Marc Davis' Instablog Marc Davis is the publisher of www.Top40goldstocks.com, a performance-oriented table for Who's Who of junior gold stocks. This web site also offers plenty of data, analysis and news about top-performing gold stocks. Marc has nearly a quarter of a century's experience in the mining-oriented venture capital marketplace as a former professional trader and as a research analyst and journalist. He also currently manages www.BNWnews.ca Marc Davis http://seekingalpha.com American Vanadium: Critical to U.S. Industry http://seekingalpha.com/instablog/503819-marc-davis/179002-american-vanadium-critical-to-u-s-industry?source=feed 179002 Heightened global demand for vanadium, especially from China, is prompting the global steel industry to aggressively seek out new supplies, especially in the U.S. where this 21st century metal is becoming increasingly indispensible.

Currently the U.S. imports virtually all of its vanadium needs, which is critical for domestic production of high quality steel, while it also enables the mass storage of renewable energy and powers next-generation smart batteries. That’s why the investment industry is backing American Vanadium Corp. (TSX.V: AVN), which is developing a high-grade vanadium resource in mining-friendly Nevada.

Named the Gibellini Project, it is on-track to become the only vanadium mine in the U.S. and is expected to begin operating before the end of 2012.Such a development will be particularly timely, according to Jon Hykawy, head of global research for the Toronto-based investment bank, Byron Capital Markets.

He says that market forces are set to make vanadium one of the most important commodities of the 21st century. “Without doubt, vanadium is growing into one of the most important metals about which no one has ever heard,” he says.

“Soon, everyone is likely to become a lot more knowledgeable about vanadium, and investors can benefit by staying ahead of the curve and owning companies that can benefit from rapidly increasing vanadium demand.

”Vanadium’s increasing importance to industry and growing cachet among investors is largely due to the fact that it has established itself as a critical element for renewable energy storage. It’s also integral to the adoption of high performance lithium vanadium batteries for the automotive and mobile power sectors.

That said, vanadium’s traditional usage as a metal that strengthens and hardens alloys like steel is also fuelling a surge in demand, especially among emerging economic superpowers like China. Already, the steel industry is reliant on about 92% of the world’s annual vanadium supply.

In fact, the world’s steel industry is already currently constrained by the fact that there simply not enough vanadium to meet existing demand. In particular, new building structures are reliant on the metal’s strengthening properties to safeguard against dangers such as earthquakes.

However, the majority of world’s vanadium is produced in only three countries -- Russia, China and South Africa. And if a booming steel industry is increasingly forced to compete for supplies with a fast-emerging global industry for renewable green energy, especially in the U.S., then there will be an even greater need to bring domestic American supplies on-stream.

American Vanadium’s president Bill Radvak says his company’s Gibellini mine should help to remedy a growing global shortage of vanadium by providing both vanadium pentoxide for the steel industry and vanadium electrolyte for green energy applications.

“In particular, the U.S. steel industry is very interested in locking-in cost-efficient long term supplies with us, especially as they’re showing increased concerns about security of supplies,” he says.

“This is especially the case with the recent announcement that China may dramatically increase their vanadium needs for steel, so much so that China will no longer be an exporter and instead will become an importer,” Radvak adds.
 
“Not only will this scenario put a major squeeze on global supplies, but it will also likely increase the price of the metal.” Radvak says the prospect of the U.S. supply chain for vanadium being at risk has prompted the government to show a keen interest in his company’s quest to become a reliable domestic producer.

Especially since the Gibellini Project is also expected to have a long mine life, with a low-cost/low-risk profile. Paramount to America’s needs to lock-in future vanadium supplies in the metal’s application for renewable energy.

In fact, vanadium has been hailed by the Obama Administration as a game-changing future driver of next-generation smart batteries, which are integral to the U.S. economy’s “green revolution.

”Large-scale adoption of clean, renewable energy is dependent on having grid level energy storage solutions and the U.S. government is already funding such initiatives.

In a recent speech, President Obama acknowledged vanadium flow batteries as an important part of improving energy efficiency by facilitating clean energy storage for the first time ever.Radvak says the Gibellini mine promises to be one of the lowest cost primary vanadium operations in the world. And consequently he expects his company to produce vanadium electrolyte cheaper than anywhere else in the world using a process called heat bleaching.

Like the steel industry, the manufacturers of vanadium redox flow batteries (VRBs) are also especially keen on the prospect of lower purchase costs from the Gibellini mine than from overseas suppliers. Vanadium currently trades at around $7.50 a pound.

“Vanadium is our largest single item cost,” says Jeff Pierson, senior vice president of Prudent Energy Corporation, which is an American manufacturer of VRBs.

“While Prudent is able to secure relatively low cost vanadium from a number of sources, an even lower price of vanadium would certainly have a material impact on the overall costs of our VRB energy storage systems.”Around the globe a handful of other small vanadium developers are also hard at work trying to commercialize their own discoveries.

However, American Vanadium appears to be ahead of the pack and is expected to be the first to commercial its increasingly strategic domestic resources. And the company’s plans to be a prolific, low cost operator should ensure a very bright future, according to Byron Capital Market’s Hykawy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> Tue, 17 May 2011 14:22:54 -0400 Heightened global demand for vanadium, especially from China, is prompting the global steel industry to aggressively seek out new supplies, especially in the U.S. where this 21st century metal is becoming increasingly indispensible.

Currently the U.S. imports virtually all of its vanadium needs, which is critical for domestic production of high quality steel, while it also enables the mass storage of renewable energy and powers next-generation smart batteries. That’s why the investment industry is backing American Vanadium Corp. (TSX.V: AVN), which is developing a high-grade vanadium resource in mining-friendly Nevada.

