Vanguard sent me this (but it's old)
EncantoPotash Moves One Step Closer To a Maiden Resource on the MuskowekwanProject in Saskatchewan
February 04, 2010
By Alastair Ford
All of a sudden the majors seem to bejockeying for position in potash. Late last month BHP Billiton announcedthat it is to acquire Athabasca Potash for C$341 million. A tidy enoughsum, you might think, but one that was dwarfed by the US$3.8 billionthat Vale has just paid for the South American fertilizer assets of UScommodity supply chain company Bunge. At the same time as that deal wasgoing through, Vale also announced that it had acquired a 16 per centstake in Fertilizantes Fosfatados in Brazil. Vale's got interests backin Saskatchewan too, and not far from Athabasca, where it continues tomake progress developing its Regina project.
Meanwhile, BHP Billiton has alsoannounced a US$240 million investment in its Jansen project, the bordersof which run up against Athabasca's ground, and which promises to bethe world's largest potash mine when it comes on stream in three or fouryears' time. Into that heady mix comes wild talk of a possible bid fromBHP Billiton for Canada's largest Potash producer, Potash Corp. OfSaskatchewan, currently valued on the NYSE at around US$31 billion.
These are big moves by mighty fish in a relatively small pond. Thereare a couple of big producers left, namely Agrium and Potash Corp., butthe takeout of Athabasca leaves just three Canadian-listed juniorpotash companies for investors to choose from: Potash One, WesternPotash, and Encanto Potash. So, for potash bulls, where's the bestinvestment opportunity? Well, Potash One is currently working up a mine,and, with a market capitalization of C$192 million, is ratedaccordingly. Western Potash is in the final stages of getting to gripswith the size and nature of its deposit, and is valued at a more modestC$48 million. Encanto Potash is the furthest from development of thethree,and, with a market capitalization of just C$35 million, perhaps offersthe most long-term upside. All told, this is the company that still hasthe most value to add.
And it's not standing still. Encanto's been making a few waves ofits own in recent weeks, following a hectic time at the VancouverRoundup, and the release of new drill results on its lead Muskowekwanproject. These showed a 3.6 metre intersection of 39.9% potassiumchloride at a depth of 1,193.6 metres, and a 2.4 metre intersection of40.4% at a depth of 1,204 metres. A third and deeper intersection, at9.6% over 5.3 metres was less encouraging. But two out of three ain'tbad, and was certainly reason enough to make Encanto chief executive JimWalchuck sound cheerful when Minesite caught up with him for a chat onthe phone this week.
The key to understanding what those grades and thicknesses mean isto take a look at what intersections other companies have reported, andhow they've worked their resources up from their. Potash One has widerintersections, but lower grades, and still reckons it has a feasibleproject. Athabasca Potash, meanwhile, has a resource 4.55 metres thick,very similar to Encanto's and a grade slightly lower than Encanto's own.Given that Athabasca's take-out price works out at very roughly tentimes the current Encanto valuation, and given that at this early stagethe deposits controlled by the two companies look similar, it's nowonder that some in the market reckon that Encanto's sharesmight be due for a run shortly.
Certainly there won't be anyshortage of news flow to support such a run, as the company is now fullyinto the swing of working up a maiden 43-101 resource, currently onschedule for release in September. The next big news will come as theresults from a 3-D seismic survey are released in March, at which pointresource modeling can begin in earnest. At some stage Encanto willrequire additional funds - between C$5 million and C$7 million on thenext round, reckons Jim Walchuck - but given the buoyancy of the potashspace at the moment, that shouldn't be too onerous a task.
In any case, Encanto has strong institutional support. It would benice, though, if the company could give its shares a bit of a lift aheadof any raising. The way to do that, of course, would be for it todemonstrate that Muskowekwan holds a real and viable resource. So alleyes turn to the rotary truth machine and the seismic.
For more information, pleasecontact:
Vanguard Shareholder Solutions
Tel:604.608.0824
Toll free: 1.866.918.0824
www.encantopotash.com
ir@vanguardsolutions.ca