bhp view on potash, page-4

Good question Jack, and the answer is probably a combination of factors, and maybe the same for Iron Ore, and Coal, and now Oil (down to $88 and heading further south today), and many other metals and commodities.

Potash has been hit this year, STB down 30%, POK down 40%, ELM down 50%, and most other Potash stocks also suffering very bad falls.

They all have their own individual issues as well. STB is sovereign risk and taxation and state control by Eritrea, POK is trying to get permission to drill on federal lands from green USA departments, and ELM is the potential cost of development.

The other problems stem from the prior stockpiling of Potash by India and China, so they have decided to stop purchasing large quantities at the moment. And other countries are trying to make do with cheaper substitutes.

Some of these deposits will take a lot of money to develop, even though the returns may be in the billions, so the up front costs are an issue, especially in the current global economic climate.

Still, global economies don't stay depressed forever, and at the end of the day, people need to eat. Population pressures are causing a depletion of soil fertility on farm lands, and global warming and droughts are not helping.

An investment in Potash can sometimes be determined by a person's timeframe. It certainly is not for the traders.

The quality of these deposits looks very good. They will all be economic, but require a high capex, especially solution type extractions like ELM.

However, these issues are not insurmountable, and when viewed against the need for food and fertilizer by an exploding world population, they may be attractive investments to some, especially those who buy into companies when that sector and stock price are depressed, as I did with many gold companies 6 months ago. Fortunately, all 7 of those gold companies are now well and truly in the black, and surging ahead (though I still have 1 or 2 pieces of dead-wood hanging on from last year that I have averaged down on and not sold because it just wasn't worth it. They slipped through my stop-loss net. So who doesn't have a couple of these eh, and they come in handy as tax losses at the right time of the year).

I have a low average for ELM, close to where the current price is, below 60 cents. I hope that more people follow your advice and sell. I believe it could fall back below 50 cents in the next few weeks, which is what I am waiting for, and will pick up some more, though never more than 5% of my total invested equity.

Actually, I just looked at how much Potash stocks are off their 365 day highs.

Potash Minerals (POK) is -62%
South Boulder (STB) is -61%
Elemental (ELM) is -60%
Highfield (HFR) is -25%
Potash West (PWN) is -22%

It is not a good looking sector. Some investors only buy into rising sectors, which is also a sound strategy, so they would be steering well clear of Potash.

Cheers, and good luck with your investing. We could all do with a little bit of luck, especially after the way the criminal banks and investment funds manipulate this market. The government will do nothing about it, at least, that is what my federal politician has told me. They are not interested.

Gw

You can put lipstick on a pig, but it's still a pig.
(Barack Obama)