Named the Gibellini Project, it is on-track to become the only vanadium mine in the U.S. and is expected to begin operating before the end of 2012.Such a development will be particularly timely, according to Jon Hykawy, head of global research for the Toronto-based investment bank, Byron Capital Markets.

He says that market forces are set to make vanadium one of the most important commodities of the 21st century. “Without doubt, vanadium is growing into one of the most important metals about which no one has ever heard,” he says.

“Soon, everyone is likely to become a lot more knowledgeable about vanadium, and investors can benefit by staying ahead of the curve and owning companies that can benefit from rapidly increasing vanadium demand.

”Vanadium’s increasing importance to industry and growing cachet among investors is largely due to the fact that it has established itself as a critical element for renewable energy storage. It’s also integral to the adoption of high performance lithium vanadium batteries for the automotive and mobile power sectors.

That said, vanadium’s traditional usage as a metal that strengthens and hardens alloys like steel is also fuelling a surge in demand, especially among emerging economic superpowers like China. Already, the steel industry is reliant on about 92% of the world’s annual vanadium supply.

In fact, the world’s steel industry is already currently constrained by the fact that there simply not enough vanadium to meet existing demand. In particular, new building structures are reliant on the metal’s strengthening properties to safeguard against dangers such as earthquakes.

However, the majority of world’s vanadium is produced in only three countries -- Russia, China and South Africa. And if a booming steel industry is increasingly forced to compete for supplies with a fast-emerging global industry for renewable green energy, especially in the U.S., then there will be an even greater need to bring domestic American supplies on-stream.

American Vanadium’s president Bill Radvak says his company’s Gibellini mine should help to remedy a growing global shortage of vanadium by providing both vanadium pentoxide for the steel industry and vanadium electrolyte for green energy applications.

“In particular, the U.S. steel industry is very interested in locking-in cost-efficient long term supplies with us, especially as they’re showing increased concerns about security of supplies,” he says.

“This is especially the case with the recent announcement that China may dramatically increase their vanadium needs for steel, so much so that China will no longer be an exporter and instead will become an importer,” Radvak adds.
 
“Not only will this scenario put a major squeeze on global supplies, but it will also likely increase the price of the metal.” Radvak says the prospect of the U.S. supply chain for vanadium being at risk has prompted the government to show a keen interest in his company’s quest to become a reliable domestic producer.

Especially since the Gibellini Project is also expected to have a long mine life, with a low-cost/low-risk profile. Paramount to America’s needs to lock-in future vanadium supplies in the metal’s application for renewable energy.

In fact, vanadium has been hailed by the Obama Administration as a game-changing future driver of next-generation smart batteries, which are integral to the U.S. economy’s “green revolution.

”Large-scale adoption of clean, renewable energy is dependent on having grid level energy storage solutions and the U.S. government is already funding such initiatives.

In a recent speech, President Obama acknowledged vanadium flow batteries as an important part of improving energy efficiency by facilitating clean energy storage for the first time ever.Radvak says the Gibellini mine promises to be one of the lowest cost primary vanadium operations in the world. And consequently he expects his company to produce vanadium electrolyte cheaper than anywhere else in the world using a process called heat bleaching.

Like the steel industry, the manufacturers of vanadium redox flow batteries (VRBs) are also especially keen on the prospect of lower purchase costs from the Gibellini mine than from overseas suppliers. Vanadium currently trades at around $7.50 a pound.

“Vanadium is our largest single item cost,” says Jeff Pierson, senior vice president of Prudent Energy Corporation, which is an American manufacturer of VRBs.

“While Prudent is able to secure relatively low cost vanadium from a number of sources, an even lower price of vanadium would certainly have a material impact on the overall costs of our VRB energy storage systems.”Around the globe a handful of other small vanadium developers are also hard at work trying to commercialize their own discoveries.

However, American Vanadium appears to be ahead of the pack and is expected to be the first to commercial its increasingly strategic domestic resources. And the company’s plans to be a prolific, low cost operator should ensure a very bright future, according to Byron Capital Market’s Hykawy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> american vanadium president obama green energy critical metals strategic metals nevada renewable green energy Obama Hails Renewable Energy Breakthrough http://seekingalpha.com/instablog/503819-marc-davis/145058-obama-hails-renewable-energy-breakthrough?source=feed 145058 By Marc Davis, BNWnews.ca

U.S. President Barack Obama has championed “multi-megawatt vanadium redox fuel cells” for mass-storage batteries as “one of the coolest things I’ve ever said out loud”.

Speaking to some of America’s most illustrious business leaders at a brainstorming forum in Cleveland last month, his light-hearted, upbeat remarks underscored his enthusiasm for clean energy solutions. Ones that his administration is committed to supporting.

Powerful vanadium-reliant fuel cells (known as VRBs) would help achieve his goal, outlined in his most recent State of the Union address, to generate 80 percent of the nation’s electricity from renewable sources by the year 2035.

Other governments and major corporations around the world are also investing vast amounts of money into the electrification of energy supplies, and a critical part of that electrification campaign is vanadium.

Indeed, vanadium has been creating quite a buzz in clean energy circles of late. And that is expected to give a big boost to production of the little-known metal in North America. Currently there are no meaningful suppliers on the continent, although the first vanadium mine is being developed in Nevada by American Vanadium Corp. (TSX.V: AVC) and is expected to come online by the end of next year.

The mining company’s much-anticipated output will be a boon to makers of VRBs, as well as electric car manufacturers. Both industries are gearing up to meet a surge in demand, according to industry analysts.

Boxcar-sized VRB batteries will provide grid-level electricity storage and thus are seen as a solution to the most common problem with clean energy production – a lack of ability to store the electricity generated by wind and solar power facilities. Vanadium is also a valuable supercharger for lithium ion batteries used in electric vehicles, which are expected to be produced in the millions by the next decade.

