Gensource Potash Corp. · TSXV:GSP
Gensource Potash — Investor Presentation (February 2014)
62 slides from Gensource Potash's investor presentation, February 2014
Slide 1: A new Approach to Potash Production
A new Approach to Potash Production Gensource Potash Corporation www.gensource.ca 1 (TSX.V: GSP)
Slide 2: Disclaimer
Disclaimer This presentation contains certain forward-looking statements relating, but not limited, to Gensource Potash Corporation expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward looking words such as “anticipate”, “believe”, “expect”, “go
Slide 3: Introduction
Introduction CONTENTS: • Who is Gensource • State of the potash industry/market • Gensource Potash: – Strategy / Business Model – Plans / Projects • How does that fit? • What to expect / Investment Opportunity Appendix – Background information on: • Nutrients • About Potash • Potash in Saskatchewan
Slide 4: Who is Gensource?
Who is Gensource? Gensource Potash Corporation www.gensource.ca 4 (TSX.V: GSP)
Slide 5: Gensource Potash Corp.
Gensource Potash Corp. • Publicly traded junior development company (GSP: TSX-V) • Potash-focused - 100% • Management team who has done this before • Building a potash and Saskatchewan focused Board of Directors • Advisory Board – World Class Expertise • Project locations where the “right” potash is
Slide 6: Gensource Potash Corp. Goal
Gensource Potash Corp. Goal: • To use the expertise of the Management Team and Advisory Board to implement a 21st century approach to potash development in Saskatchewan – using techniques that use less energy, less water and that require smaller initial capital expenditure • To become the next indep
Slide 7: Gensource - Management
Gensource - Management Mike Ferguson, P.Eng., President & CEO. Mike led the Potash One team that developed the Legacy project– the only Saskatchewan greenfield potash development to proceed. Steve Halabura, P.Geo., FEC (Hon), Director, Geology. Steve is the pre-eminent geologist in the Prairie Evapo
Slide 8: Gensource – Advisory Board
Gensource – Advisory Board Max Ramey, PE, Solution Mining. Max was the technical drive behind the Legacy Project. With his extensive experience and track record in operations and design of solution mining facilities, Max is a world-class expert in high demand. John McEwan, PE, Processing. John creat
Slide 9: State of the Potash Industry / Market
State of the Potash Industry / Market Gensource Potash Corporation www.gensource.ca 9 (TSX.V: GSP)
Slide 10: Confusion Reigns Supreme
Confusion Reigns Supreme Gensource Potash Corporation www.gensource.ca 10 (TSX.V: GSP)
Slide 11: Correlation – Grain The Main Driver
Correlation – Grain The Main Driver • Historically, grain demand has had the strongest relationship with potash demand • Grain / Potash Demand Correlation = 79% • 2013E Potash Demand = 55 Mt/yr 60,000 Potash Demand Vs. Grain Demand 55,000 50,000 Potash Demand (Kt) 45,000 40,000 35,000 30,000 25,000
Slide 12: Historical Demand
Historical Demand Potash demand posted a Compound Annual Growth Rate (CAGR) of 3.6% from 1950 to 2008. Implication: Potash Demand Grows ≈ 2 Mt/year Potash Consumption ('000 Product Tonnes) Potash Consumption 60000 50000 1950-2008 CAGR = 3.6% 40000 30000 20000 1991-2008 CAGR ~ 3 % 10000 0 1960 1980 2
Slide 13: Global Potash Industry
Global Potash Industry Current Market Situation • Global supply is dominated by a few major players • Potash consumption is growing at 3% annually ( source PCS) – But, this is not supported by the data in recent years. • The current global market is approx. 55 million tonnes • Global potash demand c
Slide 14: Historical Potash Prices
Historical Potash Prices 2-3x Price Increase $305 www.gensource.ca Gensource Potash Corporation 14 (TSX.V: GSP)
Slide 15: Potash Demand & Supply
Potash Demand & Supply Current world potash production and demand (2012) Potash Production by Country Potash Demand by Country 8% Canada 4% 20% China Russia 23% 8% 32% USA Belarus Brazil 5% Germany India Israel 8% 16% 9% Oceana China 10% Europe Jordan 15% 19% 14% Other Rest of World 9% Source: Integ
Slide 16: Gensource Potash Business Model
Gensource Potash (TSX.V:GSP) Business Model Gensource Potash Corporation www.gensource.ca 16 (TSX.V: GSP)
Slide 17: Business Model - Potash 2.0
Business Model - Potash 2.0 www.gensource.ca Gensource Potash Corporation 17 (TSX.V: GSP)
Slide 18: The 3-Legged Stool
