RE: Potash Forecast:As I have said before...it appears that the MOP market might end up with "to many companies trying to get in on the action"
One then has to wonder what the "value" (in the ground or in production) for our SOP is going to be in the future?
Very tight global market and very limited ability to increase from existing mines or from new greenfield projects.
If, as Scotia Capital predicts that "BHP takes Allana out" once we are in production with our currently planned MOP Solution Mine...how long will it take them to build a solution mine for the SOP...which lays across our complete land holdings from east to west and directly below the Sylvinite Layer?...Allana does have a real advantage here...if, the planned production increases to the MOP market materialize as stated below...and the price of MOP falls because of over supply...why would it not be in Allana's best interest to have a
"Formal Plan B" that would allow a change over to solution mining the Kainitite and creating the highly sought after SOP?...Having a proven plan that shows that the SOP can be solution mined (imho) only adds value to our shares in the long term..especially if Farhad has to sit across the table from BHP once we are in production...remember, a very large component of our NI Resource Estimate is from the Kainitite Layer and by default SOP...
Farhad would be able to say with confidence...this is the price for the MOP Solution Mine...and here is the price for the SOP in the ground and for the SOP Solution mine...or at least its value to this discussion...?
If we do not prove the viability of solution mining the SOP...then the company that buys us out most likely will...and that would mean that AAA left way too much on the negotiating table...
My hope is that...whom ever becomes our "major financing backer"...makes it clear that they also want to financially back a plan to mine the highly sought after SOP...and become a dominant player in the SOP market...which currently only produces 6 million tons per year...
The nice thing about AAA...is that it has lots of options going forward ...and the ability to unlock the real underlying value to shareholders. Just some thoughts...and maybe a question in the future?
Karma
Too many companies trying to get in on the action? That is the question that might be worth asking at this juncture. In fact, someone is asking it - Roger Bade, senior analyst at London-based Libertas Capital Corporate Finance.
In reviewing recent developments, he concludes that if all the projects in the wings get financed, then the potash market could slip into surplus. (This predicament is all too familiar to Potashblog.com readers who follow our sister site, raremetalblog.com, with the prospect that we may have scores of rare earth companies with no market when they get into production). We should also, perhaps, add here that this probably applies to the muriate of potash; quite different market fundamentals apply to sulphate of potash supply-demand ratios
by Robin Bromby Potashblog Dec 2 2011