Both types of super-batteries rely heavily on vanadium, which historically has been mostly used in the U.S. as an added alloy to strengthen steel and aluminum. Elsewhere in the world, it is often mined as a by-product of iron ore or uranium mining. But North America’s only domestic supplies are extracted from the oil refining process, which is quite expensive to achieve. And it doesn’t yield much vanadium.

Jon Hykawy, a clean technology/alternative energy industries analyst for the Toronto-based investment bank, Byron Capital Markets, says that new-age uses for vanadium are about to take center-stage.

Due to vanadium’s promising 21st century uses, including beefing-up powerful high-voltage lithium batteries and the mass storage of electricity for power grids, “there’s a significant opportunity here to see vanadium ramp up," he says. 

In particular, automakers want to use the metal to create better electric vehicle batteries that will widely extend an electric car’s range and thus conquer one of the largest impediments to the wide-scale adoption by consumers. At the same time, vanadium can cost-effectively supercharge fuel-cell batteries, allowing them to achieve large-scale storage of electricity in VRBs and thus provide uninterrupted solar and wind power to entire cities.

It was those abilities that so excited Obama. However, it has also excited others around the world, especially China, which is working hard on producing its own clean-energy storage cells and electric vehicles, and therefore is expected to create a shortage of this energy-revolutionizing strategic metal.

Hence, looming supply constraints for the U.S. marketplace are a big issue right now. That’s because in 2007 (the last year that accurate figures are available), only about 59,100 tonnes of contained vanadium was produced globally, with over 90 percent of this coming from South Africa, China and Russia.

As a result, it doesn’t take a great leap in logic to recognize that with all this interest in vanadium as the clean energy catalyst of the 21st century there will be inevitable shortages down the road. So the hunt is on throughout North America for a secure and steady supply of vanadium, according to Chris and Michael Berry, the publishers of the investment newsletter, discoveryinvesting.com.

They point to American Vanadium as the ‘go-to’ company to begin satisfying North America’s burgeoning near-term vanadium needs. The company has three deposits in Nevada but is focusing on the Gibellini project and plans to begin producing by the end of 2012. Going forward, its plans call for production of 14 million pounds of high-
purity (and therefore ready-to-use) vanadium pentoxide per year.

“The Gibellini is solidly tracking towards delivery of a feasibility study mid 2011 and production at the end of 2012,” says Bill Radvak, President and CEO of American Vanadium. “So we’re now focusing on adding a substantial vanadium resource at our other nearby vanadium sites.”

 

Buoyed by the growing demand by clean energy producers for vanadium, Radvak also has his eye on becoming a vertically integrated player in the clean energy market. He ultimately wants to leap from being a miner of vanadium to a maker of vanadium batteries to capture significant value along the different parts of the supply chain.

 

Above all, American Vanadium has the potential to become a “low cost producer” and has “good state government support to get that project up and running,” according to Hykawy. Both criteria suggest that this upstart company may yet get President Obama’s endorsement as another ‘cool’ catalyst for the green energy revolution. 

 

The principals of www.BNWnews.ca do not directly or indirectly own shares in the companies mentioned in this article. 

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> Mon, 07 Mar 2011 15:06:44 -0500 By Marc Davis, BNWnews.ca

U.S. President Barack Obama has championed “multi-megawatt vanadium redox fuel cells” for mass-storage batteries as “one of the coolest things I’ve ever said out loud”.

Speaking to some of America’s most illustrious business leaders at a brainstorming forum in Cleveland last month, his light-hearted, upbeat remarks underscored his enthusiasm for clean energy solutions. Ones that his administration is committed to supporting.

Powerful vanadium-reliant fuel cells (known as VRBs) would help achieve his goal, outlined in his most recent State of the Union address, to generate 80 percent of the nation’s electricity from renewable sources by the year 2035.

Other governments and major corporations around the world are also investing vast amounts of money into the electrification of energy supplies, and a critical part of that electrification campaign is vanadium.

Indeed, vanadium has been creating quite a buzz in clean energy circles of late. And that is expected to give a big boost to production of the little-known metal in North America. Currently there are no meaningful suppliers on the continent, although the first vanadium mine is being developed in Nevada by American Vanadium Corp. (TSX.V: AVC) and is expected to come online by the end of next year.

The mining company’s much-anticipated output will be a boon to makers of VRBs, as well as electric car manufacturers. Both industries are gearing up to meet a surge in demand, according to industry analysts.

Boxcar-sized VRB batteries will provide grid-level electricity storage and thus are seen as a solution to the most common problem with clean energy production – a lack of ability to store the electricity generated by wind and solar power facilities. Vanadium is also a valuable supercharger for lithium ion batteries used in electric vehicles, which are expected to be produced in the millions by the next decade.

Both types of super-batteries rely heavily on vanadium, which historically has been mostly used in the U.S. as an added alloy to strengthen steel and aluminum. Elsewhere in the world, it is often mined as a by-product of iron ore or uranium mining. But North America’s only domestic supplies are extracted from the oil refining process, which is quite expensive to achieve. And it doesn’t yield much vanadium.

Jon Hykawy, a clean technology/alternative energy industries analyst for the Toronto-based investment bank, Byron Capital Markets, says that new-age uses for vanadium are about to take center-stage.

Due to vanadium’s promising 21st century uses, including beefing-up powerful high-voltage lithium batteries and the mass storage of electricity for power grids, “there’s a significant opportunity here to see vanadium ramp up," he says. 

In particular, automakers want to use the metal to create better electric vehicle batteries that will widely extend an electric car’s range and thus conquer one of the largest impediments to the wide-scale adoption by consumers. At the same time, vanadium can cost-effectively supercharge fuel-cell batteries, allowing them to achieve large-scale storage of electricity in VRBs and thus provide uninterrupted solar and wind power to entire cities.

