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Pan American Fertilizer Announces (CNSX: PAF) Letter of

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RobertJames   Tuesday, 08/14/12 08:19:32 PM
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Pan American Fertilizer Announces (CNSX: PAF) Letter of Intent with Pacific Potash (TSX-V: PP)


(via Thenewswire.ca)

VANCOUVER, BRITISH COLUMBIA, August 14, 2012 - Pan American Fertilizer Corp., (CNSX: PAF) ("Pan American" or the "Company") is pleased to announce that it has entered into a letter of intent (the "LOI") with Pacific Potash Corporation (TSX-V: PP; OTCQX: PPOTF; FSE: P9P) ("Pacific Potash"). The LOI sets out a proposal by Pan American to acquire 100% of the issued and outstanding common shares of Pacific Potash (the "Transaction") which will constitute a "major acquisition" for Pan American under the policies of the Canadian National Stock Exchange (the "CNSX").

Pacific Potash, a company listed on the TSX Venture Exchange (the "TSXV"), is engaged in the exploration and development of the Provost Potash Property and the surrounding potash claims targeting the Prairie Evaporite Formation. Pacific Potash also has an option to acquire up to an 80% interest in Western Potash Corporation's (TSX: WPX) Amazonas Basin claims in Brazil.

Mr. Balbir Johal of Pacific Potash stated "We are very pleased with the proposed transaction as it provides our shareholders with a meaningful ownership in a stronger combined fertilizer-focused company. We believe this Transaction to be mutually beneficial to both parties and strategically positions the new company well for future value creation."

His views were echoed by Mr. Randy Wright, President and CEO of Pan American who stated "Pan American considers the combination of the assets held by Pacific Potash and its subsidiaries to be consistent with Pan American's mission to bring its shareholders quality projects within the fertilizer industry. We look forward to building an exceptional company by expanding and diversifying our interest in the growing fertilizer market, which in turn will result in meaningful value creation for our shareholders"

At closing of the Transaction (the "Closing Date"), Pan American will issue to the shareholders of Pacific Potash, on a pro rata basis, that number of common shares of Pan American such that, prior to the completion of the Concurrent Financing (as defined below) and on an undiluted basis, current shareholders of Pan American will hold 62.5% of the issued and outstanding common shares of Pan American and the former shareholders of Pacific Potash will hold 37.5% of the issued and outstanding common shares of Pan American.

In connection with the Transaction, Pan American intends to complete a non-brokered private placement (the "Concurrent Financing"), by way of subscription receipts (each a "Subscription Receipt") at a price of $0.40 per Subscription Receipt for minimum gross proceeds of $2,000,000 and maximum gross proceeds of $5,000,000. Each Subscription Receipt will be converted into units (the "Units") upon completion of the Transaction at no additional consideration. Each Unit will be comprised of one common share of Pan American and one-half of one common share purchase warrant (each whole warrant, a "Warrant"). Each Warrant will entitle the holder to purchase one common share of Pan American at a price of $0.60 for a period of two years from the Closing Date. If the volume weighted average trading price of Pan American's common shares on the TSXV or CNSX, as applicable, exceeds $1.00 for a period of 20 consecutive trading days, Pan American may, within five days after such an event, provide notice to the Warrant holders of early expiry and thereafter, the Warrants will expire on the date which is 30 days after the date of such notice. The Concurrent Financing will be completed by way of a private placement, in reliance on applicable prospectus exemptions pursuant to National Instrument 45-106. Pan American will pay afinder's fee in cash, securities or a combination of both, up to the maximum amount permitted by the TSXV or CNSX, as applicable.

Pan American intends to use the proceeds of the Concurrent Financing to fund the costs of the Transaction and to fund the general working capital expenses of the resulting issuer.

It is the intention of Pan American and Pacific Potash to apply for the listing of Pan American's common shares on the TSXV concurrently with the completion of the Transaction.

The completion of the Transaction is subject to a number of conditions, including, but not limited to, the execution of a definitive agreement, completion of satisfactory due diligence, approval of the Transaction by the board of directors and, if applicable, shareholders of each of Pan American and Pacific Potash, the completion of the Concurrent Financing for minimum gross proceeds of $2,000,000, and the approval of the TSXV and the CNSX. There can be no assurance that the Transaction will be completed as proposed, or at all.

Bridge Loan

Pan American is currently in the process of negotiating a loan agreement (the "Loan Agreement") with an arm's length lender (the "Lender"), in the principal amount of CDN$375,000, bearing interest at a rate of 12% per annum, accrued and payable at the end of the term which is expected to be 12 months. Upon the advancement of funds from the Lender to Pan American, Pan American will issue to the Lender 50,000 common shares as partial consideration under the Loan Agreement.

About Pan American Fertilizer Corp.

Pan American is a Canadian company dedicated to providing fertilizer to a growing global market. The company is focused on the extraction of a specific type of fertilizer called calcium sulphate (also referred to as "Agricultural Gypsum"). To ensure long term development and increase shareholder value, Pan American currently plans to significantly expand its current operational objectives while expanding its asset base by acquiring additional calcium sulphate and other fertilizer related assets.

When used as a fertilizer and as a soil remediator, calcium sulphate is a soft sulfate mineral composed of calcium sulfate dihydrate which is extremely rich in sulphur and calcium. When dissolved in water, the mineral becomes calcium and sulphate sulphur ions, both of which are required nutrients for plants. Calcium sulphate plays a vital role in establishing and maintaining good chemical balance in soil, water and plants, specifically with healthy root development. Ultimately, calcium sulphate increases overall crop quality and yields.

About Pacific Potash Corporation

Pacific Potash Corporation trades on the TSX Venture Exchange under the symbol: PP, as well on the OTCQX under the symbol: PPOTF and on the Frankfurt Stock Exchange under P9P. Pacific Potash is engaged in the exploration and development of the Provost Potash Property and the surrounding potash claims targeting the prolific Prairie Evaporite Formation, which is host to multiple conventional and solution potash mines. The Company also has an option to acquire an 80% interest in Western Potash Corporation's (TSX: WPX) Amazonas Basin claims.


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