Prospect Global Resources and Sichuan Chemical Sign $2-Billion-Plus, 10-Year
Purchase and Sale Agreement for Potash
Landmark Deal Will Provide Sichuan Chemical with at Least 25% of the Output of
American West Potash Project
DENVER and CHENGDU, China, Oct. 22, 2012
DENVER and CHENGDU, China, Oct. 22, 2012 /PRNewswire/ --Prospect Global
Resources, Inc. (NASDAQ: PGRX) and Sichuan Chemical Industry Holding (Group)
Co., Ltd. today jointly announced a more than $2-billion agreement, over a
10-year period, under which Sichuan will purchase at least 500,000 metric tons
of potash annually, or 25% of the projected output of Prospect Global's
American West Potash field in Holbrook, AZ.
The conservative deal valuation reflects current market prices of about $475
per metric ton for a total of 5 million metric tons. The contract is
take-or-pay, backed by a letter of credit. The agreement also provides an
option for American West to sell and Sichuan Chemical to purchase an
additional amount of potash.
It is believed to be the largest-ever purchase and sale contract – in price
and volume – for a potash mine under development in the United States. It is
also believed to be one of the largest potash export contracts in U.S.
Prospect Global believes that this bankable offtake agreement enhances the
attractiveness of the project to lenders. The current timetable calls for the
American West site to be in production by late 2015 or early 2016.
Pat Avery, Chief Executive Officer of Prospect Global, said: "This agreement
is a major vote of confidence both in the long-term potential of our American
West Potash site as a mineral resource and in Prospect Global's ability to
create a state-of-the-art mining operation to capitalize on that potential.
Bankable offtake contracts are a top priority in our detailed strategic plan,
and we continue to execute on key drivers."
From the perspective of Sichuan Chemical, a state-owned enterprise that is one
of China's largest fertilizer manufacturers and its third-largest chemical
company, the accord provides a large – and independent – new source of a
commodity that is critical to meeting the challenge of feeding the world's
largest nation. This year's record drought in North America and Europe has cut
grain harvests, squeezing global food reserves and raising prices. In that
context, obtaining dependable supplies of potash, which raises agricultural
productivity without depleting soil nutrients, is vital to China's food
Xiaojun Chen, Chairman of Sichuan Chemical, said: "This agreement with
Prospect Global has important long-term strategic benefitsforSichuan
Chemical and also willmake a significant contribution to the economic
development of Sichuan Province and the Chinese potashindustry. We are
honored to work with Prospect Global and look forward to a prosperous future."
Devon Archer, a Prospect Global director who acted as Prospect Global's lead
negotiator, commented: "Today's agreement is the product of six months of
negotiation and due diligence carried out in China and the United States. That
process has resulted in a high level of trust and respect on the part of both
parties. As we look forward to a long relationship with Sichuan Chemical, we
are proud of the role that Prospect Global can play in helping to bring food
security to China while meaningfully impacting the US/China trade balance over
the next decade."
The American West Potash field is located in the Holbrook Basin of eastern
Arizona. A new interim engineering report by the international engineering
firm of Tetra Tech Inc. shows Prospect Global to be on track to meet key
targets within previous expectations as to capital and operating expenses,
infrastructure, permitting, and site plan for its American West Potash project
in Holbrook. Prospect Global's next major developmental step is a bankable
feasibility study, scheduled for the first half of 2013. Further information
on Prospect Global's estimated potash reserves can be found at
Once the mine is in production, it will create an estimated 700 U.S. domestic
jobs in mining, transportation and logistics, located mainly in eastern
Arizona but also at warehouses and North American ports. Its
multi-generational economic presence will spill over into the community and
promote the development and growth of local businesses for many years.
"Today's announcement is another step in bringing much-needed, high-paying
jobs to a region of Arizona where incomes are usually low and unemployment is
chronically high," Pat Avery said. "It's a refreshing change to see money
from overseas creating jobs in the United States. And from an environmental
perspective, any large potash agreement is welcome news because increasing
agricultural yields per acre means improving quality of life and decreasing
the carbon footprint."
This Press Release may include forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
projections or estimates contained herein. Factors that could cause actual
results to differ materially from projections or estimates include, among
others, potash prices, economic and market conditions, as well as the
additional risks described in our filings with the SEC, including our Annual
Report on Form 10-K for the year ended March 31, 2012 and our Prospectus dated
June 29, 2012. Most of these factors are beyondour ability to predict or
control. The forward looking statements are made as of today's date and,
except as required under applicable securities legislation,we do not assume
any obligation to update any forward-looking statements. You are cautioned not
to put undue reliance on forward-looking statements.
About Prospect Global Resources, Inc.
Prospect Global Resources, Inc. is a Denver-based company engaged in the
exploration and development of a large, high-quality potash deposit located in
the Holbrook Basin of eastern Arizona. The company's stock is traded on the
NASDAQ Stock Exchange under the ticker symbol PGRX.
About Sichuan Chemical Industry Holding (Group) Co., Ltd.
Sichuan Chemical Industry Holding (Group) Co., Ltd. (SCIHC) is a provincial
state-ownedenterprise with assets of RMB 20 billion.It is a large-scale
conglomerate involved in production and marketingoffertilizersand
chemicalproducts, including phosphorite and coal. Additional business lines
include international commodities trade and chemical andtechnical
services.SCIHChas 24,300 full-time employees, more than 5,000 of whom are
technicalprofessionals. Sichuan Chemicalhasbeen a leader of China's
chemical industry for more than 50 years.
SOURCE Prospect Global Resources, Inc.
Contact: Sitrick And Company, New York: Thomas Mulligan, +1-212-573-6100,
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