Marching higher to fair value. Ive been in this beast for over 8 yrs paitently waiting the final stretch into production. It appears we are almost there. The recet NR is a tweak to lower OPEX which, is already very low at about $82/T. At todays spot prices of MOP $220/T that leaves profit of $138/T before transport exp to port. With the inferred 150K/t annual production of the pilot plant that leaves us with a $.044/share earnings. Say a conservative multiple of 18x = $.079 PE valuation. Potash corp trading at 34X current and 40X forward!
We now have debt/equity support by Chinese banks, engineering firms, SOE etc.. A full board of extensive expertise and the support to go from 150k/T to 2.8mm over time. Demand from Encanto at 5mm T to India cannot be met with thier mine size at full capacity. Only 1/2 of that required amount. Neither India nor China want to be held hostage by Canpotex or Russia's equilavent. Jr's will fill that void and now Encanto and WPX are the two who have structured foreign ownership, foreing financial support, CDN goverment support, Native support, enviromental support, etc.. the list goes on! Ducks are all in a row!
Even in this depressed price enviroment profitability looks great.. if the tweaks to the drilling and brine solution reduce costs a bit further and takes a month or two to review it's only going to increase margins and profitability. No more major hurdles to overcome. Water rights will be granted .. The city/province will be very flexible to get them to large enough production to pay for the building of the ciity waste water pipeline and the $20mm annually they will get once in use.
Global demand has been soft but underutilization of POT over the past few years and reduced supplies are supportive of strand demand the next number of years. Ther's not much about this picture that looks off. The only caveat is the time from construction to production. Will the sp refelct near term future revenue? Will it stay there until revenue is achived? I suspect it will now the company is more or less derisked. Successive announcements of construction, timelines, and final tweaks to OPEX etc should remain supportve.. even if pricing stays weak in the near term.
Congrats to the longs here.. it's been a loooooooong ride but it appears the rewards are close at hand. Let's see a 1mm/T annual production in 5yrs. Colud be a $8+ sp by then!