Two weeks ago, Grizzly Discoveries (GZD.V) announced it signed a Memorandum of Understanding with an undisclosed party which could lead to a substantial investment to explore Grizzly’s potash tenements in Alberta, Canada. We sat down with Brian Testo, CEO of Grizzly, and asked him some follow-up questions.
– Grizzly Discoveries is very likely the only company exploring for potash in Alberta at this moment. What was your main reason to believe there’s potash mineralization in Alberta?
We had initially sought to stake potash claims in Saskatchewan (one of the world’s most prolific potash producing jurisdictions), but discovered that basically all potash prospective ground in Saskatchewan had already been staked. We then examined public information and consulted with our geologists to try to figure out where else in Canada we might be able to find potash. The significant Potash deposits in Saskatchewan are from an ancient inland sea that stretched from the edge of Manitoba through Saskatchewan and about 200 km west into Alberta. To make a long story short, I Googled for “potash in Alberta” and found petroleum geologist Albert Golden’s 1965 report on the occurrence of potash minerals in historic well VCO #15 in the area of Vermilion in East-central Alberta, a report with findings that have largely been ignored by the potash industry in Canada.
This was enough for us to start staking ground in Alberta, much of which was easily available. Then, in December 2010, the US Geological Survey (USGS) gave a presentation at the Saskatchewan Geological Survey Open House focused on the USGS’ assessment of undiscovered potash resources in Canada and the United States, and published a corresponding PowerPoint presentation. The USGS’ assessment of potash resources in Canada corroborated the Golden report in indicating that the ancient sea beds hosting the bulk of Saskatchewan’s potash resources extend into Alberta. (There is a link to both Albert Golden’s Report and the USGS presentation on our website at www.grizzlydiscoveries.com under the Potash heading.) Subsequently, our consulting geologist, Michael Dufresne of Apex Geoscience Ltd., went to the Alberta government’s core library facility in Calgary and analyzed the core from VCO#15 with a hand-held XRF analyzer and found indicators of potentially economic grades of potash.
– Can you elaborate a bit more on the potential terms of the potential joint venture deal? Should the $15M deal go through, the JV partner will gain an equity interest in a separately trading company. What percentage of ownership would Grizzly Discoveries hold should the $15M deal go through and after the spin-off of the Alberta Potash company? Does the partnering company retain a stake in the project should it decide to back out after the first $5M investment?
We can’t elaborate at this time as the final structure of the deal is still in negotiation. The intent is, provided the full $15 Million is invested, to retain an equitable interest in the Alberta Potash Project for Grizzly’s shareholders while also ensuring that the project is advanced.
– What would be your estimated time line to effectively close the deal?
The interested party has indicated that after they have reviewed the data and if they are satisfied, they would like to proceed quickly. We believe that we could have a deal negotiated within 30 to 60 days provided they confirm their interest to move forward.
– Should the first $5M be advanced to Grizzly Discoveries, what would be your first exploration steps to prove up the potential of the Alberta Potash Project?
We have two exploratory well sites selected and ready to go based on our current models, which are based on information that we have collected and analyzed to date. The interested party may have some geophysics and technical expertise that they want to use in terms of selecting well sites, so we anticipate that the two parties would jointly select the final targets and commence drilling, once permits are in place and drill rigs are available and mobilized. It is anticipated that up to four exploratory wells could be funded with this initial $5M investment.
– According to your latest financial statements you had a working capital position of approximately C$0.5M as of at the end of October 2013. Do you anticipate to take advantage of the current strong share price to raise additional funds and secure more working capital?
We are always considering financing as this is the primary source of capital for the Company but are also cautious of causing significant dilution of our existing loyal shareholders. Over the past year we have minimized our corporate burn rate to bare essential costs only to ensure longevity of the Company and allow flexibility with regards to timing of a capital raise for working capital purposes. We will have to raise some funds to provide working capital to maintain operations going forward, and to complete the next drill program on our Greenwood gold and copper properties in southeastern British Columbia, however we have no firm financing plans at this time.
Disclosure: The author holds no position in Grizzly Discoveries. Please see our disclaimer for current positions.