By Nick Worth
Passport Potash has been moving forward with its Holbrook Basin potash-mining project on a number of fronts this month.
On Oct. 31, the company announced it had entered into an agreement with North American Potash Developments, Inc. (NAPD) to acquire 100 percent interest in its landholdings on the east side of the Holbrook Basin.
The agreement is part of a settlement agreement between Passport, NAPD and other parties in a civil action in Utah over clauses in their original option agreement. Under the terms of the settlement, the parties have agreed to amend the option agreement and Passport will pay a total of $3,850,000 to the NAPD Group.
Of that total, $150,000 is due upon execution of the amendment agreement. Another $2,450,000 is due when the Toronto Stock Exchange (TSX) Venture Exchange issues its approval. At that time, Passport will also issue 750,000 common shares to NAPD. The cash payment and shares will be placed into escrow and will be released to NAPD once the Arizona State Land Department confirms the property has been assigned to Passport.
Another payment of $1,250,000 will be due on or before Oct. 31, 2014.
In addition, under the terms of the settlement, if Passport should decide to sell or transfer its interest in the property, NAPD will receive a bonus payment, which varies according to the price Passport receives in the sale.
“We are happy to have solidified our position in our eastern landholdings,” commented Joshua Bleak, Passport’s president and CEO. “This settlement will allow us to focus all our efforts on the development of this project, and is another decisive step towards rounding out the best land package in the Holbrook Basin.”
On Nov. 13, Passport announced it had entered into a joint exploration agreement with the Hopi Tribe to explore for potash on the Hopi private land sections, which are “checker-boarded” with Passport’s southern landholdings.
The agreement formalizes what had been set out between the company and the Hopi Tribe in a letter of intent the parties entered into six weeks ago.
Under the terms of the agreement, Passport’s Germany-based engineering firm, ERCOSPLAN, can now combine the Hopi and Passport land sections in the preliminary economic assessment commissioned by Passport. The agreement also lays the groundwork for potential joint exploration and development of the potash resources in the Holbrook Basin.
The exploration program will be based upon recommendations from ERCOSPLAN, and will be designed to maximize the potential resource on the combined properties.
In what is described as an “aggressive, two-phase drilling campaign” designed by ERCOSPLAN, Passport will drill several sites to better define the potash resource potential on the contiguous sections in the DoBell ranch area of the Holbrook Basin.
According to a press release, the first phase of the program will include eight drill sites and will cover 25,000 acres of the contiguous land. This phase of the project is scheduled for completion in February 2013.
For the second phase of the exploration, ERCOSPLAN will design a drilling program based on the findings of the first phase. The second phase will include as many as 10 additional drill sites. The findings from the proposed drilling program will be used in Passport’s preliminary economic assessment.
The inclusion of the Hopi lands in the report will set back Passport’s preliminary economic assessment release date anywhere from 60 to 90 days, according to the press release.
Ken Bond of Passport Corporate Development said the assessment is still on track to be released in the first quarter of 2013. The extra time is needed to allow ERCOSPLAN to incorporate the Hopi data. The preliminary economic assessment will be owned by both Passport and the Hopi Tribe, and both will be entitled to use it for their joint or individual purposes.
The joint exploration agreement is also a first step toward negotiating a mining development agreement between Passport and the tribe, which would spell out the terms of the partnership.
“We are excited to begin this exploration program with the Hopi Tribe,” Bleak said in a press release. “We are confident that the positive results from this program will lead to further development of this world class project.”
Bond said the company and the Hopi Tribe have been working together on developing the agreement for at least 18 months.
“We believe they will be very good partners,” Bond said.
On Nov. 14, Passport announced it has amended the purchase agreement with the Fitzgerald Trust Ranch, which was originally announced on May 14, 2012.
The terms of the amendment call for both parties in the agreement to extend the closing time for the purchase by a year, from Dec. 18, 2012, to Dec. 18, 2013.
During that time, Passport will make three, roughly equal payments to the trust on Dec. 18, 2012, June 30, 2013, and Dec. 18, 2013.
Passport has also agreed to reimburse the trust for an increase in taxes as a result of closing the transaction in 2013 rather than 2012. All other terms of the original agreement remain unchanged, and the amendment will also have to secure regulatory approval.
Bleak noted the renegotiated agreement with the Fitzgerald Trust Ranch gives Passport “some needed flexibility” for its exploration program.
In addition to that, Bond noted that Passport controls 100 square miles of contiguous land with the Fitzgerald and the Twin Buttes combined. The company has not only mineral rights, but surface control rights as well.
“It ties the land we had north of Highway 180 to the land south of Highway 180,” said Bond. That puts Passport in a good position strategically, according to Bond, and would have a positive effect on speed of implementation of the project and the cost of operations in the future.
“We have the ability to go in any direction,” Bond said. He also noted that Passport’s holdings are comprised of private and state trust lands, which greatly simplifies the permitting process.
On Nov. 15, Passport issued another press release announcing it has arranged a non-brokered, fully subscribed, private placement.
A private placement involves the sale of securities to select investors, such as large banks, mutual funds, insurance companies, or pension funds, as a way of raising working capital. The average investor usually only learns of the placement after it has occurred.
In this case, Passport has made available 69,444,444 units at a price of 18 cents each for a total of $12,500,000.
According to the press release, each unit consists of one common share and a purchase warrant for another one-half of one share. Each two warrants will entitle the holder to purchase an additional common share at a price of 25 cents for a period of five years.
The money raised in the placement is slated for property payments, general working capital and Passport’s exploration program. The private placement is also subject to regulatory approval.
Bleak called the financing deal “a significant step towards meeting our near and medium term funding needs.”
He said the money would help fund the preliminary economic assessment and pre-feasibility studies.
“As we proceed forward we will explore all funding mechanisms to raise the capital necessary to complete this project,” said Bleak.
“There are a lot of positive things going on,” said Bond. “We’re very excited.”
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By Nick Worth