Green practices and sound financials bring finance partners to the table.
A while back we talked about a few of the green-mining practices employed by Gensource Potash (TSXV:GSP) that have earned their projects the title of ‘not a development’ according to the Saskatchewan Ministry of Environment. The two most distinctive features of their processes are selective-solution extraction and built-in absorption chilling. These processes, when used together, save time, money and a whole lot of energy.
And while Gensource has always felt strongly about their green approach, it seems investors are starting to jump on board too. Gone are the days where investors just care about the bottom line. In a world faced with serious issues such as climate change, investors are starting to care more about corporate social responsibility. As well they should! Until there’s life on Mars, it’s important to keep in mind that this is the only planet for humans to live on.
Corporate social responsibility can be defined as a company’s commitment to manage the social, environmental and economic effects of its operations responsibly and in line with public expectations. Doing it right builds trust among communities and decision-makers, and reduces key business risks.
For mining companies, as one would imagine, the environmental footprint is key in conversations about corporate social responsibility. After all, nobody feels good seeing a big tailings pile. Large equity investors are being much more selective in their use of funds these days. They want to be associated with environmental stewards and the best corporate citizens. Potential investors are starting to ask the tough questions. And Gensource has the answers they seem to be looking for – meaning no salt tailings piles, scaled down project size to 1/10th the size of conventional mines (right-sized for rural communities), no brine ponds (eliminating environmental concerns) and less than half the water consumption per tonne of product produced as compared to conventional potash mines.
Not only has Gensource been smart about the way they do business, they’ve also been clever in the financing of their initial project – to the point where they have the least amount of dilution to create maximum value. This has attracted parties including KfW IPEX-Bank of Germany and Export Development Canada, who have been evaluating how they can support the project by providing senior debt. Interestingly, KfW IPEX-Bank, who is an affiliate of KfW Bank Group, has in-depth resource industry experience and supports economically viable businesses and projects – specifically, environmentally responsible projects.
In addition, Gensource has identified a third-party equity investor as well an off-taker. The investor had some requirements, one of which was to invest in a primary business. Since potash helps feed the world, it ticked the right box. The off-take agreement is with a well-respected international fertilizer manufacturing and distribution company that already has a plan to strategically place 100% of the production from a Gensource facility, so the product is already presold.
While the parties are still going through due diligence, one thing is clear. Gensource has taken a very strategic approach in every aspect of the way they do business. Their forward-thinking environmental practices have led the company to attract quality investors. And it’s the very quality of these investors that make it easy to form lasting strategic partnerships. It is clear that energy efficiency and environmental sustainability are the new fundamentals for any new resource project.
So the question now isn’t ‘will this project go into development?’ but rather ‘when will this project go into development?’. We expect to hear Gensource is transitioning into a development company soon. If you’re looking to do some sustainable investing, buy into a company with a strong outlook that you can feel good about owning. Now might be the perfect time to add Gensource (TSXV:GSP) to your portfolio.