potash producers rally on high grain prices, page-13

Morning yeldub and fellow Stber's

As part of my research I came across this particular posting in another forum, unfortunately TOU POLICY PROHIBITS IDENTIFYING POSTING SITE.

Interesting comments by this forum about bhp/vale/potash inc? this post caught my eye and thought I would share with others for their comments? etc as I have not seen it discussed here...


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The poster was gab. date 9/12/2010

"I reckon potash stocks have evaded the radar of many punters because potash is not perceived as an exciting, valuable commodity not a "rare earth" if you like.

But because that perception is at odds with that of a giant like BHP (& Vale) youd think would be enough to convince them of their error? Dunno, how people think. But anyway, consider the few snippets below, which is part of the evidence which predicts that STB is looming as a huge potential threat to profitability of existing potash producers and how they will react.

Supporting reasons for BHPs recent pursuit of Potash Corp include:

Food supply is not an optional commodity. This is the key driver.

Economic crop yields require potash.

World potash prices increased from below $200/t to $700/t just before GFC.

Potash prices, currently around $350/t, are only historically low because big users raided their stockpiles and reduced their soil application rates to avoid paying the big price increase that potash suffered just prior to GFC. But neither of those practices is sustainable.

Casual perusal of consumption graph shows the current dip is temporary.

Remember the big $ understands / believes that.

BHP made its $40b bid for Canadas Potash Corp (worlds largest producer) after buying Canadas Athabasca deposit (900m deep with just 5m thick potash seams) for $341m at bottom of potash price cycle. (POTs share price had dropped from $230 in Jul 08 to av of $110 8 months later at which price it stayed for 2 years. Now ~$150 (Google Toronto Stock exchange (TSX) & check share price chart for POT = Potash Corp)

That Athabasca deposit adjacent to their Jensen leases. (just Google Athabasca potash gets you useful info)

So, BHPs play was plainly an attempt to be the biggest player dealing in this essential commodity and to purchase Potash Corp before its share price reflected the bigger profit associated with the predicted higher potash price.

Vale, the worlds biggest miner, is also into potash in a big way. Note this para (below) taken from Vales website: WWW.vale.com

"The company has been developing projects and acquiring fertilizer assets with the aim of transforming Vale into one of the worlds largest producers over the next seven years. Vales annual output targets for 2017 are approximately 10.7 million tons of potash and 19.2 million tons of phosphate rock."

But STBs shallow deposit coupled with its ideal geographic location from which to cheaply process and freight, has the potential to seriously undermine the profitability of all other producers.

Website with useful article which discusses potash price trends, incl huge freight costs with these lower price commodities:

http://seekingalpha.com/article/70577-behind-the-curve-of-potash-prices

Note that STB is close to India which consumes about 14% of total worlds annual potash.

Note that STBs $2.88 calculated sp valuation is based on BHPs Athabasca purchase price. But that was made when potash prices were at rock bottom during GFC. Further, BHPs price was for a 900m deep mine in cold, central Canada. Thats a v. expensive deposit to dig and at a location at which to both process and freight from - esp for lower price commodity like potash. The above website points out that such freight costs are around $125/t about 30% of that commodities total value.


The evidence is that in the last few weeks it's becoming increasingly evident that STB is going to pose a significant threat to the profit of these big companies.
Note that Potash Corp are currently expanding their biggest, Rocanville, mine, in Canada at a cost of $2.8b. Repeat: $2.8b. That's billion!! And its just to expand it! For details, see

http://www.mining-technology.com/projects/rocanville/

BHP must now be celebrating that their bid for Potash Corp was unsuccessful - and eagerly watching (buying???) STB.

STB's strategic value undoubtedly exceeds its current in ground value currently less than a mere $200m.

Potash Corp or Vale must take it out to protect their own huge current investments.

The worry is that STB's share price may not rise quickly enough to reflect its true value.

STB have no hope of withstanding the huge $ associated with this industry. The others will act to protect their existing investments.

DYOR"

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Correct me if I am wrong but if someone is buying up shares and they are a company aren't they required by ASX rules to disclose their position?

I so worry about the size of the find in Colluli and especially if someone is trying to buy in the background. There is one good point in our favour and that is that there is still several million options that can be bought by Management to reduce the opportunity of a T/O being mounted if someone tries to exercise this option.

If someone can tell me if Management were to exercise their options which total almost a quarter of the companies current number of shares issued would that be enough to stop a T/O at this stage?

I really want STB to succeed and bring this to production. I would hate this to be a Lake Disappointment issue where the Martu in this case might be one of the "Big Players" keeping the little ones from making a mark.

Sorry posters I am new at this kinda thing and I am not to sure about the rules about share acquisition.

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Re: Colluli name etc....

http://www.moem.gov.er/index.php?option=com_content&task=view&id=51&Itemid=49

This is the ministry of mining website for the government of Eritrea. Interesting to see all the other players in the country. i think it should answer any questions investors have re: stability issues and what is happening re: mining and other related issues.

Yeldub,

Maybe the MODS might like to put a new level of buying called hysteria buy, however a good 'screaming buy' will do me. hehe LOL

Nice post yeldub and made me do some more research.