Gensource Potash Corporation (GSP) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Annual General and Special Meeting of Gensource Potash Corporation. Please note that the meeting will be recorded. I would like to introduce Mr. Micheal Ferguson, Chair and CEO of the company. Mr. Ferguson,the floor is yours.

Thank you very much, Rod. Good morning, everyone. My name is Mike Ferguson, the Chair of the company, and I will act as Chair of this meeting. I welcome you to the 2022 Annual General and Special Meeting of Shareholders of Gensource Potash Corporation. We are holding our Annual General and Special Meeting of Shareholders virtually this year via the TSX Trust virtual meeting platform. We hope to return to normal in-person meetings in the future as health and safety best practices allow I thank you for your attendance at this year's meeting. And I'd like to begin the meeting with some remarks on activities and progress over the past year, and it has been a remarkable year from a number of different perspectives. First, let's look at the fertilizer and specifically the potash industry and then review world events that have created our current world situation. In the fertilizer industry, demand continued to pick up as the world started to emerge from the COVID-19 lockdowns following a consistent steady upward trend in demand that has been with us for decades. This drove the beginnings of a moderate firming of fertilizer prices across all nutrients. These price increases were supported by agricultural commodity prices which we're also strengthening on world food demand and a reduction in supply from reduced yields due to recent drought in several growing regions around the world. The potash industry specifically was additionally challenged with global event impacts that layered on top of the general rise in demand. First off, last June, we saw the flooding of Mosaic's K1 and K2 mines at Esterhazy, Saskatchewan. While the mines have been fighting water inflow for decades, the southern flooding and loss of the mines immediately removed 5 million tons per year of production capacity from the industry. Mitigating actions were taken to lessen the impact but nonetheless, the supply shock remained. Then due to the Belarus hijacking of Ryanair flight 4978 on May 23 last year, sanctions started to be applied against that country in June and progressively increased in scope until beginning to impact potash export from the country in the fall of 2021. Belarus colleague produces a significant portion of the world's potash and naturally, as these sanctions impacted potash supply price increases accelerated. Finally, in February of this year, we saw Russia invade its neighbor Ukraine. This active aggression caused another supply side shock as Russian potash supply suddenly became unavailable to international markets. Between Belarus and Russia, almost 40% of the world's potash supply is now under a cloud, either actually sanctioned or simply very difficult to access due to financial and trade sanctions levied against Russia. Such a large proportion of production cannot simply be made up by other producers. And the result is that some markets will go short of potash this year and potentially next year and into the future. The most concerning aspect is that these supply changes are now structural in nature and may take many, many years to sort out even after Russian aggression in the Ukraine finally ends. Supply constraints and fertilizers were more widespread than just potash as Russia is a major manufacturer of nitrogen phosphates and blended NPK products, all fertilizer prices of skyrocketed which will lead and is, as we speak, leading to, some demand destruction where growers will either underapply fertilizers or reduce planted acreage. And the result of those grower decisions may be an overall reduction in food supplies, this harvest and for harvest into the future sparking concerns over global food security. We hear a lot in the news these days about global food security. Further and with a greater impact to food security. Russia and Ukraine together represent in the range of 30% of the world's export volumes of wheat and barley. With the war remaining in full swing, concerns are real surrounding the ability of Ukrainian farmers to plant their crops and harvest them and the ability to ship existing and future grade volumes from Ukrainian ports, thus exacerbating the world food security concern. While you and I will see increased cost of food at the grocery store, these -- there are areas of the world that will go short and people will go hungry due to these conditions. Now let's look at the world's financial market over the last year. 2021 was a banner year for stock markets around the world, at least at the beginning with rising indexes and strong profitability, driven by increased consumer demand as we emerged from the worst of the COVID knock -- lockdown. That all began to abate, though in the fall of last year, supply chain issues and availability of raw materials for manufacturers caused concerns around the ability of the world's mining and manufacturing infrastructure to meet demand. Markets cooled and volatility increased. Inflation started to enter the picture as a real concern. Volatility in market index shrinkage continued into early 2022, and leading into Russia's February 24th, invasion of Ukraine. That caused volatility to increase further and world markets worldwide have plunged since that time. As Russia's war continues, markets continue to correct downwards. To the point, as we stand here today, we see markets in