It was those abilities that so excited Obama. However, it has also excited others around the world, especially China, which is working hard on producing its own clean-energy storage cells and electric vehicles, and therefore is expected to create a shortage of this energy-revolutionizing strategic metal.

Hence, looming supply constraints for the U.S. marketplace are a big issue right now. That’s because in 2007 (the last year that accurate figures are available), only about 59,100 tonnes of contained vanadium was produced globally, with over 90 percent of this coming from South Africa, China and Russia.

As a result, it doesn’t take a great leap in logic to recognize that with all this interest in vanadium as the clean energy catalyst of the 21st century there will be inevitable shortages down the road. So the hunt is on throughout North America for a secure and steady supply of vanadium, according to Chris and Michael Berry, the publishers of the investment newsletter, discoveryinvesting.com.

They point to American Vanadium as the ‘go-to’ company to begin satisfying North America’s burgeoning near-term vanadium needs. The company has three deposits in Nevada but is focusing on the Gibellini project and plans to begin producing by the end of 2012. Going forward, its plans call for production of 14 million pounds of high-
purity (and therefore ready-to-use) vanadium pentoxide per year.

“The Gibellini is solidly tracking towards delivery of a feasibility study mid 2011 and production at the end of 2012,” says Bill Radvak, President and CEO of American Vanadium. “So we’re now focusing on adding a substantial vanadium resource at our other nearby vanadium sites.”

 

Buoyed by the growing demand by clean energy producers for vanadium, Radvak also has his eye on becoming a vertically integrated player in the clean energy market. He ultimately wants to leap from being a miner of vanadium to a maker of vanadium batteries to capture significant value along the different parts of the supply chain.

 

Above all, American Vanadium has the potential to become a “low cost producer” and has “good state government support to get that project up and running,” according to Hykawy. Both criteria suggest that this upstart company may yet get President Obama’s endorsement as another ‘cool’ catalyst for the green energy revolution. 

 

The principals of www.BNWnews.ca do not directly or indirectly own shares in the companies mentioned in this article. 

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> green energy multi-megawatt vanadium redox fuel cells Western Potash Weighs M&A Options http://seekingalpha.com/instablog/503819-marc-davis/119782-western-potash-weighs-m-a-options?source=feed 119782 By Marc Davis, BNWnews.ca

It’s just a matter of time before Western Potash Corp. is gobbled up by a potash-hungry major mining company, according to investment industry analysts who follow the global fertilizer industry. But the tiny Vancouver-based potash development company is in no hurry.

Company spokesperson John Costigan says Western Potash (TSX.V: WPX) is still moving aggressively forward with its plans to become a potash producer at its Milestone deposit in potash-rich Saskatchewan. And management won’t consider any takeover offers until the marketplace assigns the company a valuation that is comparable or superior to Potash One Inc. (TSX: KCL).

Last month, Potash One accepted a buy-out offer valued at $434 million or $4.50 a share from the European fertilizer heavyweight K+S Group following the long-awaited publication of a full feasibility study on its Legacy deposit.

The pending Potash One takeover leaves Western Potash as the “last man standing,” according to Costigan. By which he means that it’s now the only one left of Saskatchewan’s tiny handful of potash explorers that has a firm grasp on the size and economic potential of its potash assets.

The only other potash junior in the region that also benefited from a resource estimate (which was still at the pre-feasibility stage) was Athabasca Potash Inc. It was acquired by the world’s largest mining company, BHP Billiton Ltd. (NYSE: BHP), last March in a deal worth $341 million or $8.35 a share.

Noting that Western Potash just announced a $40 million equity financing last week (including a potential additional $6 million over-allotment), an upbeat Costigan says his company will have plenty of cash-on-hand to control its destiny for the foreseeable future.  

“It’s full steam ahead. If this latest financing is fully subscribed, and all of our warrants from this financing and past financings are exercised, that could top up our treasury to well over $100 million,” he says.  

Such a sizeable war-chest would be ample to complete both a pre-feasibility study (a preliminary blueprint for a mine) and a ‘make or break’ full-blown feasibility study, Costigan says. In the near-term, the $40 million cash infusion, alone, will allow the company to immediately get the $7 million pre-feasibility study underway, with a six to seven month timeline to completion. A final feasibility study would involve a further approximately $43 million expenditure and would take another 12 months to finalize, Costigan adds.    

Western Potash’s game plan is following a proven formula, according to Jaret Anderson, a fertilizers and agriculture investment analyst for the Vancouver-based investment bank Salman Partners. He notes that the same strategy of reaching such critical developmental benchmarks has worked out well for Saskatchewan’s other two advanced-stage potash juniors.

“Both Athabasca Potash and Potash One secured substantial bids from established mining/potash companies this year on the back of exploration and engineering work,” he says. “The development potash producer business model can yield significant returns to shareholders.”

Siddharth Rajeev, a mining analyst for the Vancouver-based investment research company, Fundamental Research, agrees that Western Potash should at least complete a pre-feasibility study to generate a higher share price evaluation.

“The company should be able to negotiate a better deal once this study is completed,” he says.

Western Potash is currently “very undervalued,” says Rajeev, especially since its story is “very comparable” to Potash One in that both the Legacy and Milestone deposits have similar production profiles and similar mine development and operating cost structures.

For instance, Potash One’s recently published feasibility study projects an annual output of 2.86 million tonnes of potash at the Legacy deposit at average operating costs of $63 a tonne over at least 40 years. Similarly, Western Potash’s preliminary economic assessment forecasts a yield of 2.5 million tonnes per year at the same average operating costs of $63 per tonne over a minimum of four decades. 

That said, Potash One deserves a higher market capitalization, Rajeev says. That’s because its business model is considerably more advanced. Also, Legacy’s resource base is the larger of the two at 251 million tonnes, compared to Milestone’s 174 million tonnes.

