Management shakeup at Encanto may boost $3B potash project

A big shakeup at Encanto Potash Corp., which saw the CEO replaced and several directors resign from the company’s board of directors, could breathe new life into the company’s proposed $3-billion potash project at Muskowekwan First Nation, about 100 km northeast of Regina.

Norman Brewster, president and CEO of Cadillac Ventures Inc., was named CEO of Encanto earlier this month, replacing Jim Walchuk, who will stay on as an adviser. In addition to Brewster, six new directors were appointed to Encanto’s board of directors, including Muskowekwan First Nation Chief Reg Bellerose as First Nations special counsel. The company also moved its headquarters from Vancouver to Toronto.

Brewster said the financial markets haven’t been keen about financing new potash projects, especially since the price of potash plummeted from nearly US$900 a tonne in 2008 to less than US$200 per tonne in recent months.

“The price of potash has changed,’’ said Brewster in an interview from Toronto. “But there is a resource there and there is a intent within the company to pursue it and carry it to the next step, which would be to complete a feasibility study under the current regime of prices and supply.’’

In 2013, a pre-feasibility study indicated proven and probable reserves of 162 million tonnes, sufficient to develop a potash mine producing 2.8-million tonnes per year for 50-plus years. The proposed project would create about 1,000 jobs during the construction phase and nearly 500 permanent jobs when complete.

In 2016, the company’s current president, Stavros Daskos, negotiated a deal to supply potash to Metals and Minerals Trading Co. of India, a state-owed trading agency and one of the world’s largest buyers of potash. “That all has to be finalized,’’ Brewster said. “There are a number of steps involved and the participation of various parties ... in Canada and India can make that happen. One of these is the participation of the (Muskowekwan) First Nation.’’

The proposed project is the first in Saskatchewan under the federal First Nations Commercial and Industrial Development Act, which replicates and applies provincial rules and regulations for large commercial or industrial projects to a specific on-reserve economic development project.

Brewster said the new board and management of Encanto intend to meet with Chief Bellerose “with the intent of making them full partner in the project.’’ Bellerose was unavailable for comment Monday.

But Encanto also has to put together the money to undertake a detailed feasibility study, which would include mining engineering, economic and environmental studies based on the pre-feasibility study and typically cost “several millions of dollars.’’

“We’re trying to move forward and we’re testing the financial markets and seeing where we can develop resources to bring the project forward.

Financial markets in the mining sector have not been the easiest world to be working in for the last four years.’’

Brewster admits raising millions of dollars to build a $3-billion potash mine will be a challenge. “Obviously, we have to raise money. One of the things about junior mining companies is they always have to raise money.’’