
3. Market Study: An independent market analysis has been completed by an internationally
recognized market intelligence firm for the project. Based on Helm’s sound and
experienced marketing plan for all of the product produced at the Tugaske Project, an
independent analysis of supply and demand as well as pricing forecasts was produced.
This report has now been submitted to the Senior Lenders and will be finalized once their
final comments have been received.
4. Legal Due Diligence: An international law firm, incorporating Canadian and
Saskatchewan counsel, was engaged by the Senior Lenders and has completed the Legal
DD that can be completed to-date. The remaining Legal DD is the review of a few key
contracts that are not yet complete and completion of the drafting of the long-form term
sheet for the debt facility and the definitive loan documentation. This is an on-going
exercise that will not be complete until financial close. To-date, no issues have been
raised in the legal DD review.
5. Insurance review: The Senior Lenders engaged a tier-one insurance consultant to review
the project in depth and recommend insurance coverages for both the construction phase
of the project as well as the longer-term operational phase. This work is nearing
completion and Gensource is now ready to start sourcing the required insurance packages
leading into construction start.
6. Financial Modelling: Gensource has completed an exhaustive project finance financial
model for the project that incorporates loan sizing metrics for various debt tranches, a full
discounted cash flow model, which includes impacts from consumption taxes, corporate
taxes, Saskatchewan’s Potash Production Tax regime, as well as royalties and
Saskatchewan Resource Surcharges. This model is currently being audited by an
international accounting/consulting firm on behalf of the Senior Lenders. To-date, no
impediments have been identified.
The above activities represent the focus for the Gensource team and its partners over the past 6
months. It is clearly a lot of work, but the project and the development work done by the
Company has been more than appropriate, withstanding detailed scrutiny in all areas. Since
Gensource’s goal is to become a new and independent potash producer, its focus is on doing
things right – there are no shortcuts through this process.
For a real project that is being financed by real project finance industry players, it is absolutely
key to complete a detailed review of every aspect of the project. Success in this DD to-date
augers well for the Project advancing to a successful financial close.
In addition to the above, current work in the debt process is the drafting and negotiation of a
proposed long-form term sheet and the preparation of the approval package for the German
Export Credit Agency, Euler Hermes. Euler Hermes export insurance is expected to support and
help de-risk the overall debt financing package.
Tugaske Project Financing – Equity:
As the Project proceeds through the debt financing process, assembling the required equity
structure to finance the project is just as important. As announced in numerous separate news
releases over the past 6 months, Gensource has garnered significant interest in equity partnership
on the Project from its off take partner, Helm AG (~25%) and another financial investor (~33%).
The remaining cash equity contribution (~42%) is currently being sourced. Gensource is in direct
and detailed discussions with several of the world’s top private equity and mine finance groups
to commit the required equity. The Company’s goal is to complete the equity process in parallel
with the completion of the debt process, which would allow for Project kick off late summer or
early fall of 2020.
Gensource Corporate:
Gensource carries on with the development of the Company from a junior developer towards
being part of an operational enterprise. The Company has made changes at the board level - on
March 23, 2020, the Company was excited to announce the addition of Amy O’Shea to the board
of directors. Amy brings with her strong experience in the operational environment of companies
engaged in the agriculture industry. New committee structures within the board and a renewed
focus on the effectiveness of the committees underlines the effort to begin to grow the Company
into one that is well-established and ready to take on operational leadership in potash production.
About Gensource
Gensource Potash is a fertilizer development company based in Saskatoon, Saskatchewan and is
on track to become the next fertilizer production company in that province. With a small scale
and environmentally leading approach to potash production, Gensource believes its technical and
business model will be the future of the industry. Gensource operates under a business plan that
has two key components: (1) vertical integration with the market to ensure that all production
capacity built is directed, and pre-sold, to a specific market, eliminating market-side risk; and (2)
technical innovation which will allow for a small and economic potash production facility, that
demonstrates environmental leadership within the industry, producing no salt tailings, therefore
eliminating decommissioning risk, and requiring no surface brine ponds, thereby removing the
single largest and negative environmental aspect of potash mining.
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 the ability to
finance the Tugaske Project or other projects, 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 Gensource’s financial
condition and prospects, the ability to finance the Tugaske Project or other projects on terms
which are economic or at all, 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: failure to finance the Tugaske Project
or other projects on terms which are economic or at all; failure to settle a definitive joint venture
agreement with a party and advance and finance the project; changes in general economic
conditions and conditions in the financial markets; the ability to find 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.
Contacts
Gensource Potash Corporation:
Mike Ferguson, President and CEO
Telephone: (306) 974-6414
Email: [email protected]