The appeal of both projects is underscored by the fact that both Milestone and Legacy are amenable to ‘solution-extraction’ mining methods, Rajeev adds. This translates into much lower capital expenditures and operating costs than conventional potash mines.

Western Potash spokesperson Costigan says that the odds in favor of a lucrative potash mine being commissioned by 2015 at Milestone are also supported by its close proximity to the largest solution-extraction potash operation in the world, the Belle Plaine mine. Owned by the potash giant, The Mosaic Company (NYSE: MOS), it has been in business for over 40 years and is still going strong at around 2.8 million tonnes of output per annum.

Meanwhile, the most obvious fit for Western Potash might be the world’s second largest mining company, Vale SA (NYSE: VALE), according to Rajeev. Brazil-based Vale SA already has a strategic foothold in Saskatchewan where it is building its own a solution-extraction potash mine.

Notably, Vale SA’s project borders the Milestone deposit. This is particularly encouraging for Western Potash, which believes that its own deposit exhibits similar geological features – ones that are also likely suitable for the realization of an energy-efficient and therefore cost-efficient solution-extraction mine.

Anderson also wonders whether Vale SA may be inclined to expand its footprint among the world’s richest and most prolific potash fields by doing a deal with Western Potash.

“Vale has made some comments recently about their intent to make significant investments in Canada,” he says. “Whenever you’ve got guys that are next door it always makes sense to see what the synergies would be for combining the two projects and running them as one. I think they should both consider that choice.” 

“But the Milestone asset is an attractive asset to a great number of companies, including ones that are already in the potash sector,” he adds. “And there’s also BHP who are looking to get into Canada’s potash sector.”

Anderson also thinks it would make sense for the Chinese to lock-in future Canadian potash supplies, perhaps by way of a takeover of Western Potash. Or alternatively, the Chinese may yet propose an ‘off-take’ agreement, whereby they are guaranteed certain quantities of potash each year at a predetermined “reasonable” price in exchange for helping to finance mine construction costs at Milestone.

“The Chinese have an incentive to encourage the development of ‘greenfields’ (in-development) potash projects,” he adds. “So, co-operating with companies like Western Potash… makes a lot of sense for them.”

And now that Western Potash is the only advanced-stage junior developer left in Saskatchewan, Anderson says it also benefits from its “scarcity value” due to it now being “a unique asset that may attract interest from those seeking entry into the Saskatchewan potash industry.”

But Western Potash is being coy about who it may want to do business with. In a November 25th news release, the company said that it’s evaluating all options and is in discussions with takeover suitors, as well as aspiring merger or joint venture partners.

 

The principals of BNWnews.ca do not directly or indirectly own shares of any of the companies mentioned in this article. ]]> Fri, 10 Dec 2010 15:41:15 -0500 By Marc Davis, BNWnews.ca

It’s just a matter of time before Western Potash Corp. is gobbled up by a potash-hungry major mining company, according to investment industry analysts who follow the global fertilizer industry. But the tiny Vancouver-based potash development company is in no hurry.

Company spokesperson John Costigan says Western Potash (TSX.V: WPX) is still moving aggressively forward with its plans to become a potash producer at its Milestone deposit in potash-rich Saskatchewan. And management won’t consider any takeover offers until the marketplace assigns the company a valuation that is comparable or superior to Potash One Inc. (TSX: KCL).

Last month, Potash One accepted a buy-out offer valued at $434 million or $4.50 a share from the European fertilizer heavyweight K+S Group following the long-awaited publication of a full feasibility study on its Legacy deposit.

The pending Potash One takeover leaves Western Potash as the “last man standing,” according to Costigan. By which he means that it’s now the only one left of Saskatchewan’s tiny handful of potash explorers that has a firm grasp on the size and economic potential of its potash assets.

The only other potash junior in the region that also benefited from a resource estimate (which was still at the pre-feasibility stage) was Athabasca Potash Inc. It was acquired by the world’s largest mining company, BHP Billiton Ltd. (NYSE: BHP), last March in a deal worth $341 million or $8.35 a share.

Noting that Western Potash just announced a $40 million equity financing last week (including a potential additional $6 million over-allotment), an upbeat Costigan says his company will have plenty of cash-on-hand to control its destiny for the foreseeable future.  

“It’s full steam ahead. If this latest financing is fully subscribed, and all of our warrants from this financing and past financings are exercised, that could top up our treasury to well over $100 million,” he says.  

Such a sizeable war-chest would be ample to complete both a pre-feasibility study (a preliminary blueprint for a mine) and a ‘make or break’ full-blown feasibility study, Costigan says. In the near-term, the $40 million cash infusion, alone, will allow the company to immediately get the $7 million pre-feasibility study underway, with a six to seven month timeline to completion. A final feasibility study would involve a further approximately $43 million expenditure and would take another 12 months to finalize, Costigan adds.    

Western Potash’s game plan is following a proven formula, according to Jaret Anderson, a fertilizers and agriculture investment analyst for the Vancouver-based investment bank Salman Partners. He notes that the same strategy of reaching such critical developmental benchmarks has worked out well for Saskatchewan’s other two advanced-stage potash juniors.

“Both Athabasca Potash and Potash One secured substantial bids from established mining/potash companies this year on the back of exploration and engineering work,” he says. “The development potash producer business model can yield significant returns to shareholders.”

Siddharth Rajeev, a mining analyst for the Vancouver-based investment research company, Fundamental Research, agrees that Western Potash should at least complete a pre-feasibility study to generate a higher share price evaluation.

“The company should be able to negotiate a better deal once this study is completed,” he says.

Western Potash is currently “very undervalued,” says Rajeev, especially since its story is “very comparable” to Potash One in that both the Legacy and Milestone deposits have similar production profiles and similar mine development and operating cost structures.

