jorc resource estimate, page-7

Doogs, great post!

I think you hit the nail on the head with so many things.

Punters are clearly worried about management and what happened with PRA (over inflating expactations and under-delivering).. The difference here is the historical drill results for POK suggests for there is a resource, not the absence of one in the case of PRA - it's a big difference!

Let's breakdown what value we are getting here @ 51.5 cents...

A = Mkt cap for POK is: 38.3 Million
B = Value of RAD: 4.2 million (32% of 13.5 million)
C = Cash on Hand: 9.0 million (approx)
D = E.V of K20 Potash Project = A-B-C= 25.1 million or about 33 cents per share.

So let's assume POK choose to publish their JORC resource before the fed lands announcement, there is a good chance this will be only be <100 MT. Going with a mere 50MT @ 20% K20 (or 32% KCL), this would be translate to only 10 MT potash under the ground and equivalent to $2.50 per tonne to justify the share price at current levels (using EV/resource as the valuation method). This valuation for POK seems to be fair at these levels as on Page 6 of the Fertiliser Report by Patersons has ELM and STB @ ~ $2.00 EV/Resource.

So what i am trying to say here is a the JORC resource estimate may only move the needle if we see an initial estimate of 200 MT and above which i think can only happen if POK wait to get the fed approvals so that portion of the resource can be included.

As an example @ 100MT @ 20% K20 and a EV/Resource multiple of $2 per tonne, we get a value for the company of $0.72.

Extrapolating for larger resources estimates, @ 200MT we get $1.26, @ 300MT we get $1.80, @ 400MT we get $2.34. Finally for 500MT we get $2.87. Image what happens to the SP if we get close to these levels!

Looking at the Quarterly Activities report in Feb, it is stated that we can expect to hear back from the BLM 6 months from when the MOU was entered (regarding the Environmental Assessment and publishing of the Decision Record). This was entered on the 13th of October 2011 - so 6 months would be April 13th 2012 at the latest.

As Agapito Associates can already begin the analysis on what resource they think is in the Fed Areas, we probably need to wait until the end of April to get an upgraded JORC estimate, should a initial one based on state lands get released before the BLM approvals.

Not sure what you guys reckon but i think there is enough upside here to feel excited about the JORC estimate and future upgrades based on including Fed Lands on share price performance..

I am not too sure how the downside of 30 cents (as suggested by some posters) can be a medium term price range if a JORC estimate is declared.. Happy to hear your thoughts..


(n.b. these estimates have been produced in good faith and i cannot guarantee the legitimacy or accuracy of these numbers. please do your own research)