Western Potash (TSX-WPX) Interview

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Western Potash Interview
A German analyst interview John Costigan who is the Vice President of Western Potash recently.
Q: John, the potash sector has had its share of excitement recently with Russian producer Uralkali leaving the BPC consortium in Juli. But before we get to this, please give us a short summary of Western Potash’s Milestone-Projekt. 
(project facts, i.e. estimated production, opex and capex, etc.)
A:
Estimated Production                2.8 million tonnes per year
OPEX at full production            $62.28 CAD/t
Rail and Port Cost                      $59.00 CAD /t
Mine Life                                   40 Years
Initial CAPEX                            $2.91 B CAD  
Construction Period                    40 months
Payback                                       5.6 Years
Project has excellent access all infrastructure, utilities, services and is supported by a world class potash reserve. Power, natural gas, water and existing rail connections are readily available near the project. All non-technical project risks such as environmental and political concern remain very low.
 
Q: In June Western Potash announced and closed a financing deal with CBC (Canada) Holding formed by two Chinese companies. Please tell us about the terms of that transaction.
 (Terms and conditions of the deal)
A: On June 20th, 2013, we announced a strategic investment by China BlueChemical Ltd. and Benewood Holdings Corporation, through a joint venture company, CBC Holding Corp.  WPX has issued to CBCHC approximately 45 million common shares at a price of $0.71 for proceeds of C$ 31,979,022, which represents a 19.9% ownership stake in the Company. China Blue is a majority owned subsidiary of China National Offshore Oil Corporation (“CNOOC”) and Benewood is a wholly owned subsidiary of GUOXIN International Investment Corporation Limited (“GUOXIN”), a financial investment company registered in Hong Kong.
In addition, CBCHC received a right to appoint one Board of Directors nominee.
 
Q: Apart from providing needed cash what are the goals of that deal?
A: CBCHC & WPX intend to jointly develop Western’s Milestone Project and are willing to cooperate along the general principles after the completion of CBCHC’s initial investment in WPX to form a joint-venture project company to hold and develop the project. The additional goal of developing plans in relation to funding of said JV will also be contemplated once due diligence/optimization is completed.  
 
Q: What steps did you and your new partners undertake so far, to reach these goals? What will follow?
(formation of committees, technical reviews etc.)
A: We have formed a Technical Committee (TC), a Finance Committee ( FC) and a Supervisory committee.
The Supervisory Committee is responsible for overseeing the progress of FC and TC and coordinating communication between the two committees.
We have formed a technical committee whose mandate is to review the engineering and technical aspects of the Milestone Project. Engineers and operations personnel from CNOOC, China BlueChemical and other contracted parties are currently ensconced in WPX Vancouver and Regina office and are reviewing all the relevant documents form the Feasibility Study we published in Nov 2012. Progress is steady.
We have also formed a finance committee whose mandate is to develop, evaluate and recommend potential financing plans of the Milestone Property to the Supervisory Committee and the Board of Directors.
The idea is to produce a report that is put before the CBC investment board for approval early in the New Year.
 
Q: Back to the global potash market: How do you as an insider see the current situation? Do you think the Russian / Belarusian difficulties depressing the potash price longer-term?
A: Higher prices are beneficial for both parties. Current pricing makes entry for higher priced projects difficult to justify entry into the market. (EG BHP’s Jansen Project) We see price equilibrium seeping back into the market and fully stabilized by 2015. Prices continue from a clearly established bottom in Fall 2013. Higher volumes in 2014 are expected.