Potash Market Showing Signs of Recovery Potash Market Showing Signs of Recovery
Wednesday March 12, 2014, 9:57am PDT
By Vivien Diniz - Exclusive to Resource Investing News
KM: Potash projects are extremely capital intensive, and therefore are very hard to fund for a junior company. The juniors are not really measured in comparison to the major producers, but more on their chances of being developed, or being taken out by a major.
As a result, we see the juniors more divided into two camps. One is the end user side; the other is the major’s side. Most of the juniors in the sector today tend to play on the end user side. They’re trying to partner up with nations who are major potash buyers, such as China and India, in hopes that major offtake agreements with established buyers of potash will help them develop the project by themselves.
A few good examples of this type of company are Encanto Potash (TSXV:EPO), Western Potash (TSX:WPX) and Karnalyte Resources (TSX:KRN). From these three, Encanto has the most ambitious target where the company is working on securing an offtake agreement with an Indian consortium led by Rashtriya Chemicals and Fertilizers Ltd. for 2 million metric tons per year. This could be a major game changer, to have a junior with such a major offtake and could open many doors in terms of financing for the company.
On the other hand, we’ve got the companies that are on the major’s side, and who are in this game to work with established potash producers, with the potential of being fully taken out down the road...