Potash Sprouting New Entrants
Thursday, June 19, 2008
The world's major potash producers' stocks keep powering
higher day after day with Potash Corp. of Saskatchewan (NYSE- POT), The Mosaic
Company (NYSE- MOS), and Agrium Inc. (NYSE- AGU) moving strongly higher over the
past two weeks. Investors are beginning to reinvest their gains in these larger
players down the food chain into some of the potash explorers. So long as these
larger companies can keep up their momentum and avoid any sharp downturns, the
juniors should continue upwards as well.
Over the past week we have seen many new entrants into the
potash arena, and after the success of the Potash North Resources IPO we were
not surprised. These deals were in the works before, but the huge success of the
recent IPO market and Raytec Metals' explosive move due to their Resource
Calculation proved to be the inducement for the finalizing of these
transactions. From last month, it is fair to say that the junior explorers have
doubled in size and now offer some alternatives to Canadian potash explorers.
Now you can invest in American, Argentinian and Australian potash explorers.
Even in Canada there are multiple districts now available for investment through
There are many out there calling this a bubble and
proclaiming that we are near, if not at, a top. Our experience with bull markets
in resources, especially those which arrive on the scene with very few companies
publicly traded due to previous long market downturns or stagnation, is that
they can last many years longer than anyone may believe. The market can remain
irrational longer than anyone of us can remain liquid, which should be a warning
to those saying that this is a shorting opportunity. Usually if this strategy is
to work it must be implemented after the turn of a year, and even then the
bubble does not pop until a few months into the new year. We still believe that
this is a multi-year bull market going forward and that business looks strong
going forward. Looking at next year we see that the P/E's for the potash
producers looks in line with historical standards for resource companies. One
important news item to watch is how much demand is increased this year by
farmers in the US Midwest who need to purchase more potash related products due
to leaching of their fields to the heavy rains, and for those unlikely farmers
whose lands have been flooded. Corn prices have lead the way higher over the
past few years, dragging along with it the price of other grains and increasing
demand for (and the price of) any and all fertilizers.
We here at theinvestar.com, LLC track companies in the
industries we follow, and have compiled a list of potash explorers and players
for investors to use as reference. Some of the companies listed here appear in
more than one list, which is due to having properties in multiple areas. Also of
note, we have not included the potash producers such as Potash Corporation of
Saskatchewan (NYSE- POT), The Mosaic Company (NYSE- POT), Agrium Inc. (NYSE- AGU)
or any of their partners. Below you will find explorers with properties in South
America, the United States, and Canada. We fully anticipate that this list will
quickly be obsolete due to new entrants in a matter of days most likely, weeks
if we are lucky.
Potash Explorers in South America:
Allana Resources Inc. (TSX Venture- AAA) owns the rights to
154,000 hectares through its subsidiary Latin American Potash Corp. (LAPC). The
land position is located in the Neuquen province of Argentina in close proximity
to Rio Tinto's Potasio Rio Colorado Project as well as large land positions held
by Bunge and CVRD.
Lara Exploration Ltd. (TSX Venture- LRA) has set up a joint
venture with Sprott Resources Corp. to partner on acquiring phosphate, potash,
and other fertilizer feedstock minerals outside of Canada. Companies currently
have a phosphate mine in South America.
Marifil Mines Ltd. (TSX Venture- MFM) has the rights to
100,000 hectares in Neuquen province and has two historic drill holes from oil
exploration indicating the presence of high grade potash on the property.
Sprott Resource Corp. (TSX- SCP) has joint venture with
Lara Exploration, see above.
Potash Explorers in United States:
Ringbolt Ventures Ltd. (TSX Venture- RBV) has leases
totaling 86,000 acres in the Paradox Basin, a major potash mining district which
hosts a mine operated by Intrepid Potash (NYSE-IPI).
Trigon Uranium Corp. (TSX Venture- TEL) recently purchased
a 50% stake in Intercontinental Potash Corp., a privately held company. Under
the deal Trigon has the right to maintain its 50% equity stake and will run the
office/management needs of Intercontinental Potash. Intercontinental Potash has
claims in Arizona, Colorado, New Mexico and Utah.
Utah Uranium Corp. (OTCBB- UTUC) has 29,000 acres located
near Intrepid Potash's (NYSE-IPI) Cane Creek operations and other lands
prospective for potash in the Paradox Basin.
Potash Explorers in Canada:
Altius Minerals Corp. (TSX- ALS) has formed a joint venture
with Sprott Resources Corp. to search for potash projects in Canada for the two
companies to explore. Currently the two companies are exploring in the St.
