The World’s Most Advanced Junior SOP Project The World’s Most Advanced Junior SOP Project
IC Potash aims to produce premium priced sulphate of potash (SOP).
The 100% owned Ochoa Project is located in New Mexico and hosts a large polyhalite deposit to be converted into SOP (typically priced at a 35% to 50% premium versus the more standard MOP). The project is the most advanced junior SOP project today and has many advantages over existing producers (mainly lower cost versus traditional SOP production).
The project is past prefeasibility showing positive economics.
Production is targeted for a 2015 start-up with a project life of 40 years beginning at a production rate of 568,000 short tons per annum of SOP plus 275,000 short tons per annum of potassium magnesium sulphate (SOPM). Opex per ton of production is $147, which is well below the industry norm (near $400 per ton) and even the lower cost producers (above $200 per ton). The prefeasibility computes a $1.3 billion after-tax NPV and a 26% IRR.
The capital requirement is low relative to most junior potash projects.
Development capex totals $706 million (similar to the $1,000 per annual tonne benchmark targeted by the better greenfield MOP projects). Notably, the project does not require the same large scale of production as many of the other leading junior potash projects (i.e. Western Potash requires $2.8 billion for its project).
We recommend ICP with a STRONG BUY rating and a C$2.00 target price.
We base our target on a 0.5x multiple against our $4.16 per share NAV calculation using a 12% discount rate. We expect upside to our target as the project is de-risked through the completion of feasibility and through the addition of a strategic and/or financial partner.
IC POTASH CORP. ICP – TSX C
Rating: STRONG BUY
Target Price: C$2.00
Market Capitalization: C$117.6 million
METALS & MINES
Peter Prattas, CA, CFA – Analyst