Stonegate Agricom (T.ST) jumps 20% as CEO talks up takeover prospects

Peter Kennedy Peter Kennedy, Stockhouse
0 Comments| June 10, 2014

On a day when its stock rose 20%, Stonegate Agricom Ltd. (TSX: T.ST, Stock Forum) President and Chief Executive Officer Mark Ashcroft said he sees the company as a potential target for big players who are seeking a secure supply a phosphate, a key fertilizer ingredient.

Stonegate is working to develop its flagship Paris Hills Phosphate Project in Idaho. The aim is to have a mining permit by the end of 2014, a milestone that would set the stage of development of a one million tonne-per-year mine that is expected to cost about $140 million.

“We will have fully permitted reserves within the continental United States by the end of this year, with low capital expenditures and a proven mining method,’’ Ashcroft told Stockhouse during an interview, Tuesday.

“So absolutely we could be a [takeover] candidate.’’

Still, Ascroft said he couldn’t comment on the reason for the activity in the stock, which traded at 21 cents Tuesday, leaving a market cap of $40.8 million, based on 194.2 million shares outstanding. The 52-week range is 45 cents and 12.5 cents.

Brian Ostroff, the Managing Director of Windermere Capital, a Montreal-based private equity fund, which holds shares in Stonegate, said he couldn’t offer any reason for the stock price rally. Ostroff said he likes the prospects for phosphate and also holds shares in Arianne Phosphate Inc. (TSX: V.DAN, Stock Forum), Strata Minerals Inc. (TSX: V.SMP, Stock Forum) and Glen Eagle Resources Inc. (TSX: V.GER, Stock Forum). Strata Mineras and Glen Eagle are at a much earlier stage in the development cycle.

Ashcroft said Paris Hills is the highest grade Phos Rock project in the Americas. The company will extract the rock by entering the side of a hill and utilizing room and pillar mining methods. The rock will be conveyed to the surface and put in a storage location.

As a result, surface disturbance will be minimal and the grade is sufficiently high that the company hopes to be able to sell the raw material without the use of a mill or concentrator.

Meanwhile, the company is working to secure offtake agreement with end users in the North American fertilizer sector. 

“We are looking at existing fertilizer manufacturers who will need a new source of rock supply in the future,’’ Ascroft said.

Financing for the $140 million project is expected to involve a combination of debt and equipment leasing.

“But one of the aspects that lease providers and debt providers are going to want to see is an offtake agreement,’’ he said.

“We are working on both concurrently. Once we have concluded the offtake and the sale of the product, then we will finalize discussion on debt and leasing financing. I think we will get combination of debt and leasing in the neighbourhood of $120 million.’’

The balance would likely be comprised of a $20 milllion “equity plug.’’

Ashcroft said the company could start breaking ground as soon as the permits are awarded.

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