Historic Equipment Acquisition
Sage Potash Corp. is excited to unveil a pivotal advancement in its strategic expansion. The Company has entered into a Purchase Agreement with a subsidiary of International Process Plants (“IPP”) for the acquisition of processing equipment valued at $12.6 million CAD. This equipment, capable of processing up to 300,000 tonnes of potash per year, is a significant asset for Sage’s operations. The equipment, which had never been assembled or used, was originally fabricated in 2012 at a cost of approximately €36 million (US$54 million). The remainder of the equipment to be acquired will come from IPP’s inventory of second-hand machinery.
Details of the Purchase Agreement
Under the Purchase Agreement, Sage Potash will satisfy the purchase price through a combination of cash, shares, and a secured convertible debenture. Specifically, the Company will pay $6,300,000 in cash, issue 12,600,000 common shares to IPP at a deemed price of $0.20 per share, and issue a secured convertible debenture with a principal amount of $3,780,000. The debenture will mature in five years, accrue interest at 12% per annum, and can be converted into shares of the Company at $0.40 per share. The transactions are subject to approval by the TSX Venture Exchange (“TSXV”).
Non-Brokered Private Placement
Furthermore, Sage Potash is launching a non-brokered private placement (the “Private Placement”), offering 37,600,000 common shares at $0.20 each, to generate total gross proceeds of $7,520,000. The Company will also offer convertible debentures with an aggregate principal amount of $3,780,000. These debentures, while not secured, will have the same terms and conditions as the IPP secured debenture.
The gross proceeds from the Private Placement, totalling $11,300,000, will be allocated to meet the obligations under the Purchase Agreement and for general working capital. Specifically, $5,000,000 will be allocated to working capital, with the remaining $2,520,000, combined with the $3,780,000 from the debentures, covering the $6,300,000 cash requirement for the equipment purchase. This arrangement adheres to the “part and parcel pricing exception” as outlined by TSXV regulations.
Expert Commentary
Peter Hogendoorn, Sage’s CEO, stated: “We are enthusiastic about the combined $17.6 million in support from both IPP and Moneta Securities. This backing will propel our project into pilot production, facilitating growth through ongoing geological data and cash flow. By purchasing this existing equipment now, we mitigate project risks and costs, providing clarity on the project timeline—a crucial factor for funders. This strategic move will enhance shareholder value and contribute to reducing the US’s near-total reliance on potash imports.”
Shilo Sazwan, who recently joined Sage with his engineering team, noted: “With stainless steel and titanium costs having more than doubled since 2012, our acquisition results in savings of approximately US$75 to US$100 million, aside from avoiding a 4-5 year fabrication lead time. My team’s extensive experience in procuring high-quality equipment on the secondary market is pivotal in this cost-saving effort.”
Ron Gale, President of IPP, added: “Sage Potash’s approach aligns with our mission of providing high-quality, unused and used equipment for fast-tracked projects. Companies are increasingly recognising the advantages of such equipment, achieving significant cost and time savings compared to new alternatives.”
Regulatory Compliance
The Private Placement and the transactions outlined in the Purchase Agreement are subject to TSXV approval. All securities issued will be subject to a mandatory hold period of four months.