turmoil and continuing to suffer heavy losses. Concerns around inflation, continued supply chain disruptions, the war in Ukraine and food inflation and food security continue to drive volatility. I read a newsletter article recently containing some statistics and analysis that positions the current financial market conditions as the worst beginning to a calendar year in over a century. This is the context we're working in as we push the Tugaske project forward. Gensource has been active in the capital market since early this year, working towards the right financing structure for our first project. We continue to work with our Tugaske partner HELM, and they continue to be very supportive. We are making progress, but progress is slower than hoped due to the financial market conditions that I've described. Those represent the headwinds we face. My expectations were that I could communicate to you today that we were fully financed and ready to move into construction. But I can't say that right now due to these headwinds. The good news is that our senior lenders and our partners remain strongly supportive and committed to the project. And the many investor groups that we've met with have given uniformly positive feedback on the company, the business model and the project. We will get this financing completed as soon as the markets begin to accept new projects. The tailwinds of course, are that we now have a heightened awareness in almost every corner of the world about the value of fertilizers to help us grow the food we need to feed our increasing population. Regions around the world that are reliant on imported fertilizers are hardest hit in the current situation. Brazil comes to mind immediately in this regard, being in a position where they import over 95% of their required 10 million tons or so of potash every year. They and others have created strategies to work towards locally produced fertilizers, which will have a more resilient supply chain and a lower landed cost in the marketplace. We believe that Gensource is well placed to support these efforts. These tailwinds represent opportunities to begin to develop the gensource business plan, our project #2. Just expressing strong interest in the Gensource business model of providing direct access to the resource through a dedicated, direct and independent supply chain. This idea is a fundamental part of the business strategy, which is to create these new and independent supply chains that will eventually begin to diversify and add resiliency to the potash supply chain. The supply chain as it currently stands in the potash industry lacks any such resiliency. There are only 5 major producers accounting for 75% to 80% of the market. Each of the producing assets of those players are large and, in many cases, old mines. That means that an incident at any 1 producing asset can have a global impact on the market. Diversifying the supply chain is a fundamental business goal of Gensource. I want to conclude my opening remarks by applauding you, our shareholders. Some have come and gone, but so many of you who have been with us from the beginning. It's been a longer road than anyone expected at the outset, and I thank you for your continued support and your strategic forward-looking perspective on what Gensource is achieving. Thank you. We'll now proceed with the business of the meeting, the formal part of the meeting. First, I'd like to start with some introductions. With us today online are the following members of your Board of Directors, Alton Anderson, Stephen Dyer, Micheal Mueller, Amy O'Shea, Calvin Redlick and myself, Mike Ferguson. Also present online are the following officers of the company. Rob Theoret, Vice President of Finance and Business Development; and Deb Morsky, Vice President, Corporate Services. Thank you all for joining. In order to deal with the formal portion of our meeting as efficiently responsible, certain shareholders have been asked to move the resolutions, which we will consider and which are set out in the notice of meeting. I will call on them at the appropriate time. This will allow more time for your questions. Only shareholders of record or their validly appointed proxy holders at the close of business on April 7, 2022, are entitled to vote at this meeting. If you have already sent in your proxy, your vote has already been counted and you do not need to vote at this meeting. First order of business is to call the meeting to order. So I'll declare that this meeting now comes to order. Deb Moresby will act as our Secretary of the meeting, and Stephen Newen of TSX Trust will act as a scrutineer. [Operator Instructions] There will be an opportunity to ask questions on each resolution in turn to submit your question, click the ask a question button on the left of the menu on your screen and type your question in your box. Once discussion on all items of business has concluded, I will give you a minute to enter your votes and then declare voting closed on all resolutions. First item, I've received a declaration of mailing from our transfer agent confirming that the proxy materials have been duly mailed to shareholders. The notice of meeting, the instrument of proxy, management information circular dated on April 11, 2022, declaration of mailing and 2021 audited financial statements have been filed and are available for inspection on SEDAR. Will the secretary, please report the number of shareholders present in person and the total number of shares they represent, together with the number of shares represented by proxy as per the scrutineers' report?

