Chinas Beijing Tairui Acquires 51 Per Cent Ownership Stake In Western Potash

Chinas Beijing Tairui Acquires 51 Per Cent Ownership Stake In Western Potash

By: Dylan Sikes - AllPennyStocks.com News

Monday, July 6, 2015

In 2013, the breakup of one of the two cartels in the potash market led to a sharp decline in prices. The big worry was that the breakup of the Belarusian Potash Company (BPC) would lead to increased competition. So far potash prices have remained above $300 a ton mark, however, there has been pressure from major buyers such as China and India. China this year signed a supply contract much later than it normally does. This was largely because it was trying to negotiate a better price expecting increased competition.


Recently, it was reported that Potash Corp. (NYSE:POT), the world’s biggest supplier of potash, will acquire German rival K+S to boost its market share. Indeed, consolidation could be one way potash producers can defend their market share and margins. However, there has been some activity on the buyers’ side as well.

It is well known that China makes strategic investments in the natural resources sector. The country has already made significant investments in Africa and South America to ensure smooth supplies of raw materials. And now it seems that China is doing the same in the potash market.

This morning, it was reported that China-based Beijing Tairui Innovation Capital Management Ltd. will invest C$80 million in Western Potash Corp. (TSX:WPX). Based in Vancouver, Canada, Western Potash is a mineral exploration company engaged in the acquisition, evaluation, exploration and development of potash mineral properties in Western Canada and Brazil.

In return for the investment, Beijing Tairui has been granted a 51% stake in WPX. As per the terms of the agreement, Tairui will have the right to appoint four nominees to the Board of WPX. The transaction is expected to be completed by around August 31st, 2015. Proceeds from the investment will be used for the development of pilot plant scale selective solution mining operation in accordance with the previously announced positive Scoping Study on WPX’s 100% owned Milestone property in southern Saskatchewan.

With this investment, Milestone is now fully funded to go into production. The transaction still needs approval from shareholders. If WPX receives any counter offer before August 30, 2015, the company can consider it.

The news of the acquisition gave a boost to WPX shares on the Toronto Stock Exchange. The stock hit an intra-day high of C$0.34, and at last check, it was trading 3.33% higher at $0.31.

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