No one can falsely accuse me of posting only negative posts and pumping another company now!
Intersting how all the potash glut concerrns are re.MOP potash yet a non-MOP potash junior seems to have been lumped in with all the many,many MOP potash juniors......
[Weekly Piece From ProEdgeWire.com June 24, 2013]
If future potash suppliers such as Allana Potash can fulfill their promise of maintaining low CAPEX and low operational costs upon reaching production, there will be ample room for profits and growth. Allana did see a modest increase from the previous week, 2.17% in Toronto, but it is still off its yearly high, achieved but a month ago despite its having fulfilled almost all stages on the path to production with success and even ahead of schedule. Similarly, investors have also ignored IC Potash, which will produce Sulfate of Potash at low cost and which has secured as strategic a partner in Yara International. Yara is one of the world’s largest producers of fertilizers at almost 20%. It has an off-take agreement for 30% of the mine’s eventual production for 15 years.
Both Allana and IC Potash have received favorable analyst evaluations. Last week Industrial Alliance Securities rated IC Potash as a, “Speculative Buy”, projecting a price target of CAD$1.40/share over the next year while Paradigm Capital announced in early June a price target of CAD 1.21/share for Allana. Aguia Resources meanwhile announced that it has intersected phosphate at Joca Tavares project in the State of Rio Grande do Sul in Brazil.
Last week, Scotiabank said that its commodity price index performed well last May owing to a rebound in potash shipments to China and Brazil, the former saw potash imports grow 19% in the first four months of the year while Brazil saw a staggering 53% rise year over year. Two factors contributed to the surge; potash prices remaining within a range of USD$ 400-460/ton and higher grain prices. This good news was enjoyed almost exclusively by the established, dominant players, namely CANPOTEX (representing Potash Corp, Mosaic and Agrium) and the Belarus Potash Company (BPC, representing Russian and Belarusian producers).
This virtual duopoly sets prices and determines just how much potash supply or capacity is available. Their high volume production and ability to adapt capacity has enabled the duopoly to ensure that supply does not exceed demand. This is the logic behind BHP Billiton’s ambition to get into the potash market. It would be able to compete with the big producers on quantity while remaining independent and able to undercut duopoly pricing. India and China have expressed their concern over pricing – especially India, whose government has not renewed potash subsidies this year.
Alternatively, the Chinese and Indian market would prefer to buy from small and independent plays. The problem is that few of the smaller plays have enough supply to meet even minimal demand. Moreover, even the most advanced junior plays are still one or two years away from reaching production. The problem for juniors, nevertheless, is that the duopoly, by keeping prices at the USD$ 400-460/ton range, has discouraged investment in new potash plays. The potential entry of BHP Billiton into this market-with the massive Jansen mine-would further undermine the juniors, or the market perception of juniors in the potash sector. The juniors, in turn, suffer from a difficulty in securing financing.
Last week, the growing intensity of the Brazilian social unrest likely accounted for a general drop in potash shares, seeing as Brazil has accounted for such a significant slice of demand for this commodity over the past year. Brazil, until recently one of the bright spots of the world economy, has started to show some scratches in its investment machine. It is not all bad news but the social protests have brought some heretofore hidden problems to the surface. One of the problems is Brazil’s reliance on commodities and last week’s announcement that China saw less demand in May, did not bode well.
Standard & Poor’s, whose ratings have ruined many a country’s economy, raised its ominous voice against Brazil’s public finances, lowering bond ratings in turn. Moreover, the Indian central bank has devalued their own rating to revive the economy in their own country. The currency depreciation makes Indian products cheaper on international markets. This also applies to Indian fertilizer products, dampening prospects of potash price hikes next year; the devaluation of the Indian rupee is a risk to the big potash suppliers.