For instance, Potash One’s recently published feasibility study projects an annual output of 2.86 million tonnes of potash at the Legacy deposit at average operating costs of $63 a tonne over at least 40 years. Similarly, Western Potash’s preliminary economic assessment forecasts a yield of 2.5 million tonnes per year at the same average operating costs of $63 per tonne over a minimum of four decades. 

That said, Potash One deserves a higher market capitalization, Rajeev says. That’s because its business model is considerably more advanced. Also, Legacy’s resource base is the larger of the two at 251 million tonnes, compared to Milestone’s 174 million tonnes.

The appeal of both projects is underscored by the fact that both Milestone and Legacy are amenable to ‘solution-extraction’ mining methods, Rajeev adds. This translates into much lower capital expenditures and operating costs than conventional potash mines.

Western Potash spokesperson Costigan says that the odds in favor of a lucrative potash mine being commissioned by 2015 at Milestone are also supported by its close proximity to the largest solution-extraction potash operation in the world, the Belle Plaine mine. Owned by the potash giant, The Mosaic Company (NYSE: MOS), it has been in business for over 40 years and is still going strong at around 2.8 million tonnes of output per annum.

Meanwhile, the most obvious fit for Western Potash might be the world’s second largest mining company, Vale SA (NYSE: VALE), according to Rajeev. Brazil-based Vale SA already has a strategic foothold in Saskatchewan where it is building its own a solution-extraction potash mine.

Notably, Vale SA’s project borders the Milestone deposit. This is particularly encouraging for Western Potash, which believes that its own deposit exhibits similar geological features – ones that are also likely suitable for the realization of an energy-efficient and therefore cost-efficient solution-extraction mine.

Anderson also wonders whether Vale SA may be inclined to expand its footprint among the world’s richest and most prolific potash fields by doing a deal with Western Potash.

“Vale has made some comments recently about their intent to make significant investments in Canada,” he says. “Whenever you’ve got guys that are next door it always makes sense to see what the synergies would be for combining the two projects and running them as one. I think they should both consider that choice.” 

“But the Milestone asset is an attractive asset to a great number of companies, including ones that are already in the potash sector,” he adds. “And there’s also BHP who are looking to get into Canada’s potash sector.”

Anderson also thinks it would make sense for the Chinese to lock-in future Canadian potash supplies, perhaps by way of a takeover of Western Potash. Or alternatively, the Chinese may yet propose an ‘off-take’ agreement, whereby they are guaranteed certain quantities of potash each year at a predetermined “reasonable” price in exchange for helping to finance mine construction costs at Milestone.

“The Chinese have an incentive to encourage the development of ‘greenfields’ (in-development) potash projects,” he adds. “So, co-operating with companies like Western Potash… makes a lot of sense for them.”

And now that Western Potash is the only advanced-stage junior developer left in Saskatchewan, Anderson says it also benefits from its “scarcity value” due to it now being “a unique asset that may attract interest from those seeking entry into the Saskatchewan potash industry.”

But Western Potash is being coy about who it may want to do business with. In a November 25th news release, the company said that it’s evaluating all options and is in discussions with takeover suitors, as well as aspiring merger or joint venture partners.

 

The principals of BNWnews.ca do not directly or indirectly own shares of any of the companies mentioned in this article. ]]> WPX K S Group Argentina: More Gold M&A on the Way http://seekingalpha.com/instablog/503819-marc-davis/104357-argentina-more-gold-m-a-on-the-way?source=feed 104357 By Marc Davis, www.BNWnews.ca and Top40goldstocks.com
As the excitement surrounding the $3.6 billion buyout of tiny Andean Resources by Goldcorp Inc. subsides, investors are wondering who’s up for grabs next among Argentina’s other emerging success stories.
The task has been simplified by the fact that only two gold juniors have to date made sufficiently impressive gold discoveries to attract takeover speculation. One is Mansfield Minerals (TSX.V: MDR), which has been quietly developing its Lindero gold discovery since as far back as 1999.
The other is Extorre Gold Mines (TSX: XG), which burst onto the mining scene just over six months ago after it was spun-off from high-flying Exeter Resource Corp. (TSX: XRC) (NYSE-AMEX: XRA). Extorre inherited the high-grade Cerro Moro deposit from its parent company. However, only a hostile takeover could wrestle Cerro Moro from Extorre any time soon, according to the company’s management.
Having just completed a $40 million equity financing, Extorre says it’s committed to building considerably more value into the project by way of drill-defining plenty more high grade gold and silver. To date, a total of 612,000 ‘indicated’ ounces of gold equivalent (gold and silver combined) have been found in just one of the deposit’s many veins. All told, Extorre is targeting a two-million ounce resource in the same proximity and geological environment as Andean’s richly mineralized Cerro Negro deposit.
A third company worth mentioning is Australia-based Troy Resources NL (TSX: TRY) (ASX: TRY), which is an existing gold miner in Australia and Brazil. Troy is gearing up for its first gold pour this autumn at its low-cost, high-grade Casposo gold/silver project in Argentina’s mining-friendly San Juan Province.
 
This new mine is now fully funded and is therefore not for sale, according to Troy’s president Paul Benson – at least not for now. With 70 more drill targets, there’s plenty more upside potential for the discovery of significant additional ounces in the ground, he says. Furthermore, with a current reserve base of only 341,400 ounces of gold and 11.2 million silver ounces, it almost certainly does not meet the minimum size threshold to interest much bigger gold miners at this time.  
 
