By Nick Worth
Prospect Global Resources, Inc. (PGR), parent company of American West Potash, announced last Thursday it has received a letter of intent from Sichuan Chemical Industry Holding Co., Ltd. (SCIHC) indicating the chemical company is interested in investing up to $20 million in Prospect to further the development of the company’s Holbrook Project.
The two companies already have a relationship, having entered into a potash supply agreement in 2012.
“Sichuan has been looking for ways to deepen its cooperation with PGRX,” Xiaojun Chen, chairman of Sichuan Chemical’s Board of Directors, said in a PGR press release. “We look forward to working with PGRX in order to bring its Holbrook Basin project to completion and Sichuan will continue to pursue additional avenues of cooperation going forward.”
Asked when the money might be paid to Prospect, Karalea Cox, local relations director for PGR, said the letter of intent is good news for Prospect Global, but is not yet a certainty.
“There is no timetable,” said Cox. “The ball’s in their court. There is no anticipated date.”
According to Cox, Sichuan Chemical’s board needs to approve the terms of the investment before it can take place. Final approval must be given by the Sichuan Provincial Government and affiliates.
Sichuan Chemical is a provincial Chinese state-owned enterprise with assets of RMB 20 billion ($3.25 billion). The company is a large-scale conglomerate employing 24,300 full-time employees, more than 5,000 of whom are technical professionals. The company is primarily involved in the production and marketing of fertilizers and chemical products, including phosphorite and coal. It also trades in international commodities, and provides chemical and technical services.
“Our biggest priority is to finish our definitive feasibility study,” said Cox. “Our goal is to finish in the third quarter of 2014.”
Cox reported to the Real AZ Corridor meeting last Thursday in Snowflake that PGR has also extended its Sept. 10 deadline for a $1.2 million payment to the Karlsson Group. The extension was originally set at Sept. 13, but Karlsson and PGR entered into another agreement amendment on that day which extended the payment due date until Nov. 15.
According to a PGR filing with the Securities Exchange Commission (SEC), “The outstanding principal balance of the Karlsson Note is approximately $117.5 million. In addition, we are currently liable to Karlsson for a tax gross-up payment of approximately $1.2 million that was due on Sept. 13, 2013, and for accrued and unpaid interest and accrued tax gross-ups totaling approximately $26.3 million, which will be due on the maturity date of the Karlsson note.”
“The Karlsson Group had continued to be supportive of us,” Cox said.
She also noted that the public comment period for PGR’s air quality permit application has closed.
Byron James of the Arizona Department of Environmental Quality (ADEQ) told those attending the meeting that ADEQ officials have signed the permit and it will be issued.
In other PGR news, on Sept. 4 the company issued a statement on its drilling program, reporting the successful completion of seven drill holes, “three of which were ‘step-outs’ targeted to expand the existing resource base. All of the other four in-fill drilling holes campaign have hit visible potash and two of the three step-out drill holes also hit visible potash.
“The company is close to meeting the first development milestone covenant under its debt agreement of having to complete eight holes by Nov. 1.”
“The results are very pleasing, and we’re on track to convert a significant amount of our existing inferred resources to the measured and indicated categories for inclusion in our Definitive Feasibility Study,” said Prospect Global’s President and CEO Damon Barber. “In addition, the success we’ve had in hitting potash with the step-out drilling will add to the existing resource base and potentially the mine life.”
On Sept. 17 Barber issued another press release reporting PGR has successfully completed 12 drill holes and has three more drill holes at various depths of completion.
“All of the drilling holes have hit visible potash, and will aid to the conversion of inferred resources into measured and indicated resources,” he noted.
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By Nick Worth