IC Potash Corp. entered a binding letter of intent to sell its indirect interest in the Ochoa sulfate of potash project in New Mexico to Cartesian Capital Group LLC for about US$15 million.
Under the agreement, Intercontinental Potash Corp. (USA), or ICPUSA, which fully owns the Ochoa project, will redeem its common shares that are indirectly owned by IC Potash.
The IC Potash board anticipates proceeds of approximately US$15 million from the disposition.
Consideration is expected to include US$1.4 million in cash funded by Cartesian upon the release of executed settlement and transaction documents, and a US$1.4 million promissory note due to IC Potash by ICPUSA, which will be guaranteed by Cartesian and is due Jan. 8, 2018.
In addition, IC Potash will retain a water royalty equal to 75% of ICPUSA's water sales revenue, up to US$12.2 million. The water royalty will be backed up by a 1% mining royalty, should the full US$12.2 million not be received by Dec. 31, 2022.
As part of the agreement, which is subject to final documentation and shareholder approval, existing litigation between the parties and their affiliates will be settled and associated claims released.
IC Potash was recently pursuing a lawsuit in Colorado to reverse a "very dilutive financing" by Cartesian Capital, which it believed was undertaken to gain full control of the Ochoa deposit at a price below fair market value.