Potash North Resource Corporation

Potash North Resource Corporation
Potash One Inc.

Potash One Inc.

January 22, 2009 08:30 ET

Potash One and Potash North Announce Business Combination

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 22, 2009) - Potash One Inc. ("Potash One") (TSX:KCL) and Potash North Resource Corporation ("Potash North") (TSX VENTURE:PON) are pleased to announce that they have entered into a binding letter of intent ("LOI") containing the principal terms by which, subject to satisfaction of certain conditions, Potash One will acquire all of the issued and outstanding common shares of Potash North through a Plan of Arrangement or other form of business combination (the "Business Combination").

The LOI contemplates that each Potash North shareholder will receive 0.3125 common shares of Potash One for each common share of Potash North. In addition, all outstanding convertible securities of Potash North will be exchanged for comparable convertible securities of Potash One in an amount and at exercise prices adjusted in accordance with the same exchange ratio. The exchange ratio represents an approximate 29% premium for the shares of Potash North over the 20-trading day period prior to the execution of the LOI.

There are currently 65,745,002 Potash North common shares issued and outstanding, 2,750,000 outstanding options to purchase Potash North common shares, 38,672,000 Potash North common shares issuable pursuant to outstanding share purchase warrants and an additional 5,000,000 common shares and 5,000,000 common share purchase warrants issuable pursuant to an outstanding unsecured convertible note. Potash One owns 7,583,850 common shares of Potash North which represents 11.5% of the currently outstanding shares of Potash North and an additional 7,583,850 share purchase warrants.

Certain shareholders including Potash One and all the directors and officers of Potash North have agreed to vote their shares in favour of the Business Combination.

The Business Combination will require the approval of Potash North securityholders, the Toronto Stock Exchange and the TSX Venture Exchange, and will be subject to other customary conditions, including the execution of a definitive agreement and completion of due diligence.

The LOI provides that Potash North shall not, directly or indirectly, solicit, initiate or encourage letter of intent offers from, or negotiations with, any third party with respect to any other potential merger or acquisition of all or a material portion of Potash North's business, assets or outstanding securities except where required to satisfy fiduciary obligations of directors. Potash North and Potash One have both agreed to pay a non-completion fee of $2.5 million under certain circumstances. The transaction is expected to close by May 15, 2009.

The Business Combination, once completed, will create one of the strongest junior potash development companies in Canada. Potash One will be fully funded through to completion of feasibility on its solution mining amenable potash development property located in southern Saskatchewan (the "Legacy Project"). Current cash of the resulting company would be approximately $50 million.

Paul F. Matysek, President and CEO of Potash One, stated, "I am very pleased that Potash One has been able to execute this binding LOI with Potash North as this transaction strengthens our balance sheet, further consolidates the potash junior industry and positions the company with over 500,000 acres of subsurface Potash permit holdings, in Saskatchewan. This includes a very prospective exploration stage potash property adjacent to the largest potash mine in the world. In addition, we are pleased to have the support of a number of significant shareholders who together with our present shareholders are committed to the continued development and progress of the Legacy Project. This Business Combination further strengthens our exploration and development position in the Potash industry, bringing us closer to our goal of becoming the first greenfield potash producer in Canada in decades."

Craig A Angus, President and CEO of Potash North, stated; "I am very excited with the opportunity that this transaction presents to our shareholders. As a result of the turmoil in world capital markets, it is increasingly apparent that the successful companies in the junior potash space will be those that have large cash treasuries and advanced stage projects moving toward feasibility and development. This business combination will create the best capitalized Canadian Junior potash development company working in the Saskatchewan basin. Our shareholders will have the opportunity to participate in the advancement of the Legacy Project to completion of feasibility and potentially through to production in the coming years while maintaining the exploration exposure to our KP 416 and 417 Permit areas near Esterhazy."

Canaccord Capital Corporation has acted as advisor to an independent committee of the Board of Directors of Potash North and has provided to such independent committee of Potash North their verbal advice, subject to final review of documentation, that the consideration offered pursuant to the transaction is fair, from a financial point of view, to the shareholders of Potash North, other than Potash One.

Information on Potash One and Potash North may be viewed on the internet at their respective websites noted below, or at the Canadian securities regulator's website at www.sedar.com.

(1) Legacy Project: Potash One is a TSX listed Canadian resource company engaged in the exploration and development of advanced potash properties amenable to solution mining. The Company owns 100% of more than 330,000 acres of contiguous Potash Subsurface Exploration Permits in Saskatchewan. It includes the 97,240 acre Legacy Project which has a 43-101 compliant Inferred Mineral Resource of 391.5 million tonnes of K20 and Indicated Mineral Resource of 40.8 million tonnes of K20 and is adjacent to the largest producing solution mine in the world.

Cautionary Statements Regarding the Business Combination: Completion of the transaction is subject to a number of conditions, including regulatory approval, shareholder approvals, completion of satisfactory due diligence, a definitive agreement and approval of the British Columbia Supreme Court. There can be no assurance that the transaction will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the Management Information Circular to be prepared in connection with the transaction, any information released or received with respect to the business combination may not be accurate or complete and should not be relied upon. Trading in the securities of exploration and development stage resource companies should be considered highly speculative.

Forward-Looking Statements: Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" and elsewhere in the corporations' periodic filings with Canadian Securities Regulators. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. Statements in this press release other than purely historical information, including statements relating to the companies' future plans and objectives or expected results, constitute forward-looking statements. Forward looking statements are based on numerous assumptions and are subject to all of the risks and uncertainties inherent in the companies' business, including risks inherent in mineral exploration and development. The companies do not assume the obligation to update any forward-looking statement. In particular, no representation is made in this release as to the timing of the business combination, whether the business combination will complete on the terms described herein or at all, the success or value of the combined companies after the business combination. In addition, there are numerous risks and other factors that will influence a development decision, including concluding resource evaluations on mineral properties, mine design limitations, permitting risks and economic factors, all of which may be beyond our control.

U.S. Cautionary Statements: We advise US investors that while the terms "measured resources", "indicated resources" and "inferred resources" are recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize these terms. US investors are cautioned not to assume that any part or all of the material in these categories will ever be converted into reserves.

TSX and TSX Venture Exchange: Neither the TSX nor the TSX Venture Exchange has reviewed, and neither accepts, responsibility for the adequacy or accuracy of this release.

Contact Information

  • Kin Communications
    Arlen Hansen
    (604) 684-6730
    Potash North Resource Corporation
    Craig Angus
    President & CEO
    (604) 697-6262
    Website: www.potashnorth.com
    Potash One Inc.
    Paul Matysek
    President & CEO
    (604) 697-5686
    Website: www.potashone.com