That leaves Mansfield Minerals sitting pretty. The company has long groomed its ‘company-maker’ Lindero deposit for the right suitor. With gold prices vaulting to record highs, the timing is excellent, according to Mansfield’s president, Gordon Leask. This is why a bankable feasibility study (a final blueprint for a mine) is underway.
However, the company has already published key independently-assessed financial projections by way of a pre-feasibility study. One that unequivocally attests to the viability of a future gold mine based on current reserves of 1.9 million ounces. There’s also a further drill ‘inferred’ resource of one million ounces. This needs to be more clearly defined by way of additional in-fill drilling to be considered completely reliable.
Hence, “advanced talks” with one or more sizeable, expansion-minded gold mining companies are making headway, according to Leask. This surely comes as no surprise to the various mining analysts who have been covering this low-key gold story for nearly a decade.
Among the more recent enthusiasts is Joe Mazumdar, a mining analyst for the Canadian stock brokerage firm Haywood Securities Inc. After having crunched the key metrics in Mansfield’s pre-feasibility study, Mazumdar wrote a research report last April on the company encouragingly entitled: “Low Hanging Fruit.”
“The quality of the asset has been underpinned by its simplicity and low technical risk. It is the equivalent of a ‘mine on training wheels,’” he asserted in a 39-page report. Hence, his conclusion that Mansfield is “a prime candidate for takeover” and that the company could fetch “premiums of up to 250 per cent from its current price” in a takeover scenario.  
But Lindero’s allure hasn’t gone unnoticed by a number of gold-hungry producers, according to Leask, who declines to elaborate. But he notes that there’s a scarcity of bargains in the junior gold space.

At least seven potential suitors, including Yamana Gold Inc. (TSX: YRI) (NYSE: AUY) and Eldorado Gold Corp. (TSX: ELD) (NYSE: EGO), have been identified by Haywood Securities among the world’s relative few mid-tier gold miners. (Notably, Eldorado just lost out in the takeover battle for Andean Resources after its US $3.4 billion proposal was outbid by Goldcorp).

So what is it about Lindero’s economic modeling that gives it so much credibility? Apparently, the deposit can produce around 160,000 ounces per annum in the first few years at a modest cost of US $373 an ounce. This is because much of the high-grade mineralization is near surface. And this scenario would offer an anticipated payback on capital costs within two years, based on minimum gold prices of US $1,100.
Furthermore, the deposit also benefits from being well suited to an open pit (quarry-like) heap leach (low extraction cost) mining operation. All told, a minimum 9.5-year mine life will translate into average annual yields of around 150,000 gold ounces for the bulk of the mine’s life – and at an average cash cost of US $407 per ounce.

Additionally, the renowned engineering firm that conducted the company’s pre-feasibility study, AMEC Americas Ltd., calculated a pre-tax net present value of US $490 million for the Lindero deposit, assuming US $1,100 gold prices. (NPV is a pivotal decision-making metric that is defined as the risk adjusted value of the deposit once all the borrowed capital costs are repaid).

Another Canadian investment bank, Paradigm Capital Inc., also views Mansfield as an obvious takeover candidate. In a research paper discussing the company’s pre-feasibility study, senior mining analyst Don MacLean made a good case for a likely takeover.
The Paradigm report, which was published last March, noted that Mansfield only has approximately 44 million shares outstanding and a low market capitalization. The report’s takeover conjecture comes into clearer focus when considering the fact that Paradigm assigned an after-tax net present value (NPV) of US $242 million to Lindero, based on US $1,100 gold prices. By using a much more cautious after-tax evaluation than the pre-tax version assigned by AMEC, Paradigm still was able to deduce that Lindero is worth more than three times the actual value of Mansfield, itself.
The Haywood research report also points to the fact that geopolitical considerations also weigh in Lindero’s favor. In particular the project is located in a remote, economically underdeveloped region of Salta Province. that is actively soliciting foreign investment. Hence, Salta’s pro-mining government is actively soliciting foreign investment and is therefore supportive of Lindero, according to Leask.  Similarly, the federal government is also onside, he adds.
This favorable situation, along with the absence of any environmental challenges, explains why Leask expects a mining permit to be issued before year’s end.
Mansfield Minerals, Extorre Gold Mines and Troy Resources may be well ahead of the pack towards producer status. But a growing number of other ambitious gold explorers are aggressively working to validate their own gold discoveries in Argentina. All of which have a shot at becoming the next ‘home run’ takeover success story.
The principals of www.BNWnews.ca and Top40GoldStocks do not directly or indirectly own shares in any of the companies mentioned in this article.


Disclosure: No positions]]> Mon, 25 Oct 2010 13:46:53 -0400 By Marc Davis, www.BNWnews.ca and Top40goldstocks.com
As the excitement surrounding the $3.6 billion buyout of tiny Andean Resources by Goldcorp Inc. subsides, investors are wondering who’s up for grabs next among Argentina’s other emerging success stories.
The task has been simplified by the fact that only two gold juniors have to date made sufficiently impressive gold discoveries to attract takeover speculation. One is Mansfield Minerals (TSX.V: MDR), which has been quietly developing its Lindero gold discovery since as far back as 1999.
The other is Extorre Gold Mines (TSX: XG), which burst onto the mining scene just over six months ago after it was spun-off from high-flying Exeter Resource Corp. (TSX: XRC) (NYSE-AMEX: XRA). Extorre inherited the high-grade Cerro Moro deposit from its parent company. However, only a hostile takeover could wrestle Cerro Moro from Extorre any time soon, according to the company’s management.
Having just completed a $40 million equity financing, Extorre says it’s committed to building considerably more value into the project by way of drill-defining plenty more high grade gold and silver. To date, a total of 612,000 ‘indicated’ ounces of gold equivalent (gold and silver combined) have been found in just one of the deposit’s many veins. All told, Extorre is targeting a two-million ounce resource in the same proximity and geological environment as Andean’s richly mineralized Cerro Negro deposit.
A third company worth mentioning is Australia-based Troy Resources NL (TSX: TRY) (ASX: TRY), which is an existing gold miner in Australia and Brazil. Troy is gearing up for its first gold pour this autumn at its low-cost, high-grade Casposo gold/silver project in Argentina’s mining-friendly San Juan Province.
 
