I have had this question between fellow investors IRL, so Ill put my thoughts in this post for others to read also:
What specifically in the presentation on 28th caused rapid buying on the 29th? And following buying on Friday?
For those new to the stock, SHP has a BHP Jansen sized potash deposit. Cenkos securities have the NPV of the starter project of 4 of their projects at a NPV north of $1B with an additional 3 projects at a larger size than the starter. So why is it sitting at a mere $50M MC?
Drill permits are required to drill two holes in each of the 4 projects tenements to updated the 300+ hole resource from Inferred (a state that ASX wont allow economic studies to be released under) to go to measured and indicated resources (so that these studies can be released)
Being in Germany, would the administration and environmental bodys allow this to happen? That was a case for major contention between investors, therefore resulting in a trading valuation so very low up until this point.
The community experienced widespread layoffs on the historic potash mines in the 1990s due to grossly overmanned state led mining operations and a potash price drop. What was left was a sour taste and major salt hill waste dumps disturbing the landscape. This had caused apprehension from the community for potash mining to reoccur.
Although - Being in the lowest GDP area of Germany (Thuringia), the regional government has voiced public support, namely the Prime Minister, the mayors AND the old miners have come out to the local newspaper the past 6-8 months saying "It would be insane not to mine the salt given its value" ONLY if it was done in a modern way to avoid the waste dumps and lower emmissions.
SHP responded with room and pillar mining methods, where the waste is deposited underground rather than above, and community have appeared happy with this response and have shown wider spread support.
So What has changed?
The above was all communication via local newspapers, the investors on the fence wanted to hear the certainty that drill permits would be released from the management themselves; fast forward to 28th of September.
At minute 18.20 of the presentation, he states that he sees no large hurdles to permitting with a supportive "administration".
And at minute 19.30 of the presentation, we look forward to fast tracking the drilling and MRE of the other projects
Now, after other presentations of no definitive description on the permitting confidence, as they focused on the diplomatic approach required for successful permits (ticking the correct boxes, doing the right analysis and application - germany is very bureaucratic) he has now stated definititive confidence around the permits to the point he is willing to fast track the other drilling - at least, propose that to the board.
As what seems like a conservative manager, never once mentioning drilling permits confidence until then, this was seen as a major tick of investor confidence regarding 1) permits 2) the local govt support 3) local environment administration support. (my interpretation from the slide saying local administration; local govt and accompanying environmental regulators)
What ensued, was the largest volume day in 6-8 months.
The larger effect, was sustained buying for a week, before the largest seller since May (Nomura) upon broker data analysis, stopped selling.
You also had an article released on Thursday night which stated the internal scoping study that presented economic info warranting this drill program and mine construction, was at a $250 potash price input... BHP used $320 for their scoping study, with the quote "we are expecting quite a punchy IRR"
Furthermore, he stated CAPEX was 40% less than normal MOP mine construction due to key infrastructure already in place (these tenements were planned mine extensions from previous mining)
And that he expected bottom quartile OPEX costs....
What this meant, is that Cenkos NPV estimates for project 1 that were based on the PEER AVERAGE CAPEX and OPEX, and a potash price of $300, was now severely understated...
What happens when you have the above derisking, a major seller exhausting their supply and a key chart level break out from 9c resistance, leading into 2 weeks where permits and driller mobilisation catalysts are due anyday, for a tier 1 potash project the size of Jansen, at a $30M MC with only 2 drill holes required before a scoping study is released?
Share price goes Bang. I see this rerate continuing off the back of people realising the absurd value that SHP contains. Considering BHP bought Jansen at a similar stage to SHP project, ten years ago for $350M canadian... we are $50M....
I hope that helped the explanation, DYOR, NOT FINANCIAL ADVICE, gltah.
(20min delay)