Press Releases2017

Apr 11, 2017
Essel Group ME announces Execution of Shareholder Agreement for its Vanguard Potash Corp Joint Venture with Gensource

Essel Group ME Limited is pleased to announce it has executed a shareholder agreement ("Shareholder Agreement") with Gensource Potash Corporation ("Gensource") (TSX.V: GSP) to create a joint venture company, Vanguard Potash Corp. ("JV" or "Vanguard"), pursuant to the memorandum of understanding between the two parties announced on November 29, 2016.

The purpose of the JV is the construction and operation of the new Vanguard potash production facility in Saskatchewan, which will bring together technical innovation, management expertise, international logistics and capital.

Gensource's President & CEO, Mike Ferguson, said: "This is the most significant milestone for Gensource to date. Our investors are aware that Gensource's business plan has been to create a joint venture with a strategic partner who can bring the required financing and commercial expertise to the project. The JV will begin with the construction of one of Gensource's small scale facilities with target production of 250,000 tonnes/year. Subsequently, we aim to increase production from that initial 250,000 tonnes per year to a minimum of 1 million tonnes/year. EGME brings the necessary global business experience and financing to complement Gensource's highly-skilled development team, rich potash resources and innovative extraction technologies.  The value we aim to create is much greater than the sum of the investments in Vanguard."

EGME's Joint Managing Director & Group CEO, Punkaj Gupta, commented:
"I am delighted to be signing the Shareholder Agreement, a key moment for the Vanguard project, EGME and Gensource. This is a landmark event as we work towards developing this iconic asset, in order to meet the growing global potash demand."

"We are very pleased to be working with Gensource's highly experienced and innovative team, with today's announcement further strengthening our relationship and providing increased certainty for the project. Vanguard is a key part of EGME's portfolio, and this JV underlines our continued long-term commitment to developing high-quality assets in the natural resources sector."

Vanguard is a private corporation incorporated under the laws of Saskatchewan and headquartered in Saskatoon, SK. Vanguard's sole purpose is:

i.    to finance, develop, engineer, construct and operate a mine and processing plant to produce potash from the Vanguard asset near Eyebrow and Tugaske in Saskatchewan; and
ii.    to market and sell the potash product.

The key terms of the Shareholder Agreement are as follows:

(a)    EGME will contribute capital to Vanguard in two tranches:

(i)    First tranche of $US 5M will be used to complete the Vanguard One Project feasibility study;
(ii)    Second tranche of $US 200M, which represents the full estimated capital to construct and commission the first facility of the Vanguard project;

(b)    Gensource will assign a 49% interest in the KL 245 lease (the "Lease") to Vanguard;

(c)    Gensource will assign the Mining Rights Agreement to Vanguard, allowing it to benefit from 100% of mining on the Lease;

(d)    Gensource will assign the Technical Services and Technology Agreement to Vanguard, bringing Gensource's expertise and unique approach to potash mining and processing to the JV;

(e)    Vanguard will become 49% owned by EGME and 51% owned by Gensource upon receipt of the first tranche of financing ($US 5M). Once construction financing is committed by EGME (estimated at $US 200M), Vanguard will become 70% owned by EGME and 30% by Gensource;

(f)    Following the completion of Phase One of the Vanguard 1 Project (to produce 250,000 tonnes of potash per annum), both parties shall make all commercially reasonable efforts to undertake and complete one or more expansion phase necessary to increase production of potash to a minimum of 1M tonnes/per annum, the final production target; and

(g)    The board of Vanguard will initially comprise of three nominees of EGME and two nominees of Gensource.  A jointly appointed management team will lead the development of the new potash facility.
It is anticipated that investment banking firm Morgan Gatsby will lead on the construction financing of Vanguard. Morgan Gatsby is a wholly-owned subsidiary of EGME, based in Dubai, UAE.

The Feasibility Study is on schedule for completion in Q2 2017.

The scientific and technical information contained in this news release was reviewed and approved by Mike Ferguson, P.Eng., President and CEO of Gensource and a Qualified Person under NI 43-101.

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