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Gensource Potash
Leading the way to sustainable food security
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GENSOURCE POTASH
Leading the way to sustainable food security
The United Nations estimates that the global population will rise to just under 10 billion people by 2050. This fact alone highlights how food security will be one of the greatest challenges facing societies in the coming three decades. Potash is a type of natural plant fertiliser that could play a pivotal role in expanding agricultural food production for the growing human race, however contemporary methods of potash extraction and production typically place a heavy toll on local ecosystems and communities. For many years, the industry has been dominated by an oligopoly of large-scale producers whose operations leave permanent scars on the environment, in the shape of huge piles of salt tailings and brine ponds that slowly contaminate shallow acquifers, while the sustained mining activity permanently disturbs and displaces communities, often rural and indigenous in nature. A few years ago, a number of individuals from the technical team that delivered one of these large operations - the Legacy Potash Project/Bethune Mine in the Canadian Province of Saskatchewan – started to develop ideas around a different way of operating in the potash game. Their concept was crystallised in a new company called Gensource Potash, now listed on the TSXV with a twopillared business model. The first is to be a small, efficient and environmentally sustainable potash producer and the second is to be vertically integrated from mine to farm. “We’re trying to create a new way of producing potash that is open and transparent,” says Gensource’s president and CEO Mike Ferguson. “We hope our production method becomes more broadly available in order to create an open supply chain for this key macronutrient in the agricultural sector.”
Gensource aims to create a series of small-scale and sustainable potash production facilities referred to as ‘modules’, with the Tugaske Potash Project in Saskatchewan the first of those modules to be brought into operation.
Tugaske will initially produce 250,000 tonnes per year of potash, making it a significantly smaller operation when compared with the 2.8 million tonnes (Mt) per year Bethune mine developed by the Gensource team in their former roles with Potash One.
Incidentally, Ferguson is of the view that his technical team at Gensource is the best in the world for developing a sustainable potash project, based on an unrivalled collective insight into the workings of the large-scale industry.
Marrying ESG and economics
While being smaller naturally reduces the environmental impact of the Tugaske project by using less surface land and having a reduced impact on local infrastructure and communities, the standout environmental feature of the project is undoubtedly Gensource’s selective dissolution extraction method.
In contrast to traditional solution mining, which uses fresh water to dissolve potash and salt underground, selective dissolution uses brine to dissolve only potash from underground caverns. The new method is a real ‘gamechanger’ for the industry, according to Ferguson.
GENSOURCE POTASH
AT A GLANCE
STOCK TICKER
TSXV:GSP
MARKET CAPITALISATION
US$58.8 million (as of January 26, 2021)
a j
“Selective dissolution creates no salt tailings and requires no brine ponds on surface,” he proclaims. While erasing the presence of redundant piles of salt up to 100 metres high and stagnant brine ponds next to the mine site, the method also uses about a quarter of the water pertonneof product compared to the normal solution process.
“Coincidentally, selective dissolution mining makes for a much lower cost production facility. It’s nice when you combine a strong ESG footprint with strong economics. They run together in this case.”
The 2017 bankable feasibility study for the Tugaske project estimated operating costs of just US$39.57 per tonne, with sustaining capital expenditure and various royalties contributing to all-in operating costs of about US$100 per tonne.
In addition, being roughly a tenth of the size of the prevailing large-scale potash operations, which Ferguson labels ‘lumpy’, allows Gensource to track demand and ramp up incrementally with new modules so as not to flood the market with millions of tonnes of production at once.
“When you show up with a 4 Mt per year project in a market that is only 65 Mt globally, those are big lumps of new production that the market has to deal with. By adding small scale, incremental production, I think we’ll start to see a much smoother ramping up of supply to meet the demand side.”
Shovel-ready
Since acquiring 100% of the Vanguard Project Area in June 2016, Gensource has rapidly advanced the Tugaske project through the development timeline, notably achieving automatic environmental approval from the Saskatchewan Ministry of Environment in August 2018.
This unprecedented decision to approve the project without the need for a formal environmental impact assessment was made by the Ministry after it designated Tugaske as ‘not a
“We’re trying to create a new way of producing potash that is open and transparent. We hope our production method becomes more broadly available in order to create an open supply chain for this key macronutrient in the agricultural sector” Mike Ferguson, Gensource Potash president and CEO
development’, due to its lack of environmental impacts. Without knowing, Gensource had made history as the first ever potash project in Saskatchewan to receive this type of determination.
The project is currently in the financing stage and has been ‘shovel-ready’ for some time, however the pace of progress has slowed as a result of upheaval to working patterns over the last 12 months due to the COVID-19 pandemic.
“We are working through the debt financing and the approval process for the Export Credit Agency and that hasn’t stopped despite of the slowdown in the business world that is a product of the various cycles of COVID-19,” says Ferguson.
MIKE FERGUSON, GENSOURCE POTASH PRESIDENT AND CEO
“We’re moving a bit slower than we would under ideal conditions, but things carry forward. We have great support from our senior debt partners and the whole process continues to progress.” of local vendors and service providers operating in the ‘potash capital of the world’.
Gensource’s construction partner SECON is another local partner with decades of experience working on potash projects in the region. “We hope to reach financial close in Q2 this year. As soon as we do, we will be on the ground with construction, because of the parallel work we have been doing for project ramp up,” Ferguson reveals.
In fact, Gensource is already working on some engineering activities at the project site along with its partners, including Saskatoon-based Engcomp. The engineering firm is one of a multitude
Offtake and equity
Perhaps the most vital partnership Gensource has made is with German conglomerate HELM AG, who came on board in January 2020 with an offtake arrangement for 100% of the potash production from the first Tugaske module, via its North American subsidiary HELM Fertilizer Corp.
In addition to the offtake deal, HELM also committed to invest equity in the project, in doing so helping Gensource create a streamlined supply chain for the potash space, in line with its second business pillar: Vertical integration.
“To find an offtaker who believes in the project enough to become an equity investor was key for us. We now have perfect alignment between the project and what we see as its marketing arm. With an existing infrastructure and customer base in the US, HELM has visibility straight through to the customer.
“Besides the small-scale production, the other part of our business plan is about vertical integration and making sure we have the most efficient supply chain from the Tugaske project in Saskatchewan to the identified market, with no other interveners in between. HELM will take our product from mine site at Tugaske and move it directly to the customer, with no intermediaries.”
Going global
Gensource is tantalisingly close to delivering its first small-scale, efficient and environmentally sustainable potash production module in Saskatchewan, which is being touted as a ‘gamechanger’ for the potash sector. However, this is just module number
Mike Ferguson, Gensource Potash president and CEO
one and Gensource’s vision is global.
“The Tugaske project is set up to expand incrementally with additional modules. So as we work with HELM on the market side of things, we aim to add modules based on demand. But more broadly speaking, our approach is always ‘market first’. As we identify a market that is interested in an efficient supply chain that we are offering, that’s what sparks another module.”
Crucially, the company’s downsized approach to potash production is set to unlock an entire cache of projects around the world previously deemed too small to be economic. Gensource’s aim is to find these deposits in close proximity to key agricultural regions. “Being close to market in the fertiliser world is important because a lot of the costs involved in the supply chain are around transportation and logistics. The closer you can get to that market the better off you are. We’re excited about the prospect of identifying and putting into production these various – some known and some currently unknown – resources in locations around the world,” Ferguson concludes.
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