topwon, i am still long. I was long a 1.04, long at 0.675 and...

topwon, i am still long. I was long a 1.04, long at 0.675 and today long at 0.50.. I think my patience has been tested enough to the extent that i am happy (or shall i say forced) to wait a little longer. I am guessing we saw close to the potential downside today or scenario if drill results are bad - alot of selling and no buyers! I was watching the screen and only saw 2 or maybe 3 on the bid when the gap really grew.

When i invest I like to buy into a company which i think has a good resource (traders will drive short term prices but investors will over the long term push shares towards fair value). I THINK THIS HAS THE POTENTIAL TO BE ONE OF THE BEST POTASH RESOURCES IN A REGION WITH MINIMAL SOVEREIGN RISK. Think of all the new discoveries and where they are being found. We have not seen enough to convince ourselves that the resource is as good as what the exploration target/historical drilling would imply and we cannot discount it yet until Hole 3 is a known (right now it is still an unknown). If Hole 3 is great then the legitimacy would certainly be enhanced (not guaranteed). Right now the market is expecting that Hole 3 will be a dud so very little value is being placed on this asset.

Guys my analysis here could be seriously flawed (or scientifically incorrect) in deriving a rough idea of what each share is worth but I have chosen to do the following: I have assumed POK will come out with a resource estimate of 1 Billion Tonnes by late 2012 (less than 50% of what is in bed 18U as per the Sep Potash presentation) @ a grade of 15%. This would then imply a resource under the ground of 150 Million Tonnes. Using an EV Multiple of $0.75 per tonne (this is conservative number from Paterson's Fertiliser update comparing names such as STB, ELM and a few global peers), we should get $112 mill for Paradox - Radar Iron is worth about 10 mill on a good day. So lets say including cash the EV is 125 mill (no debt) so with the number of shares on issue (undiluted amount of 75 million) this equates to about $ 1.50/$1.60 per share. So if the drilling is just average and POK define a resource which is not likely to grow through further exploration, I say $ 1.50 is probably fair value. We would also need to see permitting for Federal Land secured to get to this level..

56 cents is a long way from $1.50 and the stock needs to do a lot right to get there (but I do not think that Agapito could have been that off for things to go horribly wrong) ….I am down in average 11% on my investment (I have been putting more $$ at each lower price) and have decided to hold on until I know the outcomes of State Hole 3 (and 4).