Despite commodities’ struggles, junior potash firm sees ray of light

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Small cap resource firm Potash Ridge Corp. has received a minor boost from a major shareholder, at a time when junior resource companies are struggling to raise capital.

Pinetree Capital Ltd. disclosed on Wednesday that it recently bought 500 thousand shares in in Potash Ridge Corp via an open market purchase. At current prices, that stake would cost roughly $87,000. The purchase brought its stake in the company up to 13.5 percent from 12.7 percent. Pinetree is the second biggest shareholder in Potash Ridge. Sprott Resource Corp. is the biggest.

Toronto-based Pinetree is an investment and venture capital firm that invests in small cap resource and technology companies.

Guy Bentinck, CEO of Potash Ridge said in a telephone interview. "Pinetree has supported this company since it was founded and has continued to be a very supportive shareholder of the company."

Potash Ridge is exploring for a volcanic rock called alunite in Utah. Alunite ore contains sulphate of potash, sulphuric acid, and alumina-rich bauxite (raw material for the production of aluminum) – all of which Mr. Bentnick says are in short supply. The company's long-term objective has been to get a mine in operation. It has cleared some hurdles such as attaining most of the permits it needs. But one challenge it still needs to surmount, is raising money for a feasibility study. "We're looking to raise about $25-million, which effectively gets us to the execution phase of the project." said Mr. Bentinck.

Like many companies in the embattled resource sector, raising cash in a market where commodity prices have tumbled, is no easy feat. "Markets are tough for financing development stage projects right now." said Mr. Bentinck.

Potash Ridge went public in December 2012 at $1 a share, but it has lost about 80 percent of its value since then. Potash prices have perked up a bit this year, but are far below 2013 levels. On Tuesday, Russia's Uralkali – the world's largest producer of potash – revealed a major outage at one of its mines, which has brightened the outlook for the sector. "Under the worst-case scenario… Uralkali's capacity could decrease by 3.3 million tonnes from its current 13.3 million tonnes," according to a research report referenced in a Reuters story.

Potash Ridge's story is not unique. Dozens of junior resource plays that were launched in more buoyant markets are struggling to stay afloat at a time when tumbling commodity prices have all but eliminated new capital for start up mines.

Potash Ridge has around $2.5-million in cash on its balance sheet, which is enough to keep it operating until mid-next year according to Mr. Bentinck.

Potash Ridge is one of Pinetree Capital's smaller investments. It has about $1.7-million tied up in the common shares of Potash Ridge. Pinetree's single biggest investment is software company Sphere 3D Corp., in which it holds shares worth $18-million, according to Bloomberg data.

Calls to Pinetree Capital were not returned.

Editor's note: An earlier version of this story incorrectly referred to Sprott Inc. This has been corrected.