This 1 holder represented in person or web 14,564,143 shares, 209 management proxies received representing 153,972,107 shares for -- which represents 40.024% of the total share count.

Thank you, Deb. On the basis of the foregoing, there is a quorum present and proof of notice calling this meeting has been given in accordance with the company's bylaws and the Business Corporations Act of Ontario. I now declare the meeting is regularly called and properly constituted for the transaction of business and instruct the secretary to make the declaration of mailing and attached exhibits as Schedule A to the minutes of this meeting. Before commencing the business of the meeting, I'd like to comment on voting procedures. Only shareholders of record, at the close of business on April 7, 2022, are entitled to vote at this meeting. Each registered shareholder or their duly appointed proxy holders entitled to vote on each matter and has 1 vote for each share entitled to be voted on a matter and held by that shareholder. If you've already sent in your proxy, your vote has already been counted and you do not need to vote at this meeting. We will also conduct voting by electronic ballot on all matters. Voting will be open for all resolutions at the same time, which will allow you to choose to vote on each resolution immediately or wait until the conclusion of each resolution prior to casting your vote. To vote, simply click on for or withhold or against as applicable. You will see confirmation immediately above the voting buttons once you have submitted your choice. The results will be tallied by the scrutineer once voting is complete and will be provided at the end of the formal portion of the meeting. First formal item of business is the presentation of the balance sheet and related financial statements of the company as at December 31, 2021, together with the report thereon of the auditors of the company. Copies of these documents have been mailed out to all shareholders who have so requested. And they are additionally filed on SEDAR. It is not proposed to read them at the meeting. The next item of business is the election of directors for the ensuing year. At the company's 2011 Annual and Special Meeting, shareholders passed a resolution empowering the Board to determine from time to time, the number of directors of the company to be elected at the Annual Meeting of Shareholders of the company. The Board has set the number of directors to be elected at 6, and it is intended that 6 directors will be elected. Therefore, the nomination and election of directors shall be set at 6, and it is attended that 6 directors be elected. Particulars of the 6 proposed nominees for whom in the absence of other instruction, management proxies will be voted are set out in the information circular. Pursuant to by-law Number 2a of the company, which was adopted by the Board as a by-law of the company on May 9, 2013, nominations of persons for election to the Board must follow the notice procedure set out in by-law 2a. As the company has not received notice of proposed nominee to the Board by a nominating shareholder, the only individuals entitled to be nominated as directors at this meeting are the person's named as nominees in the company's information circular. Those being Alton Anderson, Stephen Dyer, Micheal Ferguson, Micheal Mueller, Amy O'Shea, and Calvin Redlick. Those individuals are hereby nominated as directors of the company to hold office until the next annual meeting or until their successors are elected or appointed subject to the Business Corporation Act and the by-laws of the company. In accordance with our majority voting policy, the election of directors will be conducted by allowing registered shareholders and proxy holders to electronically register votes for or to be withheld from each director. Please vote for each individual director if you have not already done so. [Voting]

The next item of business is a resolution appointing MNP LLP chartered accountants to serve as auditors of the company for the ensuing year and authorizing the directors to fix the remuneration to be paid to the auditors. I now ask that someone move for the appointment of the auditors and to authorize the directors to fix their remuneration.

I move that MNP LLP chartered accountants be appointed as auditors of the company for the ensuing year. or until their successors are appointed and that the Board of Directors be authorized to fix their remuneration. Moved by Alton Anderson.

I second the motion, second by [ Carla Lions ].

Thank you for the motion. And the second -- shareholders, please vote on this motion now if you have not already done so. [Voting]

The next item of business is to consider a resolution appointing the company's amended and restated -- sorry, approving the company's amended and restated rolling stock option plan, the details of which are more fully set out in the information circular. May I have a motion approving the company's amended and restated rolling stock option plan as amended and conditionally approved by the TSX Venture Exchange on April 13, 2022?

Being resolved as an ordinary resolution of the shareholders of Gensource Potash Corporation, the company that: one, the company's amended and restated stock option plan, the amended and restated option plan as described in the company's information circular dated April 11, 2022, including the reservation for issuance under the amended and restated action plan at any time of a maximum of 10% of the issued and outstanding common shares of the company be and is hereby ratified, confirmed and approved subject to the acceptance of the amended and restated action plan by the TSX Venture Exchange, the exchange. Number two, the Board of Directors of the company be authorized in its absolute discretion to administer the amended and restated option plan amend and modify the amended and restated option plan in accordance with its terms and conditions and with the policy of the exchange. And three, any one director or officer of the company be and is hereby authorized and directed to do all such acts and things and to execute and deliver under the corporate CEO of the company or otherwise all such deeds, documents, instruments and assurances as in his or her opinion may be necessary or desirable to give effect to the foregoing resolutions, including, without limitation, making change to the amended and restated option plan required by the exchange or applicable securities regulatory authorities and to complete all transactions in connection with the administration of the amended and restated option plan. moved by Alton Anderson.

