Prospect Global Resources, Inc. (NASDAQ: PGRX) today stated that recently announced potash pricing of $400 per metric ton for shipments to industrial companies in Asia in the first half of 2013 validates the Company's operating model and the value of the 10-year offtake agreement that it signed last fall with a major Chinese buyer.
In its Preliminary Economic Assessment of December, 2011, Prospect Global projected operating expenses of approximately $98 per metric ton of potash extracted. An updated Cost Feasibility Study on October 18, 2012, stated that operating expenses remained comfortably within confidence levels set by the December, 2011, preliminary economic assessment. At current pricing, such expenses would create significant operating margins, the Company said.
"Recent global potash prices further validate the cost infrastructure of Prospect Global's operations," Chief Executive Officer Patrick L. Avery said.
On October 22, 2012, Prospect Global and Sichuan Chemical Industry Holding (Group) Co., Ltd. of Chengdu, China, jointly announced a more than $2-billion, 10-year agreement under which Sichuan will purchase at least 500,000 metric tons of potash annually, or 25% of the projected output of Prospect Global's American West Potash field in Holbrook, AZ.
"At current market levels, the long-term arrangement with Sichuan would yield attractive returns," Mr. Avery said.
Sichuan Chemical is a state-owned enterprise that is China's third-largest chemical company and one of its largest fertilizer manufacturers.
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