The potash mine planned for the Tugaske district northwest of Moose Jaw won’t start construction for awhile.
A Bizworld column published Feb. 1 described the Gensource Potash project as ready for construction.
That was based on the belief that Gensource had lined up all the financing for the mine. However a March 8 news release by Gensource noted the company is still $105 million short of the equity needed to fully finance construction of the mine.
Two foreign banks have agreed to finance $280 million in debt. A subsidiary of HELM AG has committed to invest $50 million and buy all the potash fertilizer produced.
Gensource executives are currently in Europe looking for investors.
Gensource has three options to come up with the $105 million: 1 - sell new shares in the company; 2 - find another partner, 3 - a combination of 2 and 3.
Existing investors’ holdings will be severely diluted no matter which option the company takes.
At 40 cents a share raising $105 million would require issuing over 50 per cent more shares.
Taking on another partner will also dilute holdings.
Thus the glowing cash flow estimates in the February Bizworld are now way out in left field.
A dilution will leave Gensource shares as an interesting speculation but not that glamourous.
Another Saskatchewan potash company, Western Resources, bears watching. The company is developing a potash mine in the Milestone district of southern Saskatchewan.
The mine construction is 85 per cent complete, but was put on hold because of the COVID pandemic, according to the company.
However in 2020 the company also admitted not all financing was in place.
In February the company agreed to put the potash mine assets into a new company. Chance Vantage, a company registered in the tax haven British Virgin Islands, will invest $80 million for a 54 per cent share and Western will own 44 per cent of the new company.
It appears the mine producing 146,000 tonnes of potash a year will be completed.
Shares of Western jumped from 15 cents to a current 43 cents on news of the new investor.
The investment by unknown investors underlies the need for a law requiring more disclosure about who owns large interests in companies.
This isn’t just a matter of national security to ensure unwanted investors from authoritarian states or investors from the underworld are identified.
Investors should have a right to know who major holders of the company are. How many people would get into business without knowing identities of their major partners?
Yet investors are forced to do that every day.
Australia and New Zealand securities laws require corporation’s annual reports to disclose the names and share holdings of major investors in the company.
Why can’t Canadian investors be granted the same right of identifying major shareholders?
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
