This is just some data I have collated for selected potash explorers. It is very apparent that STB is significantly undervalued.
1. Potash One • Capex: $2,781M • Operating costs $111/tonne FOB • IRR before tax 22.7% • Production rate 2.86Mtpa • Mine life 40 yrs • Resources ~1065Mt @ 24 – 26% KCL (~265Mt contained potash) • NPV $5.51B based on 10% discount rate Note: Potash One was taken over by German fertilizer company K&S for $432M in December 2010
2. Allana Potash • Capex: $796M • Operating costs $90.5/tonne FOB (includes transport and port handling) • IRR before tax 36.8% • Production rate 1Mtpa • Mine life +30 yrs • Resources ~1270Mt @ 18.7 – 20% potash (~245Mt contained potash) • NPV $1.85B based on 12% discount rate • Market cap C$235M
3. Western Potash • Capex: $2,800M • Operating costs $62/tonne + $29/t for taxes and royalties + $40 - $45 for transport & port handling • IRR before tax 22.7% • Production rate 2.8Mtpa • Mine life +40 yrs • Resources ~945Mt @30.3% of KCL (~285Mt contained potash) • NPV $4.14B based on 10% discount rate • Market Cap ~$190M
4. South Boulder Mines • Capex: $740M • Operating costs $?/tonne • IRR before tax 40.6% • Production rate 1Mtpa • Mine life +17 yrs • Resources ~564Mt at 18% - 20% potash for 105Mt contained potash. Target resources of 1250 – 1750Mt @ 18-20%KCL (~250 – 350Mt contained potash) • NPV $1.33B based on 12% discount rate • Market Cap ~A$138M Using Allana Potash as most comparable example but taking into account shorter transport distance to the port one may expect STB operating costs to be in the order of $75 - $85/t FOB.
Note that the production costs globally range from a low of ~70/t to as high as $200/t. Some examples include: • Potash Corp ~$75/t • Agrium ~$90/t • Mosaic ~$140/t • Interprid ~$160/t • K&S ~$210/t
STB Price at posting:
$1.51 Sentiment: Buy Disclosure: Held
