Ive asked the company for some clarity and guidance on current conditions, timeline and competitive forces facing the market today among other questions we all have.
Here is the email chain.. some clarity provided regarding financing partners..
Any chance mgt would care to comment on developments regarding financing progress? Last statement was an expectation by the end of the 1st qtr 2014.. we are almost there and not a word from mgt of any significance in 7 months.. Any comments on IC Potash released FS today? They are next in line with financing and looking for 1B vs. WPX 3.3b what impact with this have on WPX financing ? What about this lawsuit? No comments from mgt again.. Yes I understand comments are to be limited but at least some comments should be made other than to hide behind NDA .. good to see mgt and directors get paid well to sit on their hands..
At Western Potash we have no comment regarding the article pertaining to any potential legal action against us.
Regarding to your question about the recent IC Potash Feasibility Study, there are many differences between Milestone and Ochoa (IC Project) so we do not believe it will affect our ability to get financing. Our mine will be producing Muriate of Potash (MOP) and it looks like the Ochoa Project will be producing Sulphate of Potash (SOP). There are a few other differences as well. I read that the total production outlined in their Feasibility study is 714, 400 at full capacity per year, whereas ours will be 2.8 million tonnes per year (this would explain the capital cost differences). The differences in scale of production and the different type of product produced are fairly major, so comparing Milestone to Ochoa isn’t comparing apples to apples. There is a market for SOP potash, and to quote their own release “The global market for SOP is 5.5 million tons per year”. But we are looking for strategic partners that have a demand for MOP product (Global demand for this product has been anywhere from 50 million tonnes to 60 million tonnes worldwide over the past few years).
You are aware of the many confidentiality agreements and on-going negotiations, things I am not allowed to comment on. As many of your requests seemed to be directed specifically at management, I will forward your email onto my boss to see if he can provide you with anything further.
What I can say, is that although we haven’t had any material news since last summer, management is working hard to obtain the necessary funding to build the mine at Milestone.
Thank you,
Hi Angela,
Thank you for your quick and detailed response. While I am well aware of the differences between IC & WPX from mineral compounds, volume, mine life, cap cost etc my question was more in relation to the prospect and time line with respect to financing. As the IRR of the IC project based on the FS forecasts is about 4-5% less than WPX. Will this positively / negatively effect WPX with respect to financing? Given the number of brownfield projects nearing FS the competition for said financing will become more challenging in the near future.
Has mgt considered re tooling the FS to reflect potash pricing lower than 450/t? I understand ST market price movements are not typically indicative of LT market price conditions and should not be necessarily be used for the basis of "selling" the merits of the project to prospective debt financing IRR. However, that said any reasonable LT debt financing partner would ignore St "noise" in the marketplace and focus on the LT merits of the project. Yet, there has not been any material development as of yet which is of concern. Yes, Jr financing globally has been extremely challenged yet the de-risking of the project and IRR is forecast to be very attractive vs. alternative companies in Potash and outside in other commodities. What's the hold up?
I appreciate your response and would welcome any comments from mgt if they were inclined to do so.
Hi,
I will mention again that the parties we are negotiating with are interested in specifically MOP Product so we do not see IC’s progress impacting our timeline. However, your point about other projects progressing and the impact it may have on our ability to fund the project is a good question. For now, we do not feel any pressure from other projects nearing our stage. The reason being is our confidence in Milestone and it’s technical merits. Our mine is on a larger scale, so it may take longer to get the financing in place (mind you we have been searching for longer as well). Management is confident that a mine on the Milestone Property will be built, we are just not sure when or who will build it.
Re-doing the Feasibility Study is something we have been asked about. It was very expensive work, and re-doing it isn’t something we are planning to do at the moment. Keep in mind there was a lot of economic modelling done that wasn’t publically released, and our potential partners have access to more than what is public (Confidentiality Agreements signed). There is a lot of due diligence that goes into negotiations, so a lot is being considered. Changes in potash pricing affect the Feasibility numbers greatly, which is why when the Feasibility Study was completed there were sensitivities built it with reference to price – specifically its impact on the NPV and IRR numbers.
Hope this helps - Thanks again,
Angela Aydon