Robin Bromby From: The Australian December 10, 2009
IT'S happened again, the old buy on the rumour, sell on the news situation. Transit Holdings - a company we’ve been featuring this week - this monring announced its scoping study from the Paradox Basin potash project in Utah, a study that shows it can produce 2 million tonnes a year of potash solution. The company is moving immediately to the pre-feasibility stage.
TRH fell 3.5c to 52c in the first half hour of trading after a good rise over last week’s price. We thought it looked a good piece of news -but perhaps the traders had got a little ahead of themselves.
True, it is hard to commit to potash at this stage. Overnight the world’s biggest listed company in this sector, Potash Corp of Saskatchewan, said it would close its Penobsquis, New Brunswick, mine for another 8 weeks due to low prices and demand.
But then take a look at the website for BHP Billiton. There on the home page is a very bullish feature on the company’s potash plans in Canada after absorbing Anglo Potash. BHP has several potash targets across Saskatchewan and Manitoba which it believes are first class. It is an unusually bullish tone for the BHP crowd.
We know that some punters are hoping that a major, and BHP seems to be the current favourite amng the speculators, will take out TRH to get control of Paradox Basin. The reasoning appears to be that this is what TRH is positioning itself for.
We don’t know. We don’t have a clue. And, one suspects, no one else outside the TRH board knows either - and that’s assuming that the TRH board has such a plan, which is a pretty big assumption.
But just one word of caution: there was a pretty hot theory a few years ago that Andrew Forrest’s big plan was to force BHP’s hand to buy out Fortescue Metals Group, that he really didn’t have any intention of actually building a mine, railway and port. Forrest did all three.
Again, who knows. To use the new cliché, TRH's strategy is one of the known unknowns.
But Pure Speculation prefers a known known: that potash and phosphate will in the coming year or two prove the place to be. Think long term.
