Investors ask: Got potash?

The week ended June 14, the 24th trading week of 2008, revealed a new twist to the commodities boom, as a few scarce potash juniors became investor favourites, what with the quadrupling of potash prices to US$1,000 per tonne all of a sudden looking attainable in the mid-term.

The mood in potash these days is akin to the mini-boom we saw two years ago, when just about any stock with a connection to uranium shot up in price, whatever its fundamentals.

• The fledgling junior potash brigade is being led by Potash North Resource, which nailed down a Canaccord Capital-led, $25-million financing on June 9, with the money earmarked for exploration and development of potash assets in Saskatchewan. The financing was priced at $2.50 per unit, with each unit comprising a share and warrant exercisable at $4 within four years. All this for a company that traded for pennies a share a month earlier without potash assets, under the name Timer Explorations. At presstime, the stock is up 100% from its first day of trading under the Potash North banner.

• Other juniors in the new potash space include: Potash One, which is at $5 compared with $3.50 a few weeks ago; Trigon Uranium, with its 38% interest in private U. S. developer Intercontinental Potash Corp.; Ringbolt Ventures, which is raising $20 million to explore and develop potash properties in Utah, and has seen its share price double in the past month; Saskatchewanfocused explorer Athabasca Potash, which has had its share price double in the past three months; new potash entrants Alix Resources and Geo Minerals, both of which doubled their share prices on word they’d struck a deal to explore for potash in Saskatchewan; Western Potash, another two-bagger, which is gearing up for an exploration program in Manitoba; and Vulcan Minerals, which also recently doubled in price when it unveiled a potash play in western Newfoundland.

• The big boys of potash are blossoming too, with at least a doubling of stock being the norm in the past year for majors such as Agrium and Mosaic. Potash Corp. of Saskatchewan is now far and away Canada’s biggest mining company, with a market capitalization of $73 billion, compared with Barrick Gold at $35 billion, Goldcorp at $29 billion, and Teck Cominco at $21 billion.

• Meanwhile, Export Development Canada — the federal government’s export credit agency — reports that Saskatchewan will lead the country in export growth in 2008, driven by strong external demand for potash and uranium, plus high wheat and coarse grain prices. To help things along, the EDC has just opened a new office in Regina, the provincial capital.

• While some miners wait for a turnaround in their favoured commodity to give juice to their share price, others create their own excitement. On June 13, the market saw the unveiling of Gold Wheaton by much of the same team that brought into existence the similarly unconventional but ultimately successful Silver Wheaton vehicle several years ago.

The timing is excellent for Gold Wheaton’s backers, with gold regaining some cachet of late as a safe haven for spooked investors, and junior mine developers becoming more open to unconventional financing, burdened as they are these days with tighter lending markets combined with all-too-frequent cost overruns.

• For thinking big, though, it’s hard to compete with Brazil’s Vale. Management of the base metals giant has recommended to its board to go ahead with a US$15-billion public share offering. Details are still forthcoming, but funds will be directed mostly to the company’s vast, organic growth program, which has capital costs estimated at US$59 billion.

Rumoured for six months to be eyeing Xstrata as a takeover target, Vale was careful in its financing announcement to mention that it “currently is not negotiating any strategic acquisition.”

Vale powered the Sao Paulo Exchange higher, as Standard & Poor’s said it might upgrade Vale in response to the financing, and there were predictions that steel prices may be increased for a third time this year.

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