Nother new Potash play...
Mantra options Elkhorn project
2008-02-26 11:30 MT - News Release
Mr. Raj Chowdhry reports
MANTRA MINING INC. ACQUIRES OPTION ON ELKHORN POTASH PROJECT IN MANITOBA, CANADA
Mantra Mining Inc. has entered into an option agreement pursuant to which the company has been granted the option to earn up to a 100-per-cent interest in an exploration permit application for the Elkhorn potash project, located within southwest Manitoba. The application encompasses 12 townships, along the Manitoba-Saskatchewan border covering approximately 110,592 hectares (approximately 276,480 acres).
Mantra chief executive officer, Raj Chowdhry, comments: "We are very pleased to announce the acquisition of the Elkhorn potash project. The existing infrastructure in the Elkhorn project area, together with the close proximity to major producers, such as Potash Corp.'s Rocanville mine, will allow Mantra the opportunity to create shareholder value. This significant land package, located in a premier potash mining district, with significant corporations such as Agrium Inc. and BHP Billiton as neighbours, affords Mantra shareholders a project with large blue-sky potential while demand for potash increases significantly worldwide."
The permit area
The Elkhorn potash permit is enclosed both to the north and south by land/permits held by Western Potash Corp. Additional land/permit holders within a short distance to the north of Elkhorn potash project include: Agrium Inc. and Manitoba Potash Corp., which is held 51 per cent by BHP Billiton and 49 per cent by the government of Manitoba. BHP has previously announced a $15-million exploration program for the Russell-Binscarth deposit held by Manitoba Potash. Further, immediately west of the border in Saskatchewan, Potash Corp. of Saskatchewan recently announced a $1.8-billion expansion at the Rocanville mine, increasing the capacity to about five million tonnes annually, to meet the growing world demand for potash.
The Elkhorn potash project was acquired to cover potential extensions of the potash-rich members of the Prairie Evaporite, which has been mined, according to Davies et al. (1962, page 178), for over 50 years in Saskatchewan.
According to Davies et al. (Bannatyne, Barry and McCabe, 1962): "Beds rich in potash salts occur in the upper part of the Devonian Prairie Evaporite in a narrow area along the west edge of the province from township 4 through to township 21. The potash occurs at depths ranging from 2,560 feet (780 metres) in the north to 4,400 feet (1,241 m) in the south. S.A.M. Explorations Ltd. drilled the northern part of the area from 1956 to 1958, and their three wells indicated a potash bed six to eight feet thick, grading 25 per cent K2O or better..."
Terms of the option agreement with the arm's-length optionors
The Elkhorn potash option entitles the company to earn the sole and exclusive right and option to acquire up to an undivided 100-per-cent-right, title and interest in and to the permits in accordance with the terms of the option agreement as follows:
The company must make cash payments of $500,000 to the optionors as follows:
On the date of signing of the option agreement, $25,000 (paid);
Within five business days from the effective date, $100,000;
Within 30 business days of the acceptance of the option agreement by the TSX Venture Exchange, $125,000.
A total of $225,000 of the aforementioned payments is refundable in certain circumstances, such as if the permits are not granted within a fixed period of time. Further, subject to the optionors receiving valid permits from the Manitoba Permit Authority and the optionee receiving acceptance of the option agreement from the TSX-V, the company must make the following cash payments.
On or before six months after the approval date, $100,000;
On or before 14 months after the approval date, $150,000.
The company must issue six million shares to the optionors subject to the optionors receiving permits from the Manitoba Permit Authority on at least 120,000 acres (total shares to be prorated down based on 120,000 acres in the event the permits cover less than 120,000 acres) and the optionee receiving acceptance of this agreement from the TSX-V:
Within 12 months of the approval date, 1.2 million shares;
Within 24 months after the approval date, 1.8 million shares;
On or before 36 months after the approval date, three million shares.
In addition, in the event certain resource, drilling, market capitalization and financing milestones are met by the company, then 50 per cent of all unissued shares making the total shares will be issued immediately to the optionors, subject only to TSX-V approval.
The company must incur the following cumulative expenditures of not less than $3-million on the permits as follows:
Within 14 months of the later of the date the optionors receive valid permits from the Manitoba Permit Authority and the approval date, $500,000;
Within 24 months of the later of the date the optionors receive valid permits from the Manitoba Permit Authority and the approval date, $1.5-million;
Within 36 months of the later of the date the optionors receive valid permits from the Manitoba Permit Authority and the approval date, $3-million.
Finder's fee
The company, subject to TSX-V approval and various other conditions, has agreed to pay a finder's fee of 240,000 shares.
Potash outlook
RBC Capital analyst Fai Lee in the Financial Post article dated Jan. 22, 2008, although focused on Potash Corp., points out the strong demand for potash from Southeast Asia as a major catalyst in the continuing surge in prices paid for potash. The article also references historic lows in both customer and distributor warehouse inventories.
Involvement in potash, the major component in the fertilizer arena, at a time when the world's growing population's need for food is subject to continued growth, especially in China, India and the rest of Asia, provides Mantra a unique and highly promising position to create shareholder value.
