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This photo shows a carved out shaft in one of Potash Corp.'s Saskatchewan mines. Potash is mined from naturally occurring ore deposits, many of which are several thousand feet underground, that were formed by the evaporation of seas (The Canadian Press/Troy Fleece)
This photo shows a carved out shaft in one of Potash Corp.'s Saskatchewan mines. Potash is mined from naturally occurring ore deposits, many of which are several thousand feet underground, that were formed by the evaporation of seas (The Canadian Press/Troy Fleece)

Potash One buyer to fund development Add to ...

The timing is just right for Potash One Inc. Not only is the potash market hot in the aftermath of BHP Billiton's bid for Potash Corp. of Saskatchewan Inc., but the company also recently filed its 43-101, which assesses the amount of potash the company has in its assets. Moreover, Potash One also just got approval from the Saskatchewan government to develop its Legacy Project.

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Before a 43-101 is filed, potential bidders can only speculate on a company's resource levels. Now, however, K+S AG knows it is buying enough resources to initially produce 2.86 million tonnes of potash product every year for 47 years.

Why doesn't Potash One go it alone, considering it has such a promising resource base? Costs. The Vancouver-based company doesn't have the scale to absorb the costs needed to develop the mine, while K+S has an almost $13-billion (U.S.) market cap and is funding the all-cash $434-million (Canadian) friendly takeover from its balance sheet.

K+S is offering $4.50 per share, which is a 24 per cent premium to the closing price of Potash One's shares on Friday. However, the company also pointed out that the bid comes in at a 82 per cent premium to Potash One's closing price on August 16, the day before BHP's bid for Potash Corp. was made public. That shows just how hot the potash market has been since late August.

National Bank Financial is Potash One's financial adviser while Farris, Vaughan, Wills & Murphy LLP is advising on legal matters. GMP Securities provided Potash One with a fairness opinion. Morgan Stanley is advising K+S, while Borden Ladner Gervais LLP is the firm's legal counsel.

Potash One's Legacy Project is located 80 kilometres northwest of Regina. Directors and officers of Potash One already hold 21 per cent of the company's shares on a fully diluted basis.

Follow on Twitter: @timkiladze

 
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