The 3-Legged Stool Business model as a 3-legged stool: • Leg 1 – Market Access. The market for potash is not an open one. There is no organized exchange for the commodity and private sales between the few large suppliers/sales organizations and consumer/distributors set benchmark prices each year. T
Slide 19: Saskatchewan Crown Reserve and Permit Positions
Saskatchewan Crown Reserve and Permit Positions 2005 2012 Potash 1.0 Start of Land Rush Era Potash 2.0 Begins Originally ~ 800,000 acres Currently ~ 11 million acres • Crown potash reserve wide open • Focus on solution mining • Extensive land staking rush begins • Vertical integration • New players
Slide 20: Potash 2.0
Potash 2.0 Potash 2.0 Features: • Updated mining and processing technologies for the 21st century – See next slide • Departure from the typical junior development approach: – Market partners engaged in the project at the outset – Focus on reaching production, rather than a develop and flip plan – Ra
Slide 21: Technologies
Technologies Potash 2.0 developments must deal with the issues identified during the past 50 years of operation and the recent “rush” Issue Discussion Significant salt tailings Resolution of the problem for existing stored on surface for operations is difficult. Using mining methods indefinite perio
Slide 22: Typical Saskatchewan Solution Mining Math
Typical Saskatchewan Solution Mining Math The right resource and land package required to provide a long mine life Example: Calculation Range Typical Length 1610 meters 1610 meters X Width 1610 meters 1610 meters X Thickness 30- 35 meters 30 meters X Grade 22-28% 25% X Specific Gravity 2.14 2.14 X P
Slide 23: Lazlo Potash Project
Lazlo Potash Project This project is made up of Freehold mineral leases (21 years), with a novel approach to engaging the surrounding minerals. • Comprises an area up to 123,000 acres (several mining blocks of 20,000 ac each are possible) • Freehold mineral leasing is on-going • 3 on-property histor
Slide 24: Lothar Potash Project
Lothar Potash Project This project is made up of Freehold mineral leases (21 years), with a novel approach to engaging the surrounding Minerals. • Comprises up to 42,000 acres (1 or 2 mining blocks) • 2 on-property historic drill holes • Historical NI43-101 indicates strong grades and good thickness
Slide 25: Investment Opportunity
Investment Opportunity Gensource Potash Corporation www.gensource.ca 25 (TSX.V: GSP)
Slide 26: Investment Opportunity
Investment Opportunity 1. Global potash consumers are looking for a long term stable supply of potash 2. Saskatchewan has an estimated 3000 + years supply of potash 3. Through partnerships created in 2013, Gensource is signatory to 5 Letters of Intent with fertilizer distributors in China. Leg 1 4
Slide 27: Corporate Milestones
Corporate Milestones Gensource Potash Corporation www.gensource.ca 27 (TSX.V: GSP)
Slide 28: Proposed Field Program – 2013/2014
Proposed Field Program – 2013/2014 Gensource Potash Corporation www.gensource.ca 28 (TSX.V: GSP)
Slide 29: Typical Value Creation Curve
Typical Value Creation Curve Example of Value Creation With The Gensource Potash Team *KP289 was identified and applied by Steve Halabura. *KP289 constituted Potash One’s Legacy project , which was led by Mike Ferguson to construction decision. *Nov 22nd, 2010, Legacy project/Potash One was acquired
Slide 30: Gensource Potash Corporation
Gensource Potash Corporation Stock Symbol GSP – TSX.V Share Price $0.03 (as of 02-02-14) 52 Week High/Low $0.1150 - $0.03 Shares outstanding – 100 million - Fully Diluted 119 million Warrants Exercise Expiry 12,500,000 $0.25 3-29-2014 • Directors/Management and closely held – 20% • Market capitaliza
Slide 31: Contact
Contact Mike Ferguson, P.Eng. Rob Theoret, B.Comm., CIM President & CEO CFO Gensource Potash Corp. Gensource Potash Corp. Suite 1100, 201 1st Ave. South Suite 1100, 201 1st Ave. South Saskatoon, Saskatchewan Saskatoon, Saskatchewan mike@gensource.ca rob@gensource.ca 306-974-6414 306-974-6406 www.gen
Slide 32: APPENDIX
APPENDIX Gensource Potash Corporation www.gensource.ca 32 (TSX.V: GSP)
Slide 33: Nutrients
Nutrients 101 Gensource Potash Corporation www.gensource.ca 33 (TSX.V: GSP)
Slide 34: Plants Need Nutrients to Grow
Plants Need Nutrients to Grow Liebig’s Law (Law of Minimum) Principle developed Carl Sprengel (1828) and later popularized by Justus von Liebig - states that growth is controlled not by the total amount of resources available, but by the scarcest resource (limiting factor) By increasing the amount o
Slide 35: What is Fertilizer?
