Appian to pony up $85M loan for Western Potash’s Milestone project in Saskatchewan

Western Potash, a subsidiary of Western Resources (TSX: WRX) will receive an $85-million loan from Appian Capital Advisory to complete the construction and development of the first phase of its Milestone potash project in Saskatchewan.  

The deal includes a six-year term loan facility at an interest rate of 12.5% per year, a grant of a 1.5% royalty based on the project’s gross revenue, and the issuance of about 20.7 million warrants to Appian that will represent up to 9.9% of Western’s shares.   

Drillers at Western Potash’s Milestone potash project in Saskatchewan, 30 km southeast of Regina. Source: Western Potash

Western Resources also said that a previously announced equity investment of $80 million from Vantage Chance, an investment firm based in the British Virgin Islands, in one of Western’s subsidiaries will be completed next month, as it wasn’t flagged for further review under the Investment Canada Act.  

“Appian has only done 17 projects since its inception 10 years ago…this speaks to the delicate considerations in the decision making of their investments, as well as the profitability that Appian sees in Western Potash,” Bill Xue, the company’s CEO told The Northern Miner.

Located about 30 km southeast of Regina, the Milestone project is expected to begin production in the second quarter next year and is expected to achieve a production of 146,000 tonnes per year. According to an updated security filing on Dec. 29, the project is expected to have a 40-year mine life. The second phase of the project has the potential to produce 1.4 million tonnes per annum. 

“This funding, together with the $80 million Equity investment from Vantage will enable Western Potash to also start looking into preliminary works of our Phase 2 project, which is a similar sized plant adjacent to our existing one,” said Xue.   

He added that Phase 2 would share the same infrastructure and utilities from Phase 1, and “further reduce the already industry competitive CAPEX and OPEX costs.” 

According to Western, the project is expected to be the first potash mine in the world that will leave no salt tailings on the surface as the company aims to use a technology that’s new to Saskatchewan – selective horizontal solution mining.  

The project team envisions the simultaneous operation of three pilot production caverns. The horizontally drilled wells inject a sodium chloride (NaCl) saturated brine that has a higher temperature than the in-situ rock formations. Potassium Chloride (KCl) is then selectively dissolved within the potash formation, leaving a lattice of NaCl behind.  

Potassium chloride-rich brines are then brought to surface through each production well. Potassium chloride recovery is achieved through delivery of the KCl-rich brine to a surface crystallization pond, producing 146,000 tonnes of standard grade muriate of potash (MOP) per year. 

Appian CEO Michael Scherb said that the transaction was a strong fit with Appian’s investment mandate. Appian Capital Advisory is the investment advisor to Appian Natural Resources Fund I and Appian Natural Resources Fund II, two private equity funds that invest solely in mining. 

According to Xue, the potash industry has always had an extremely high barrier to entry due to its oligopoly nature. “This financing will give Western Potash the opportunity to break that perceived barrier to entry and enable more potential investors the ability to come into the potash industry,” he said.   

At press time in Toronto, Western Resources was trading at 40¢ per share, up 3¢ or 8.1%, within a 52-week trading range of 15¢ and 47.5¢. The company has 187.17 million common shares outstanding for a market cap of $74.8 million.