Quantcast

Jim Letourneau's Blog

Investing, Technology, Travel, Geology, Music, Golf. I think that covers it.

Potash Juniors on Fire

We've had 71 days away from home this year and logged over 40,00 km of air travel.  Most recently we were in Turkey where I learned much about markets by visiting Istanbul's Grand Bazaar. Turkey's largest covered market is estimated to contain over 4000 shops. There is fierce competition for tourist dollars, there are no price tags on the merchandise, and touts start directing tourists to shops several blocks from the main entrance. Calls of "excuse me sir" lead to an invitation into a shop, an offer of tea and time-honed sales pitches. Picking up an "accidentally" dropped brush leads to an aggressive shoeshine offer in a matter of seconds (we were saved by our choice of footwear - runners).

Coincidentally there are just over 4000 listed securities competing for your investment dollar in the Canadian markets.

The SaskROCKS conference held this weekend was a great success. Conference organizer, Joe Martin of Cambridge House told me there were over 600 registrations. Saskatoon hosts the head offices of Cameco (CCO.TO, CCJ) and Potash Corp. (POT, POT.TO). These companies are global leaders in their respective industries and carry a combined market capitalization of well over C$40 billion.

Coincidentally, junior companies that are actively advancing uranium and potash deposits have seen a resurgence in investor enthusiasm. Juniors in this space have provided investors with amazing gains this year. Here is an excerpt from our Big Picture Speculator service about one of them...

Potash One (KCL.TO)

Potash stocks were one of the last "mini-bull" markets that peaked in June 2008 before stocks became toxic. Anglo Potash managed to ring the register early by selling out to BHP Billiton for $284 million ($8.15/share). BHP is now saddled with the heavy lifting of permitting, planning and financing the new 8 million tonne/year Jansen potash mine. A recent Financial Post article quoted analyst cost estimates of $2.5-billion for every 2.2 million tonnes of annual production. Initial BHP estimates have the mine running at full capacity by February 2026. Clearly there is a big leap of faith involved when laying out such large expenditures.

There is no shortage of potash, Saskatchewan's supplies could fulfill world demand for several hundred years. However it is a bulk commodity that lies 1000 to 1600m below the surface. Large shaft sinking is expensive and carries technical risk.

One company has taken a more nimble approach to mine development and may be the first new potash producer in Saskatchewan. Potash One (KCL - a great stock symbol) is planning to use solution mining because it is scalable, with lower CAPEX costs and quicker time line to production than hard rock operations.

Potash One's CEO, Paul Matysek is no stranger to putting together a successful company as he took Energy Metals from a market capitalization of $10 million in 2004 to $1.8 billion when it was sold to a larger uranium producer in 2007. The strength of Matysek is not just in the acquisition of strategic assets. There are numerous companies with potash ground. In fact potash bearing evaporites extend across the entire province from Alberta to Manitoba. What sets him apart is the recruiting and hiring of a technical team with the specialized experience required to build the project.

Potash One currently has ~$40 million in cash which is enough for them to complete a bankable feasibility study. Serious investors are starting to filter potash opportunities by looking at which projects will be developed first and at what cost. Potash One is leading the pack.

I currently own KCL.TO