What is Fertilizer? Maximum plant yields are only Plants require 16 different nutrients possible when nutrients are applied for healthy growth - classified as in a balanced way Macronutrients (Primary & Secondary) or Micronutrients The three primary macronutrients are nitrogen (N), phosphorous (P),
Slide 36: How Fertilizer is Delivered
How Fertilizer is Delivered • Nutrients are typically delivered via the direct blending of the primary nutrients or through application of a ‘compound’ fertilizer • Compound fertilizers contain a specific proportion of the primary nutrients within each granule, providing a precise composition approp
Slide 37: Nutrient Table
Nutrient Table Nutrient Where It Comes From What It Does Nitrogen (N) The atmosphere Essential in protein formation Phosphorus (P) Shallow rock deposits formed by decay of ancient sea life Essential for photosynthesis and other cellular processes Potassium (K) Deep rock deposits left behind by evapo
Slide 38: About Potash
About Potash Gensource Potash Corporation www.gensource.ca 38 (TSX.V: GSP)
Slide 39: Importance
Importance • Potash is an essential, irreplaceable nutrient needed for plant development • Potash enhances water retention, increases crop yields, and aids plant resistance against disease • Potassium’s main benefits include: Energy Nitrogen & Enzyme Water Starch Production Protein Activation Relati
Slide 40: Potash Application
Potash Application Experimental studies have consistently shown the economic benefits of a balanced potash application program Potash Application Yields Positive Net Returns Yield with No Yield With K Value Of Cost of Net K Application Application K Rate Crop Price Response Potash Return (US$/acre L
Slide 41: Implications Of Application
Implications Of Application The actual impact of lower potash application may not be immediately apparent - could take 1-3 year to see the full impact Effect of Continued Elimination of K Use on Soybean Yield in Brazil 0 4000 Annual K20 40 3500 applied Grain yield (kg ha¯¹) 3200 previous 5 years 80
Slide 42: Worldwide Flow of Nutrients
WORLDWIDE FLOW OF NUTRIENTS Gensource Potash Corporation www.gensource.ca 42 (TSX.V: GSP)
Slide 43: Nutrient Drivers Macro and Micro
Nutrient Drivers Macro and Micro Gensource Potash Corporation www.gensource.ca 43 (TSX.V: GSP)
Slide 44: Macro Drivers – Food Security
MACRO DRIVERS – FOOD SECURITY Dimensions of Food Security: Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life World Food Summit, 1996 Food ava
Slide 45: Macro Drivers – World Demographics
Macro Drivers – World Demographics World population and income growth drive Arable Land (Acres) World Population Acres Per Person 8,000,000,000 1.20 demand: 7,000,000,000 1.00 6,000,000,000 • World population 5,000,000,000 0.80 increasing 4,000,000,000 0.60 • Decreasing arable land per capita 3,000,
Slide 46: Potash Development In Saskatchewan
Potash Development In Saskatchewan Gensource Potash Corporation www.gensource.ca 46 (TSX.V: GSP)
Slide 47: Sask. Potash History
Sask. Potash History Potash mining was not a planned industry • German mines had created a virtual monopoly market for potash in Europe and in the United States, mining companies in New Mexico created a cartel that managed potash production and prices. • Potash discovered by accident when US oil com
Slide 48: Saskatchewan
Saskatchewan First Class Location for Potash Mining • Low(est)cost of mining – World class scale – Consistent and predictable geology – High and consistent resource grades • Established infrastructure – Rail – both CN + CP – Power – Natural gas – Highway road system • Excellent access to US market •
Slide 49: Saskatchewan
Saskatchewan The Potash Capital of the World 1. Vanscoy – Agrium 2. Cory – PotashCorp. 3. Patience Lake – PotashCorp. 4. Allan – PotashCorp. 5. Colonsay – Mosaic 6. Lanigan – PotashCorp. 7. Esterhazy K1/K2 – Mosaic 8. Rocanville – PotashCorp. 9. Belle Plaine - Mosaic 10. Rocanville – PotashCorp. 11.