Alix Resources Corp. (TSX Venture-AIX) recently acquired
~14,000 acres (noncontiguous) of potash lands in Saskatchewan with partner Geo
Minerals Ltd. (TSX Venture GM). The companies have 640 acres located next to
lands held by Potash North Resources and 6,200 acres located 25 kilometers from
the K1 and K2 potash mines.
Anglo Potash (TSX Venture- AGP) is in the process of being
bought out by BHP Billiton (NYSE- BHP).
Athabasca Potash Inc. (TSX- API) has the Burr Project which
they are actively developing through exploration through drilling and 2-D
Seismic. The company has a total of 1,500,000 acres (ranks second among
explorers in the area) in the world's most prolific potash production area.
Cornerstone Capital Resources Inc. (TSX Venture- CGP) has
staked 1085 claims totaling 271.25 square km which the company calls the Codroy
Project. This project is in the St. George's Basin area.
Geo Minerals Ltd. (TSX Venture- GM) is partnered with Alix
Resources. Please see above.
Grizzly Diamonds Ltd. (TSX Venture- GZD) has applied for
200,000 acres on the Alberta and Saskatchewan provincial borders with the
government confirming that 115,000 acres will be awarded to Grizzly in due
course and the remaining 85,000 acres being subject to a sealed bid sale, which
Grizzly will participate in.
Hinterland Metals Inc. (TSX Venture- HMI) submitted an
application for 17,783 hectares for salt and potash in Nova Scotia. There are
two salt deposits located on these lands, with two layers of potash found at
both locations, although at the Malagawatch deposit.
Potash North Resource Corp. (TSX Venture- PON) has 185,000
acres covered by two permits in Saskatchewan adjacent to lands held by Mosaic
(Esterhazy) and 45KMs north of the Rocanville Mine. The company has two
shareholders of note, Potash One (TSX- KCL) and another company owned by a
Lundin family trust.
Potash One Inc. (TSX- KCL) currently has 336,344 acres in
Saskatchewan surrounding Mosaic's Belle Plain Solution Mine. The company is
focused on 97,240 acres just north of Belle Plain Mine where they have their
Findlater Potash Project. The company is also a significant shareholder in
Potash North (TSX Venture- PON) with approximately 13% of the outstanding
Raytec Metals Corp. (TSX Venture- RAY) holds nearly 300,000
acres in Saskatchewan's prolific potash grounds. Raytec announced the results of
their recently completed NI 43-101 resource calculation indicating an estimated
indicated resource of 148.02 million metric tonnes grading 23.44% K2O (34.7
million tonnes of K2O) and an additional inferred resource of 229.16 million
metric tonnes grading 20.40% K2O (46.76 million tonnes K2O). The company also
expects to receive exploration permits for their claims in July 2008.
Sprott Resource Corp. (TSX- SCP) has joint venture with
Altius Minerals for Canadian potash exploration, see above.
Universal Uranium (TSX Venture- UUL) has 816 claims
totaling 204 square km in the St. George's Bay Basin in Western Newfoundland.
The property borders land held by Altius Resources Inc. (TSX- ALS), Sprott
Resource Corp. (TSX- SCP) and Vulcan Minerals (TSX Venture- VUL).
Utah Uranium Corp. (OTCBB-UTUC) has 474,400 contiguous
acres in the province of Alberta adjoining the Saskatchewan border. Currently
the company is negotiating with potential partners in regards to creating a
Vulcan Minerals Inc. (TSX Venture- VUL) may have discovered
a new potash zone in the St. George's Basin from drilling conducted by the
company. In 2002 the company encountered a 165-meter thick section of evaporates
consisting of salt and a potentially significant potash zone. Again in 2004 the
company intersected 200 meters of salt about 2 km from the 2002 drill hole with
seismic data suggesting that the discoveries are connected and that a
potentially significant salt/potash resource may exist in the St. George's Bay
Many of these companies are not “pure-plays” but instead
moving into the potash arena. This is yet another indication that the market has
not yet matured or reached a tipping point where the next move would be
dramatically lower. Until we see companies moving to focus solely on potash in a
major way, we shall believe that there is still room to move upwards. Investors
would be wise to watch for new demand from farmers in the Midwestern United
States as inventories at supply shops for various fertilizers are at next to
nothing due to the high storage costs of buying a commodity at these high prices
as well as the downside risk for the stores. No one knows whether there is
excess to be had at this moment, but the market will adjust accordingly and we
could see higher prices altogether if the world's richest farmers really want
potash for their fields.