potash is back, thanks madam

Potash is back, thanks Madam



John Beveridge ? Herald Sun ? February 03, 2011 12:00AM ?

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A potash mine owed by the Potash Corporation of Saskatchewan: BHP Billiton made an unsuccessful bid. Source: News Limited

BHP Billiton's unsuccessful tilt for a Canadian potash group certainly alerted the investment world to the mineral.

The investment theory - which is difficult to dispute - is that fertiliser use will rise inexorably with the world population as crop yields become more important.

Well, despite BHP's failed efforts to land Canada's Potash Corp of Saskatchewan, a very early stage chance to jump on that bandwagon has emerged with the recently floated Fortis Mining.

Even though it raised funds for the float last December at just 20c a share, the board yesterday announced it had entered an alliance with Hong Kong's Grand Concord and principal owner Madam Cheung to buy six million shares at 40c a share.

The reason for the hefty premium is a potential deal in which an as-yet unidentified major potash asset in Central Asia would be folded into Fortis.

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Executive chairman Jitto Arulampalam said he could not provide further details about the deal that was in the middle of due diligence and negotiations, but confirmed the potash deposit was "world class" and included significant exploration potential.

He said China was the main customer for the existing deposit's two mines, which were capable of being expanded if further exploration were successful.

"Our Australian listing is one of the keys to the deal plus the expertise within the company on potash," Jitto said.

Madam Cheung would emerge with a 13 per cent stake in Fortis if the deal goes ahead, with two million shares issued in a placement and a further four million to be issued subject to shareholder approval at a shareholder meeting.

Predictably, the market loved the news that a further $2.4 million and a new deal was flowing into the company, sending Fortis to a record close of 37.5c.

It is very early days with a young company and a deal that is not finalised, but Fortis earns a speculative buy on the back of the "feed the world" potash