Slide 50: Potash Mining
Potash Mining Gensource Potash Corporation www.gensource.ca 50 (TSX.V: GSP)
Slide 51: Potash Mining Techniques
Potash Mining Techniques Three principal potash mining methods: 1) Shaft mining or conventional underground mining; 2) Solution mining; 3) Evaporation of brines Gensource Potash Corporation www.gensource.ca 51 (TSX.V: GSP)
Slide 52: Conventional Mining
Conventional Mining Shaft mining or conventional underground mining: Deeply buried marine evaporite deposits (typically found in Canada and Russia), range from 400 metres to greater than 1,000 metres below surface. Most potash is extracted from buried deposits using conventional mechanised undergrou
Slide 53: Conventional Mining Cont.
Conventional Mining Cont. At great depths, conventional mining for potash faces technical challenges and costs which can be prohibitive due to significant costs associated with sinking deep shafts. 1km underground Mosaic K1’s potash mine near Esterhazy, Saskatchewan. Labour costs and fuel and energy
Slide 54: Dual Well Solution Mining
Dual Well Solution Mining Solution mining Solution mining is employed for deep evaporite deposits. The process involves pumping heated water through the ore body, dissolving the potash and pumping the resultant brine solution to a refinery for extraction. Source: Gensource Potash Corp. Gensource Pot
Slide 55: Dual Well Solution Mining Cont.
Dual Well Solution Mining Cont. Solution mining The deposit temperature (and hence depth) is an important component in the economics of solution mining. Operating costs for conventional underground mining are generally lower compared to solution mining projects which tend to be more energy intensive
Slide 56: Dual Well Solution Mining Cont.
Dual Well Solution Mining Cont. Secondary Solution mining The deposit temperature (and hence depth) is an important component in the economics of solution mining. Operating costs for conventional underground mining are generally lower compared to solution mining projects which tend to be more energy
Slide 57: Evaporation of Brines
Evaporation of Brines Evaporation of brines There are also salt lakes, near- surface saturated gravels and underground aquifers containing minerals dissolved in brines and some may include buried layers of evaporite minerals. The brines are pumped to the surface into evaporation ponds where the wate
Slide 58: Solution Mining Preferred
Solution Mining Preferred Solution Mining is preferred over conventional mining for the following reasons: • Reduced mining risk “We continue to prefer solution mining over • Shorter time to construction conventional mining for a new greenfield potash • Lower capital cost production due to the forme
Slide 59: Conventional Vs Solution Mining
Conventional Vs Solution Mining Conventional Mining Solution Mining Brine/Solar Evaporation Lowest operating expenses, utilizing Low operating costs Low capital costs natural (solar) energy Well known and understood procedure Reduced time to production Possibility of other marketable by-products Pro
Slide 60: Considerations
Considerations • Off-take Agreements • Mining Risk – potential flooding at conventional underground mines • Tax Environment • Infrastructure Risk • Country/Political Risk • Financing Risk • Processing Risk • Local Community • Water • Energy • Environment • Supply Side Shock Source: Uralkali in Berez
Slide 61: Typical Saskatchewan Solution Potash Mine Economics
Typical Saskatchewan Solution Potash Mine Economics Capex Per tonne ($Cdn) Primary and Secondary Mining $ 1,050/t Operating Costs Mine Gate ($Cdn) Process Plant* $ 56/t Mine Operating* $ 11/t $ 67/t Corporate SG&A ($CDN) $ 13/t Transportation Costs (FOB Vancouver, $CDN) $ 45/t * Operating costs assu
Slide 62: Typical Saskatchewan Solution Potash Mine Economics
Typical Saskatchewan Solution Potash Mine Economics Project Economics at Various Potash Pricing NPV @ Price/Tonne IRR Opp Margin Payback (Yrs) 6.00% 8.00% 10.00% 12.00% 14.00% $225 7.90% $ 727,307,423 ($28,957,488) ($465,149,086) ($723,132,421) ($876,670,780) 65.40% 12.00 $250 9.93% $ 1,610,260,569
Gensource Potash — Investor Presentation (February 2014) on 6ix