One can find several articles that identify and tout the planned increase potash production of the major potash producers in the world over the next 2 to 10 years. As posted before, if all the majors “actually delivered” on their stated production goals from Greenfield and Brownfield mines…we should rightfully expect a Glut of Potash as near 30 million new tons would come onto the world market and have to be absorbed. The bottom line is that the price per ton would fall dramatically.
So, if the majors are indeed posturing…and making every effort to “scare the wanna-bees” into not moving forward with the more expensive capex projects, then, one can then harvest the real intent of the article below. Remember these points while reading the article: Allana has plans to start production by the forth quarter of 2014…that is just over 30 months from now.
Allana will make millions of dollars of cash flow at $350 per ton potash if indeed the majors flood the market with over supply and the price drops…anything higher than $350 per ton is a clear bonus to the bottom line and paying back the mine capex....Imagine $750 per ton in two years time...then read on...
If we are indeed at Mid Cycle for pricing…then, 8 months from now we will have our BFS completed and any offtake agreements will be at a much higher price per ton…
If $700-$750 per ton does materialize over the next 18-24 months..Allana will be well positioned: as the Revised Resource Estimate will confirm over 1 Billion Tons in the measured and indicated categories, Completely Financed 60% long term debt + 40% equity, BFS study completed, Off-Take agreements in place, and our Mine and Processing Plant construction well under way. With all this completed…as stated below…A lot of people are going to make a lot of money in potash.
Bring on 2012…and its time to show the world that we are indeed going to be the next producing potash miner….and have the lowest capex in the world…then onto Argentina and our other daughter.
Karma
Digging Into Potash Stocks
January 2, 2012
By: Oakshire Financial
Filed under Bourbon & Bayonets
People have to eat. That seemed to be the consensus of the markets in 2011, which saw potash gaining traction as a new kind of safe haven. A resource that promises higher crop yields in a time of exploding global population growth, potash is ripe with potential profits for investors who choose carefully. The Energy Report dug deeper into this sector in 2011, interviewing analysts and industry experts who shared how to gain exposure to this growing market.
Investing in agriculture can take many forms. Bob Moriarty, 321energy.com founder, shared his insights in a March article titled “Food Is Fuel.” He said: “Potash is used to make fertilizer. As food gets more valuable, potash gets more valuable. It’s not necessarily that you’re more efficient in the production of food. If the price of wheat doubles, farmers can afford twice as much potash. It’s not necessarily more efficient; it’s just cheaper in relative terms. The price of food is going to go higher and higher. Potash is around $600/ton now, but it could be $1,500/ton based on the cost of food today.”
The trend will not continue forever, Moriarty cautioned. “Most companies are going to fail. You have to be counter-cyclical. Potash was way too cheap. Companies couldn’t afford to mine it profitably, and now it will overshoot in the other direction. I hope there is a bubble. That will be a tremendous opportunity to get out at a giant profit. We’re not at the top for potash, but everything goes up and everything goes down.”
Moriarty elaborated in a December article titled “Profit from Peak Oil“, making the point that energy and food are directly related. “Potash is a form of energy. Food is a form of energy. To make more food, you need more energy and you need more potash. There are enormous potash deposits, basins of sedimentary deposits—basically a variation of salt—that date back tens of millions of years. We know where they are. They’re easy to drill. A lot of people are going to make a lot of money in potash.
“You can bet on some things in the short term and others in the long term. I don’t think anyone would conclude the cost of energy is going to go down over the long term, because there are no cheap energy sources. There is no magic bullet. So the cost of food is going to go up. I think any potash company would be a good investment right now. Real safe investments for 5, 10 or 15 years would be food, potash, water, oil and natural gas. Good shorter-term investments would be anything real—gold, silver, platinum and anything that you can actually hold in your hand.”
Moriarty is not alone in his assessment of the agriculture industry. In a May story titled “Potash Prices Heading to $750,” Richard Kelertas said:
“We believe the upward price pressure started after the economic crisis in 2009, and it could remain a substantial bull market until stocks 
:use ratios (carryover:total use) in most major food stocks—grains, corn, soy beans—can be brought back up to 10-year averages. Currently, the ratios are well below those averages. There doesn’t seem to be any reprieve in sight, unless we have two to three years of bumper harvests in all grains around the world.
“In retrospect, 2009 was a tough year for a lot of fertilizer producers. Farmers had to delay applications, even though they started to see crop shortages followed by slowly rising crop prices. We didn’t really see fertilizer-price recovery until 2010. Around March/April, or mid-2010, we started to see a pickup in fertilizer stock prices. It was slow at first and, in some cases, it has been muted; but at the beginning of 2011, it started to surge dramatically. Now it’s come off again on the expectation that all commodity prices, including that of oil, will come off as the global economy slows down (especially in China). But our view is that this is just temporary, and that these stock prices don’t really reflect anywhere near the fertilizer prices we are looking at “in 18–24 months.” So, these current stock prices are only reflecting mid-cycle, but nothing near peak prices.
“We won’t see $1,000/ton. I don’t expect the type of hoarding experienced back in 2007 and 2008 will happen again to the same degree. We certainly will get speculation; but, typically, the amount of cash that’s available, the lending requirements and margin calls are more stringent than they were three years ago. You will probably see one-half of the speculative run-up in potash that we saw back in 2007. This time it is coming from actual supply/demand dynamics, not speculative investors gobbling up contracts. So, $1,000/ton?—I’ll never say never, but I think the next peak we’ll see is probably more in the $700–750/ton range. . .in the next 24 months.”