Dec 212011

By Teri Walker–

Passport Potash has cancelled a letter of intent to purchase land holdings from NZ Potash in the Holbrook Basin, which would have increased the company’s total land package to about 200,000 acres.

“We couldn’t get to terms that were fair for our shareholders,” said Joshua Bleak, president and CEO of Passport Potash.

Passport drafted the letter to NZ Legacy in October, intending to purchase the company’s 50 percent ownership of HNZ Potash, LLC, a subsidiary of Hunt Oil of Texas.

The parties had until Dec. 15 to exercise the letter, and Passport cancelled the transaction just before the deadline.

Bleak is not troubled by the decision. He says his company has plenty of potash to work with in its existing land holdings, and if they desire to expand their holdings at a later time, they would relook at the NZ Legacy properties, if they’re still available and if agreeable terms could be achieved.

Along with the cancellation of the letter of intent, Passport also announced it had secured $7 million to cover its 2012 operations.

“With the financial markets being so volatile around the world, we felt securing money now to guarantee operations for another year would help us toward our ultimate goal of bringing mining to the basin,” said Bleak.

Passport’s stock prices jumped 23 percent upon Friday’s news of the cash infusion.

With the financing in hand, Bleak says regardless of what happens in the economic market, Passport can continue on its path toward mine development.

“We don’t want production jeopardized by outside factors,” said Bleak.

His plans for 2012 include completing a resource estimate, which will tell Passport how much potash underlies its 81,000 acres and provide recommendations for optimal locations to set up mining operations; and getting through a prefeasibility analysis.

Passport has been working in the Holbrook Basin since 2009, longer than the other two companies currently exploring for potash. The company has spent the past two years trying to learn as much as it can about the mineral resource under its control. To date, Passport has drilled about 30 core holes and conducted more than 100 miles of seismic testing to determine the depth, grade and position of the potash. Thirty-two wells were also drilled historically on property controlled by Passport.

“Our resource report will be, in my mind, the most complete resource calculation in the industry,” said Bleak.

As exploration results continue to come in, Bleak says, “We’re satisfied with where we’re going without that land,” referring to NZ Legacy’s land package.

Speaking of the company Passport has brought on board to complete its resource report and prepare for pre-feasibility studies, Bleak said, “I really feel like we’ve stepped up to an industry leader with ERCOSPLAN.”

He explained that the German company is known worldwide for its expertise in potash mining engineering and consulting work.

“With each milestone we reach, we continue to de-risk the project,” said Bleak.

He said as the company continues to drill wells to verify potash presence, grade and depth, it is also gathering information that will help Passport prepare for mine development.

“We are trying to get the drilling and technical work completed as quickly as possible,” said Bleak. “Hopefully, we’ll have enough in-ground work done to complete feasibility in the next year.”

While Passport will not be picking up the NZ Potash holdings at this time, Bleak says the company will likely add to its land holdings over time. In fact, the company still holds a letter of intent for purchase of the Fitzgerald Ranch, which is adjacent to Passport’s land holdings in the basin. Increasing the company’s land holdings, and associated potash inventory, will allow Passport to extend the life of its mining operations.

“We plan on being in Holbrook a long time to come,” said Bleak.