Oct. 22, 2012
/PRNewswire/ -- Prospect Global Resources, Inc. (NASDAQ: PGRX) and Sichuan Chemical Industry Holding (Group) Co., Ltd. today jointly announced a more than
agreement, over a 10-year period, under which
will purchase at least 500,000 metric tons of potash annually, or 25% of the projected output of Prospect Global's American West Potash field in
The conservative deal valuation reflects current market prices of about
per metric ton for a total of 5 million metric tons. The contract is take-or-pay, backed by a letter of credit. The agreement also provides an option for American West to sell and Sichuan Chemical to purchase an additional amount of potash.
It is believed to be the largest-ever purchase and sale contract – in price and volume – for a potash mine under development in
the United States
. It is also believed to be one of the largest potash export contracts in U.S. history.
Prospect Global believes that this bankable offtake agreement enhances the attractiveness of the project to lenders. The current timetable calls for the American West site to be in production by late 2015 or early 2016.
, Chief Executive Officer of Prospect Global, said: "This agreement is a major vote of confidence both in the long-term potential of our American West Potash site as a mineral resource and in Prospect Global's ability to create a state-of-the-art mining operation to capitalize on that potential. Bankable offtake contracts are a top priority in our detailed strategic plan, and we continue to execute on key drivers."
From the perspective of Sichuan Chemical, a state-owned enterprise that is one of
's largest fertilizer manufacturers and its third-largest chemical company, the accord provides a large – and independent – new source of a commodity that is critical to meeting the challenge of feeding the world's largest nation. This year's record drought in
has cut grain harvests, squeezing global food reserves and raising prices. In that context, obtaining dependable supplies of potash, which raises agricultural productivity without depleting soil nutrients, is vital to
's food security.
, Chairman of Sichuan Chemical, said: "This agreement with Prospect Global has important long-term strategic benefits for Sichuan Chemical and also will make a significant contribution to the economic development of
and the Chinese potash industry. We are honored to work with Prospect Global and look forward to a prosperous future."
, a Prospect Global director who acted as Prospect Global's lead negotiator, commented: "Today's agreement is the product of six months of negotiation and due diligence carried out in
the United States
. That process has resulted in a high level of trust and respect on the part of both parties. As we look forward to a long relationship with Sichuan Chemical, we are proud of the role that Prospect Global can play in helping to bring food security to
while meaningfully impacting the US/
trade balance over the next decade."
The American West Potash field is located in the
Basin of eastern
. A new interim engineering report by the international engineering firm of Tetra Tech Inc. shows Prospect Global to be on track to meet key targets within previous expectations as to capital and operating expenses, infrastructure, permitting, and site plan for its American West Potash project in Holbrook. Prospect Global's next major developmental step is a bankable feasibility study, scheduled for the first half of 2013. Further information on Prospect Global's estimated potash reserves can be found at
Once the mine is in production, it will create an estimated 700 U.S. domestic jobs in mining, transportation and logistics, located mainly in eastern
but also at warehouses and North American ports. Its multi-generational economic presence will spill over into the community and promote the development and growth of local businesses for many years.
"Today's announcement is another step in bringing much-needed, high-paying jobs to a region of
where incomes are usually low and unemployment is chronically high,"
said. "It's a refreshing change to see money from overseas creating jobs in
the United States
. And from an environmental perspective, any large potash agreement is welcome news because increasing agricultural yields per acre means improving quality of life and decreasing the carbon footprint."
This Press Release may include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Factors that could cause actual results to differ materially from projections or estimates include, among others, potash prices, economic and market conditions, as well as the additional risks described in our filings with the SEC, including our Annual Report on Form 10-K for the year ended
March 31, 2012
and our Prospectus dated
June 29, 2012
. Most of these factors are beyond our ability to predict or control. The forward looking statements are made as of today's date and, except as required under applicable securities legislation, we do not assume any obligation to update any forward-looking statements. You are cautioned not to put undue reliance on forward-looking statements.
Prospect Global Resources, Inc.
Prospect Global Resources, Inc. is a Denver-based company engaged in the exploration and development of a large, high-quality potash deposit located in the Holbrook Basin of eastern Arizona. The company's stock is traded on the NASDAQ Stock Exchange under the ticker symbol PGRX.