Potash Weekly Review: Potash leads a TSX Stock Rally
Last week Agrium (TSX: AGU; NYSE: AGU) focused market attention on potash as this resource led a rally on the Toronto stock exchange. It was all based on the strong sales performance over the last three months of 2013 thanks to strong demand from North American farmers in the fall. The strong potash performance was also sustained by predictions that prices for seeds and grains would remain high, inviting farmers to produce more and consume more mineral fertilizers. The other major news for the week involves Vale SA (NYSE: VALE), the Brazilian mining giant, and its apparent decision to pull out of its USD 6 billion dollar project in Argentina. This was slated to be one of the largest potash projects (Rio Colorado) in the world and would have propped Vale, which produces a number of minerals and iron ore in particular, as one of the leading potash producers in the world.
Vale has not confirmed it is abandoning the venture quite yet; it has merely sent hints by ranting employees an ‘extended vacation’. Nevertheless, the Argentinean government has demanded the project resume operations; failure to do so would result in Vale losing its license for the Rio Colorado property. The project is highly politically charged and Argentina’s president Cristina Fernandez de Kirchner has become personally involved and is expected to meet Vale management next weekend. Vale has not issued any statements on the project; however, the rumors are substantiated by two possible scenarios.
Get our daily investorintel update
One would have Vale scrambling to sell assets, in an effort to compensate for poor sales in 2012 that are not directly related to its core mineral interests: potash being one of these. A second scenario would have the project being halted due to excessive political interference and risk in Argentina, which has recently been surpassed by Colombia as the second largest economy in South America (the first being Brazil). Argentina has made repatriation of profits for foreign investors very difficult in the past few years. Should Vale abandon the project it would leave a large demand gap for potash in South America, given that the Rio Colorado project was expected to produce some 4.5 million tons of potash a year.
This could be good news for a number of junior potash players – some of which are ProEdgeWire sponsors – starting to operate in South America in the mineral fertilizer space such as Aguia Resources (ASX: AGR) and U3O8 Corp (TSX: UWE; OTCQX: UWEFF) – developing phosphate. Aguia Resources, last week, announced it discovered a new phosphate discovery, named the Porteira prospect in its property in southern Brazil. It is a ‘greenfield’ discovery that, the Company says, shows the region could contain more resources similar to those at the Aguia Tres Estradas project.
IC Potash Corp. (TSX: ICP; OTCQX: ICPTF) also announced an expansion of property, noting that it has secured an additional 1,914 acres of land in Lea County from the New Mexico State Land Office. This has increased the Company’s total State lease and federal permit holdings to some 101,500 acres spanning 158.6 square miles in the region. IC Potash is running the 100% owned Polyhalite Ochoa Project in New Mexico, focusing on Sulfate of Potash (SOP) which typically commands a premium over the more commonly produced muriate of potash (MOP) the Company. Potash Minerals (ASX: POK) meanwhile, saw some positive stock movement rising 16.67% on rumors that it will soon expects to obtain a decision, in the first part of 2013, regarding the Federal Bureau of Land Management (BLM) environmental assessment, an essential component to secure Federal drilling Permits early in 2013.