by Greg Klein | September 16, 2015
Private equity has bought into Western Potash TSX:WPX with an $80-million investment that covers capital costs for the company’s Milestone project in Saskatchewan. On September 16 Western announced it closed a deal with Beijing Tairui Innovation Capital Management, which now holds a 51% stake in the company. Chinese joint venture CBC (Canada) Holding Corp invested another $720,245, leaving it with 10.1% following a $31.9-million investment that accompanied the JV’s 2013 offtake agreement.
At $0.3358 per share, the two investors paid a premium of about 53% over Western’s volume-weighted average for 30 days ending July 3.
In combining the resources of Tairui with the high-quality Milestone project and an innovative development process, we are excited about the future prospects for Western.—Bill Xue, president of Beijing Tairui Innovation Capital Management
Western bases its $80.6-million capex on a July preliminary economic assessment for a downsized but upwardly scalable potash solution mine in infrastructure-rich southern Saskatchewan. With all major permits in place, the company intends to begin development after further engineering work but probably without a feasibility study. Construction could take around two years.
The revised plan uses horizontal drilling and selective mining for a project considerably more modest than envisioned in a 2012 feasibility study. But Western maintains the new plan is not only viable under current market conditions but allows for potential expansion. The “scalable and more flexible approach” attracted the $80-million infusion, acknowledged Tairui president Bill Xue.
In addition to financing, its strategic alliance with Tairui offers Western “technical expertise in large-scale project construction, and management and marketing channels for future potash sales.” Four Tairui nominees have been appointed to Western’s board of directors.
Calling Tairui “an ideal partner,” Western president/CEO Pat Varas said, “We believe that this strategic investment provides our shareholders with much greater value than an outright sale of the project or a dilutive standalone public financing would in the current depressed markets. The transaction represents an opportunity not afforded to the shareholders of many junior companies at the moment.”
“At Tairui, we look to invest in advanced projects with a large resource base and without environmental complications,” Xue added. “The Western Potash team is highly skilled, committed and passionate. In combining the resources of Tairui with the high-quality Milestone project and an innovative development process, we are excited about the future prospects for Western.”
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