Chinese investment in a potash project in the Canadian province of Saskatchewan bodes well for junior mining companies in search of international financing, analysts say.
Vancouver-based Western Potash Corp, recently closed what it called was a strategic equity investment in the company by China BlueChemical Ltd and Guoxin International Investment Corporation.
Under the joint-venture deal, CBC (Canada) Holding Corp will make a strategic equity investment of $32 million in Western Potash at a price of 71 cents a share, according to a company news release.
As a result of this transaction CBC (Canada) Holding will hold a 19.9 percent ownership stake in the company on a non-diluted basis.
CBC (Canada) Holding is jointly owned by China BlueChemical Ltd and Benewood Holdings Corp Ltd. China BlueChemical is a majority-owned subsidiary of China National Offshore Oil Corporation, while Benewood is a wholly-owned subsidiary of Hong Kong registered Guoxin International Investment Corporation Limited.
In addition, the deal also includes an off-take agreement of up to 1 million tons of potash annually for 20 years from Western’s Milestone project in southern Saskatchewan.
“This is not only extremely good news for Western Potash, but for other junior mining companies with mid-size projects in search of international financing,” said Siddharth Rajeev, a vice-president at Fundamental Research Corp, which analyzes small and micro-cap public companies.
“This deal took many months to put together, but the investment is significant, which shows a good level of confidence by the Chinese investors,” Rajeev told China Daily.
“The Chinese investors are going to be very active in this JV, but what is more important is their level of confidence in this project could trigger further financing,” he said.
China and India are the world’s biggest importers of potash, a plant nutrient used to boost crop yields. Saskatchewan is home to nearly half of the world’s estimated potash reserves.
Western Potash’s proposed mine in Milestone has the potential to produce at least 2.8 million tons of potash annually for at least 40 years, experts say.
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