EarthRenew (ERTH.C) announced they have signed a non-binding letter of intent (LOI) to lease approximately 15 acres of land from K+S Potash Canada General Partnership (KSCP).

The land is near KSCP’s existing Bethune, SK potash mine and processing plant, where EarthRenew wants to build a new fertilizer manufacturing facility. ERTH’s projections estimate that the new facility would be able to produce up to 100,000 tonnes of granulated regenerative and organic fertilizer product, which sells for between $345 and $545 per metric tonne, representing a gross margin of ~30%. EarthRenew expects the facility to cost between $10 million and $15 million, which they aim to finance through a combination of grants, debt, and equity.

“The signing of this LOI represents our commitment to working towards increased manufacturing capacity. We are very excited to be pursuing an opportunity that would allow us to work closely with a global leader like K+S Potash and to secure consistent access to their high-quality potash,” stated EarthRenew’s CEO Keith Driver. “Customers prefer our regenerative products because they are made from natural mineral sources which are essential to the plant but do not leach into groundwater like conventional products. KSPC’s potash is an integral part of our blends and this LOI further establishes our long-term relationship and commitment to building the best soil health products possible.”

Before any ground is broken for the facility, there are a handful of conditions that need to be met, including, but not limited to, execution of a definitive agreement with KSCP, such as a long-term lease agreement and agreements respecting shared services, and completion of permitting and engineering activities. As the letter is non-binding, EarthRenew is continuing to scout other locations for the facility in Western Canada and the US.

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However, if they do build their facility on KSCP’s land, pursuant to the terms of the LOI, ERTH anticipates entering into a potash supply agreement with KSCP, whereby they will supply potash by-products for raw material input into EarthRenew’s regenerative fertilizer blends. Both the proposed potash supply agreement and the lease of the land will last a minimum of 15 years each. The LOI also includes the terms of the lease and shared services for the facility, granulation services, marketing and distribution and the potential option to collaborate on future product innovation and research and development within the Facility.

KSPC’s President and General Manager, Sam Farris, commented, “We welcome the possibility of EarthRenew establishing its facility near our site to secure a local outlet for our potash by-products. The opportunity to add value to our potash locally would mean more local jobs and economic activity and would open the door to further partnership between our companies in the future. The KSPC team has been working with the EarthRenew and Replenish teams for the past several months as a by-product sales partner and we look forward to building on those relationships with this exciting potential partnership opportunity.”

Following the news, EarthRenew’s share price is up two cents and is currently trading at $0.34.

Full disclosure: EarthRenew is an Equity Guru marketing client.

Written By:

Piers Eaton

Canadian, English, and American writer, interested in human behavior. Can usually be found on reading or on a walk. Passable musician and decent snowboarder.

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