I second the motion, seconded by [ Carla Lions ].

Thank you for that. Shareholders, please vote on this motion now if you have not already done so. [Voting]

The next item of business is to consider a resolution to consider and vote to reapprove by ordinary resolution, the shareholder rights plan, dated April 8, 2019. A summary of the shareholder rights plan is set forth in Schedule C to this -- to the information circular. Shareholder re-approval is being sought in accordance with the policies of the TSX Venture Exchange. The shareholder rights plan was approved by the TSX Venture exchange. May I have a motion to reapprove the shareholder rights plan dated April 8, 2019?

Being resolved as an ordinary resolution of the shareholders of Gensource Potash Corporation, the company that one, the shareholder rights plan substantially as summarized in Schedule C to the management information circular of the company dated April 11, 2022, the shareholder rights plan be and is hereby reapproved and adopted as the shareholder rights plan of the company with such modifications, if any, as may be required by any stock exchange upon which the shares of Gensource Potash Corporation may be listed or may trade from time to time. Two, any officer or director of the company is hereby authorized to do all such acts and execute and file all instruments and documents necessary or desirable to carry out this resolution, including making appropriate filings with regulatory authorities including any applicable stock exchange moved by Alton Anderson.

I second the motion seconded by [ Carla Lions ].

Thank you very much. shareholders, please vote on this motion now if you have not already done so. [Voting]

Next item of business is to consider a special resolution. We're calling it to reapprove to it as the continuance resolution, approving the continuance of the company out of Ontario under the Business Corporations Act of Ontario into Saskatchewan under the Business Corporations Act of Saskatchewan. We're calling -- we refer to this action as the continuance to allow the company to move its corporate records office to Saskatchewan, which is where its head office is and its land assets are located, including its proposed potash project located near Tugaske, Saskatchewan. May I have a motion to approve the continuance of the company under the Business Corporations Act of Saskatchewan.

Being resolved as a special resolution of the shareholders of Gensource Potash Corporation of the company, that one, the continuance of the company from the province of Ontario in the province of Saskatchewan pursuant to Section 181 of the Business Corporations Act Ontario and Section 181 of the Business Corporations Act Saskatchewan, the continuance is hereby approved; two, the continuous application as approved by the directors or in such other form as the directors of corporations under the Business Corporations Act, Saskatchewan may accept or hereby approve in such form with such amendments as the director or officer executing the same may approve such approval to be conclusively evidenced by the director or officer's signature therein too. Three, the articles of continuance substantially in the form attached to the management information circular dated April 11, 2022, as Schedule E are hereby authorized and approved to become effective on the date of continuance into Saskatchewan. Four, a new by-law substantially in the form attached to the management information circular dated April 11, 2022, as Schedule F are hereby authorized and approved to become effective on the date of continuance into Saskatchewan. Five, effective on the date of continuance into Saskatchewan, the repeal of the current by-laws and replacement with the new by-laws of the company is hereby ratified and confirmed. Sixth, the Board of Directors of the company may, without further notice or approval of the shareholders of the company decide not to proceed with the continuance or otherwise give effect to the special resolution at any time prior to the continuance becoming effective. And seven, any director or officer of the company is hereby authorized for and on behalf of the company, to execute and deliver all documents and instruments and to take such other actions as such individual may determine to be necessary or desirable to implement this special resolution and matters authorized there. Moved by Alton Anderson.

I second the motion seconded by [ Carla Lions ].

Thank you very much. Please vote on this motion now if you have not already done so. [Voting]

As there are no further motions, voting on all motions is now closed. We will pause for a moment while the results are tabulated. I will continue. I've been advised by the scrutineer that the results are more than 50% in favor of each director and in accordance with legal requirements and our majority voting policy, those nominated are duly elected as directors. I've also been advised by the scrutineer that all other motions have been carried. This concludes the formal portion of the meeting, and I will direct that the scrutineers' report be kept by the secretary within the minutes of the meeting. This now concludes the formal business to be conducted at this meeting as set out in the information circular. Following termination of the formal part of the meeting, there will be time for shareholders to ask questions. As the formal meeting of the business of the meeting has now been completed, I declare the meeting terminated. We'll now have some time to answer any questions that are entered in the online question facility. It seems the questions we have are really around the remarks that I started with at the beginning of the meeting, so there's really no new questions and no additional information, therefore to be added. Very good. If there's no further questions from the shareholders, then I will say once again, thank you very much for attending our meeting this year and stay tuned as we progress our priorities.