Comtrax Logistics Solutions hopes farmers will contribute to the feasibility study to get idea off the ground
MILESTONE, Sask. — They’ve made their pitch, and now proponents of a commodity hub near Weyburn, Sask., say it’s up to producers to decide if they will help build it.
Comtrax Logistics Solutions held 11 public meetings in southeastern Saskatchewan to see what producers think of a grain handling facility combined with a 260-car loop track rail system and transloading capability for commodities such as oil, aggregate and fertilizer.
The company hopes landowners will contribute $600,000 for the feasibility study, or about $1 for every acre in the southeast region. It had raised close to $200,000 before the meetings ended last week.
Comtrax believes producers could then raise $30 million of the estimated $75 million capital cost if the proposed facility went ahead. The rest would come from condo sales and commercial partners such as grain and oil companies.
Mark Bratrud, one of the seven producers promoting the idea, said raising the money for the feasibility study would demonstrate to potential partners that producers are on board.
However, he said producers need to look at the first contribution as a donation.
“This is the risky money,” he said.
“We can’t make you any promises at this point.”
The $30 million investment is based on one bushel per acre, worth about $10, on 600,000 acres for five years.
If that supporting acreage were to double, it would be a $5 per acre investment over five years.
“Our goal is to raise it from producers,” Bratrud said.
“The advantage of raising it from producers is we want to have that influence in the company to be innovative and doing things that are reacting to different problems.”
For example, the facility could offer grain drying or blending to reduce ergot or fusarium.
Bratrud said it’s critical that the facility be fully capitalized.
Wayne Paproski, a partner at MNP who specializes in tax, said there are lots of ways to raise the money if the project proceeds. He highlighted two at the Milestone meeting that would be advantageous from a tax perspective and lessen costs up front.
“One would be a contribution of grain for shares and using rollover provisions under the tax act that allow a producer to sell a high value of grain but elect for tax purposes to have it transferred for at a lower amount, for example, a dollar,” he said.
“It’s fully tax deferred until such point that they sell the shares.”
Another is using pre-tax registered savings plan dollars to contribute to the shares. The money is tax-deferred until the share is sold or withdrawn from the RSP, he said.
“The RSP one is very commonly used in private and/or public company placements,” Paproski said.
“The grain one is a bit unique to a cash-based industry that might use a commodity.”
Any type of share offering must still be offered under a prospectus.
Bratrud said no final decision has been made on location but a grain facility is likely two years away if everything went well.
“We wouldn’t be asking for this if we didn’t feel confident,” he said.