EDITOR: | July 22nd, 2013 | 1 Comment

Magna’s 30% rally lifts potash plays in Utah’s Paradox Basin

| July 22, 2013 | 1 Comment
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paradox basinPotash and Phosphate Week in Review: InvestorIntel’s Potash & Phosphate members rose 5.8% for the week ending on July 19. The gains were spread throughout the sector; however, there was a clear rebound of potash companies operating in Utah’s Paradox Basin, including EPM Ventures (TSXV: EPK | OTCQX: EPKMF), Potash Minerals Ltd. (‘POK’, ASX: POK) and Magna Resources (‘Magna’, CNSX: MNA). Magna itself jumped 30% and, in fact, it was Magna, which accounted for the rise after a series of lackluster weeks. In fact, Magna announced that the US Bureau of Land Management (BLM) environmental assessment – examining all environmental issues associated with the exploration plan – for its Green River Potash Project in Utah has ended on July 8.

The BLM can now review concerns and advise magna of changes – if any – that need to be made before the exploration phase of the project can continue. However, what is more significant is that the BLM submission marks the end of Magna’s process for the application of all relevant prospecting permits ending in a decision of “Finding of No Significant Impact” (FONSI) for Magna’s plans such that the Company can expect to be granted the relevant BLM Federal prospecting permits promptly. POK, which showed a 6.67% increase, has already received the BLM permits last April while EPM (+13.33% in TSX trading) Ventures also announced that the BLM confirmed its finding of “No Significant Impact on the Sevier Playa Potash Exploratory Testing Proposal and Environmental Assessment”, which should also lead to the prompt granting of exploration permits.

The potash market overall proved especially resilient last week. While prices for agricultural commodities fell close to their annual lows, the potash juniors did not suffer, despite ongoing fears of a potash overcapacity. Andrew Mackenzie, the chief executive of mining giant BHP Billiton, continued to fuel speculation over whether or not the massive Jansen mine would proceed. Last week, he noted that the project would have to meet “certain profitability criteria”, given that it is expected to cost around USD$ 10 billion. The CANPOTEX cartel, comprising of such major players as Potash Corp and Mosaic, has been adding pressure by maintaining prices at about USD 400/ton. This is enough to ensure profits for current producers while being too low to attract new major players.

Mosaic CEO Jim Prokopanko warned that prices would continue to decline because of weaker demand prospects in India – a major potash market – owing to the depreciation of the Indian rupee and the decline in government subsidies for the next year. If the price of potash should drop for India; China will also demand discounts and the CANPOTEX players will likely oblige as this price drop would probably send the death blow to BHP’s Jansen, which has to make its decision for Jansen in the next few months. Nevertheless, if in the short term will be characterized by ‘price games’, the fact that wheat has experienced a surprisingly high export demand is indicative of potash’s potential.

China has been importing large quantities of grain, since it expects its own harvest to be lower by ten million tons. Wheat production requires large quantities of potash and ultimately the demand prospects for this mineral are very favorable. As for phosphates, since the start of 2013, prices of phosphates are down;, average per ton process fell from USD $ 185 at the end of 2012 to USD$ 164 last June. The market fears the entry of a new high volume player, Saudi Arabia’s Ma’aden Resources. Few will be able to compete with Saudi Arabia’s low energy costs ; however, production has been postponed. Saudi production may prove competitive, given that its main target market is India, closer to it geographically than the major phosphate supplier of Morocco. The speculation has led to lower world prices for phosphates in the short term. In the long term, considerations of world population increases will help phosphate prices bounce back. Mineral fertilizers offer the best solution to the problem of growing population, higher food demand and more productive uses for agricultural land.

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Comments

  • Obama's climate initiative is good for mining industryInvestorIntel

    […] This is not actually bad for the mining industry and two sectors come to mind that have much to gain, regardless of how a rational thinking person might be persuaded by the climate change hype. The benefits are available to both climate change evangelists and infidels. By limiting Federal Bureau of Land Management (BLM) permits in the Western states, the Obama administration would make the various potash miners that have recently been granted – or in the last stages thereof – BLM permits much more valuable. The beneficiaries here would be Potash Minerals (ASX: POK) and the other potash companies operating in Utah’s Paradox Basin, including EPM Ventures (TSXV: EPK | OTCQX: EPKMF) and Magna Resources (‘Magna’, CNSX: MNA). IC Potash (TSX: ICP | OTCQX: ICPTF), which is operating in New Mexico, should also benefit as the new regulations will help to limit the entry of additional potash plays, addressing one of the factors being blamed for the commodity’s failure to rise beyond its current USD$ 400/ton price. Indeed, the fact that over the past week, the potash miners in Utah’s Paradox Basin all witnessed share price increases. […]

    July 23, 2013 - 3:12 PM

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