Sage Potash: A Strategic Acquisition to Enhance Shareholder Value

Sage Potash Corp. (TSXV: SAGE, OTC: SGPTF) has recently announced updates to its equipment purchase and financing, which are set to significantly impact the company's project timeline and start-up costs. The company has entered into an agreement with a subsidiary of International Process Plants (IPP) to acquire processing equipment for $12.6 million, capable of processing up to 300,000 tonnes per year of potash. This strategic move allows Sage Potash to mitigate project risk, reduce costs, and accelerate its project timeline.

Under the Purchase Agreement, Sage Potash will satisfy the purchase price by paying $6,300,000 in cash, issuing 12,600,000 common shares to IPP at a deemed price of $0.20 per share, and issuing IPP a secured convertible debenture with a principal amount of $3,780,000. The secured convertible debenture will mature in five years while accruing interest at 12% per annum, and the holder may convert any or all of the outstanding indebtedness into shares of the Company at $0.40 per share at any time. This financing structure allows Sage Potash to secure the necessary funds to acquire the equipment while also providing IPP with an equity stake in the company and the opportunity to convert the debenture into shares.

In addition to the Purchase Agreement, Sage Potash is announcing a non-brokered private placement of 37,600,000 common shares at $0.20 each for gross proceeds of $7,520,000 and convertible debentures with an aggregate principal amount of $3,780,000. The gross proceeds of the Private Placement of $11,300,000 will be used to satisfy the obligations under the Purchase Agreement and for general working capital. This private placement is integral to the proposed transactions under the Purchase Agreement and allows Sage Potash to raise additional funds to cover the cash closing requirements under the Purchase Agreement.

The acquisition of the existing equipment now, rather than waiting for new equipment to be fabricated, mitigates project risk and cost, as well as providing added clarity to the project's timeline. This ultimately enhances shareholder value as Sage Potash seeks to reduce the United States' nearly 100% reliance on imports for potash supply. The company estimates that they are saving in the order of US$75 to US$100 million in project costs, not to mention the 4-5-year fabrication lead-time before they could even begin assembly. This acquisition aligns perfectly with IPP's 46-year mission of providing high-quality, existing unused and used equipment for fast-tracked projects, as more and more companies are realizing the benefits of unused or quality second-hand equipment and plants at a fraction of the cost and time as competitors.

The "part and parcel pricing exception" provided for in the policies of the TSX Venture Exchange allows the Company to issue equity and convertible debentures to IPP at a deemed price, without the need for a formal valuation or minority shareholder approval. This exception enables the Company to satisfy the purchase price of the processing equipment without the need for a formal valuation or minority shareholder approval, as the Company is listed on the TSX Venture Exchange.

In conclusion, Sage Potash's strategic acquisition of second-hand processing equipment and the associated financing updates have a significant impact on the company's project timeline and start-up costs. By acquiring existing equipment and securing financing through a combination of cash, equity, and convertible debentures, Sage Potash is able to mitigate project risk, reduce costs, and accelerate the project timeline. This ultimately enhances shareholder value and supports the company's mission to reduce the United States' reliance on imports for potash supply.