permit/maiden jorc resource, page-67

Wednesday, 5 December 2012

Potash Minerals (POK) $0.30

Recommendation: Speculative Buy

Event

The 30 day public notice period for the USA Bureau of Land Management’s (BLM) drilling permit approvals process for POK’s subsidiary, K2O Utah, to drill on Federal land closed at 4.30pm in Moab Utah on November 30, 2012.

Seven comments were received from the public, environmental groups and government agencies.

Impact

The BLM and their environmental consultant Kleinfelder are now reviewing the comments in order to determine any modifications to the BLM Environmental Assessment published on 25 October 2012.

For a modification to occur these comments need to raise new objections that have not been addressed in the past. These groups cannot keep posting the same objections in a bid to delay the permit approval process. If there are any modifications POK will have to address these and post them for another 30 day period for any comments. If no amendment is made the permits should be issued in the near future.

The issuance of the permits will give POK legal control over the land and allow independent geologist Agapito to define POK’s maiden JORC compliant resource. We believe that this is now likely to happen in the next quarter.

From an in-situ valuation perspective, a conservative 25% of the low range of the exploration target, 3.4Bt @ 23% KCl (14.5% K2O), implies a total resource EV/t value of $0.13/t. This is relatively cheap compared to a peer group average of $0.50/t.

Accordingly we retain our Speculative BUY recommendation.

Patersons Securities Limited
AFSL No. 239 052 Level 37,
Riverside Centre, 123 Eagle Street BRISBANE QLD 4000
GPO Box 98, Brisbane, QLD 4001

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So...

3.4bt x 23%KCI x 25% = 195.5mt

Patersons are suggesting 195.5mt KCI in place

195.5 x 0.13 = $25.4m mkt cap / $0.30 a share

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Valuation

195.5 x 0.5 = $97.75m mkt cap / $1.25 a share