Millennial Potash Corp (TSX-V:MLP, OTCQB:MLPNF) chairman Farhad Abasov talked with Proactive about the US International Development Finance Corporation's commitment of up to US$3 million in development funding for the Banio potash project in Gabon.
Abasov explained that the funding is structured as non-dilutive, interest-free support, representing a major milestone that reduces geopolitical and financial risks.
Proactive: Hello. You're watching Proactive. I'm joined by Millennial Potash Chairman Farhad Abasov. Farhad, very good to speak with you. The US International Development Finance Corporation has committed up to 3 million US dollars in development funding for Banio. What does this strategic investment signal to institutional investors about the project's geopolitical and economic importance?
Farhad Abasov: Good to see you and thank you for the question. So this is actually a major milestone for us because it really de-risks the project on many accounts. First of all, of course, the 3 million US dollar investment is non-dilutive funding. In other words, it’s not equity. It is structured as a loan, but it doesn’t come with any interest payments or collateral, etc.
We can return those funds only when we are actually raising funds to build this project. So it is very important for our shareholders to understand it. The second thing is geopolitical mitigation of risks. That is extremely important as well. We are in West Africa, and although Gabon is one of the most stable countries on the continent, it was very important to have a strong strategic partner such as USDFC backing us in this project.
That means it mitigates risk in the country and region but also shows there is a significant commitment on the part of DFC going forward. Remember, this is just a small part of their overall financing approach. These funds are earmarked for the feasibility study. As we go forward, DFC has the ability to come in and help us with construction funding as well. So it is a major milestone for us going forward.
Food security has been cited as a key driver behind the DFC’s interest in Banio. How does Millennial’s vision of “potash from Africa for Africa” align with global trends and long-term demand fundamentals?
If you look at the supply-demand situation in potash specifically, you will see that about 70–75% of the entire potash supply comes from only three countries: Canada, Russia, and Belarus. Africa is one of the major consumers of potash. Actually, the consumption or use of potash has grown exponentially in the last decade or so, but the continent doesn’t have domestic production.
There are a few potash projects in Africa, but they haven’t reached production. Our task, our aim, is to put this project in production in the next 2–3 years so that it can become the first African potash producer to supply the market and meet demand on the continent itself. That’s a huge step forward. I think that appeals to organizations like DFC, our company shareholders, and future shareholders, because this is a very unique project.
We are right on the coast, and this is going to be probably one of the lowest cost producers in the world. With strong support coming from the government of Gabon and the USDFC, we think we can put this in production in the next few years.
Given the involvement of both the US government and the president of Gabon, how has this strengthened Millennial’s position when it comes to securing future development capital or potential strategic partnerships?
What happens in a project like this is investors look at a few parameters. One of them is economic viability. We already put out a preliminary economic assessment last year, and we will probably finish our feasibility study next year. So far, it shows this is going to be one of the lowest cost structures in the world.
That’s probably the number one reason for shareholders and future investors to look at this project. The other thing is availability of infrastructure. Most potash basins are in the middle of continents, like Saskatchewan or the Ural Mountains. We happen to be right on the coast. So infrastructure logistics become a lot easier compared to many other projects.
You mentioned support from the US government and the Gabonese government. What that means is we are working in partnership with those organizations to make sure all the other issues around the project can be handled in a timely fashion. I think that should give tremendous comfort to potential investors and institutional investors.
You have just completed the BA-004 drill hole, following strong results from the BA-001 extension. That has further strengthened the project’s geological profile. With the DFC funding now supporting your feasibility study, how do these phase two drilling results and the US backing enhance the scale, economics, and de-risking of Banio as you move towards production?
We have finished these two holes recently, and as you may remember, we also drilled a couple of holes last year. These two holes will go into the revised 43-101 technical report that will probably be out sometime in September or October this year. Hopefully that will tremendously expand our existing resource.
Remember, we have 1.7 billion tonnes of indicated and inferred resource covering less than 5% of our property. Even with these two new holes, it will still cover less than 7–8% of the property. We think the upside is tremendous. When the revised report comes out, we will see a much larger resource, and that will kickstart our feasibility study because quite a bit of that resource will be indicated in potential major categories.
That means feasibility can proceed at full speed along with the environmental baseline study. Those programs will go hand in hand. With funding from DFC, that will allow us not to waste or delay any programs because we will have plenty of funding to proceed. That means we will be on track, and we expect to apply for a mining permit sometime in the middle of next year.
Quotes have been lightly edited for clarity and style