Potash Corp beats the ‘Street’ and POK receives Federal Approval in Utah
Potash and Phosphate Week in Review: The ProEdgeWire Potash and Phosphate index bounced back last week, ending at an average 6.16% increase. This is especially significant in view of a rather unremarkable performance of potash companies in the past few weeks. The sector needed a boost of confidence in the midst of a generally weak commodities market. The boost arrived from Potash Corp (‘POT”, NYSE: POT) which announced a very strong first quarter earnings report. The potash market experienced an intense second half of 2012 as a long phase of negotiations with Indian and Chinese potash importers raised concerns of potash prices falling below the USD$ 400/ton mark. That was avoided and potash prices remain above that ceiling. Indeed, Potash Corp saw increased earnings in Q1 2013 as compared to a year earlier (USD$ 0.63/share vs. USD$ 0.56/share in Q1, 2012).
Potash Corp’s strong performance helped raise the visibility of the potash sector in general. Last week, Potash Corp also announced that it was denied the rights to purchase the Israeli potash giant ICL Chemicals in the quest for better access to markets in India and China. Surely, POT will continue to look for opportunities to secure opportunities North America to address that market strategy; however, in the short term, the failed purchase leaves more opportunities for returns to shareholders, which should translated to higher share price valuations that will reflect throughout the Potash space.
Against this backdrop Potash Minerals (ASX: POK) announced that the Federal Bureau of Land Management (BLM) has approved its potash project in Utah at Hatch Point. This is surely the most important milestone for the company since it acquired the K2O project. The permit is especially significant considering that it is the first one to be awarded in Utah in the past 25 years, receiving the designation of “Non-Known Potash Leasing Area” (Non-KPLA). Potmin will now be able to continue exploration in some of the areas considered to hold the best resource.
Potmin’s BLM permit should also stimulate more interest in the US junior potash space as the US looks for viable additional sources of this critical fertilizer. Potmin is sitting on major deposits of sylvinite in Utah and has already drilled many exploratory wells on State land but believes that the best potash is located on federal land property. Potmin’s project covers a 146 square mile area and it has the potential to be a major player. The receipt of BLM authorization marks a major milestone and allows the full extent of this huge property to open up for development. The BLM authorization was announced late last week and the market did not have time to absorb the news such that Potmin closed the week even at AUD$ 0.26 (0.0% change).
The potash tide caused by Potash Corp’s Q1 helped to lift Allana Potash (TSXV: AAA | OTCQX: ALLRF) as well, rising 16.44% in Toronto and 12.5% at the OTCQX. Investors noted that Allana Potash has been proceeding toward production having filed the final mining application and feasibility with the Ministry of Mines for its Dallol potash project. Allana expects to complete all regulatory requirements before the end of 2013. IC Potash (TSX: ICP | OTCQX: ICPTF), which is developing the Ochoa Project in New Mexico also saw its shares rise, closing the week at +12.5% in Toronto and +6.12% at the OTCQX. IC Potash intends to produce a premium quality sulphate of potash (SOP) at its Ochoa facility, which is usually priced anywhere between 30-50% higher than lesser varieties of SOP. The total proven and estimated capacity at Ochoa is 400 million tons with production expected to start in 2015.