Potash miner Prospect Global Resources Inc PGRX.O said on Friday that private equity firm Apollo Global Management LLC (APO.N) would buy $100 million worth of Prospect debt to help it develop an Arizona mine.
The deal follows on the heels of Prospect agreeing a 10-year potash supply deal earlier this week with a Chinese fertilizer company, Sichuan Chemical Industry Holding (Group) Co SICHAD.UL. Prospect used that deal to obtain financing, effectively showing creditors it has customers in place and a guaranteed cash stream.
Prospect has yet to receive regulatory approval for the Arizona mine, and doesn't expect it to open until at least 2015.
Shares of Denver-based Prospect slumped 8 percent to $3.11 in early trading on Nasdaq.
The funds will help Prospect complete feasibility studies for the mine, which Apollo senior partner, Gareth Turner, described as a "highly strategic resource."
Potash is one of the most important fertilizers for farmers to apply, after nitrogen and phosphate. Prospect's mine in Holbrook, Arizona, is estimated to have the largest potash reserves in the United States, with nearly 40 years of supply.
Prospect will issue the $100 million debt as 10 percent convertible second lien notes. About 4 percent of the interest rate will be paid in cash, and the remaining 6 percent in additional notes.
Apollo will have the option of buying 16.7 million Prospect shares at a strike price of $3 per share. Prospect's stock closed Thursday at $3.38 per share.
Prospect separately said it would offer 30 million shares. It currently has about 55 million shares outstanding.
(Editing by Bernadette Baum)