This new mine is now fully funded and is therefore not for sale, according to Troy’s president Paul Benson – at least not for now. With 70 more drill targets, there’s plenty more upside potential for the discovery of significant additional ounces in the ground, he says. Furthermore, with a current reserve base of only 341,400 ounces of gold and 11.2 million silver ounces, it almost certainly does not meet the minimum size threshold to interest much bigger gold miners at this time.  
 
That leaves Mansfield Minerals sitting pretty. The company has long groomed its ‘company-maker’ Lindero deposit for the right suitor. With gold prices vaulting to record highs, the timing is excellent, according to Mansfield’s president, Gordon Leask. This is why a bankable feasibility study (a final blueprint for a mine) is underway.
However, the company has already published key independently-assessed financial projections by way of a pre-feasibility study. One that unequivocally attests to the viability of a future gold mine based on current reserves of 1.9 million ounces. There’s also a further drill ‘inferred’ resource of one million ounces. This needs to be more clearly defined by way of additional in-fill drilling to be considered completely reliable.
Hence, “advanced talks” with one or more sizeable, expansion-minded gold mining companies are making headway, according to Leask. This surely comes as no surprise to the various mining analysts who have been covering this low-key gold story for nearly a decade.
Among the more recent enthusiasts is Joe Mazumdar, a mining analyst for the Canadian stock brokerage firm Haywood Securities Inc. After having crunched the key metrics in Mansfield’s pre-feasibility study, Mazumdar wrote a research report last April on the company encouragingly entitled: “Low Hanging Fruit.”
“The quality of the asset has been underpinned by its simplicity and low technical risk. It is the equivalent of a ‘mine on training wheels,’” he asserted in a 39-page report. Hence, his conclusion that Mansfield is “a prime candidate for takeover” and that the company could fetch “premiums of up to 250 per cent from its current price” in a takeover scenario.  
But Lindero’s allure hasn’t gone unnoticed by a number of gold-hungry producers, according to Leask, who declines to elaborate. But he notes that there’s a scarcity of bargains in the junior gold space.

At least seven potential suitors, including Yamana Gold Inc. (TSX: YRI) (NYSE: AUY) and Eldorado Gold Corp. (TSX: ELD) (NYSE: EGO), have been identified by Haywood Securities among the world’s relative few mid-tier gold miners. (Notably, Eldorado just lost out in the takeover battle for Andean Resources after its US $3.4 billion proposal was outbid by Goldcorp).

So what is it about Lindero’s economic modeling that gives it so much credibility? Apparently, the deposit can produce around 160,000 ounces per annum in the first few years at a modest cost of US $373 an ounce. This is because much of the high-grade mineralization is near surface. And this scenario would offer an anticipated payback on capital costs within two years, based on minimum gold prices of US $1,100.
Furthermore, the deposit also benefits from being well suited to an open pit (quarry-like) heap leach (low extraction cost) mining operation. All told, a minimum 9.5-year mine life will translate into average annual yields of around 150,000 gold ounces for the bulk of the mine’s life – and at an average cash cost of US $407 per ounce.

Additionally, the renowned engineering firm that conducted the company’s pre-feasibility study, AMEC Americas Ltd., calculated a pre-tax net present value of US $490 million for the Lindero deposit, assuming US $1,100 gold prices. (NPV is a pivotal decision-making metric that is defined as the risk adjusted value of the deposit once all the borrowed capital costs are repaid).

Another Canadian investment bank, Paradigm Capital Inc., also views Mansfield as an obvious takeover candidate. In a research paper discussing the company’s pre-feasibility study, senior mining analyst Don MacLean made a good case for a likely takeover.
The Paradigm report, which was published last March, noted that Mansfield only has approximately 44 million shares outstanding and a low market capitalization. The report’s takeover conjecture comes into clearer focus when considering the fact that Paradigm assigned an after-tax net present value (NPV) of US $242 million to Lindero, based on US $1,100 gold prices. By using a much more cautious after-tax evaluation than the pre-tax version assigned by AMEC, Paradigm still was able to deduce that Lindero is worth more than three times the actual value of Mansfield, itself.
The Haywood research report also points to the fact that geopolitical considerations also weigh in Lindero’s favor. In particular the project is located in a remote, economically underdeveloped region of Salta Province. that is actively soliciting foreign investment. Hence, Salta’s pro-mining government is actively soliciting foreign investment and is therefore supportive of Lindero, according to Leask.  Similarly, the federal government is also onside, he adds.
This favorable situation, along with the absence of any environmental challenges, explains why Leask expects a mining permit to be issued before year’s end.
Mansfield Minerals, Extorre Gold Mines and Troy Resources may be well ahead of the pack towards producer status. But a growing number of other ambitious gold explorers are aggressively working to validate their own gold discoveries in Argentina. All of which have a shot at becoming the next ‘home run’ takeover success story.
The principals of www.BNWnews.ca and Top40GoldStocks do not directly or indirectly own shares in any of the companies mentioned in this article.


Disclosure: No positions]]> mdr xra Mansfield Minerals Andean Resources Troy Resources Extorre Gold Mines Exeter Resource Mansfield Minerals ‘Peak Phosphate’ Spells End of Cheap Food http://seekingalpha.com/instablog/503819-marc-davis/104189-peak-phosphate-spells-end-of-cheap-food?source=feed 104189 By Marc Davis, BNWnews.ca
Potash may be a hot commodity garnering plenty of headlines as of lately. But in the quest to feed a burgeoning global population, phosphate may eventually steal the limelight. That’s because this lesser-known but equally indispensible key ingredient in fertilizer is expected to run out long before potash ever does.
"While the exact timing may be disputed, it is clear that already the quality of remaining phosphate rock reserves is decreasing. And cheap fertilizers will be a thing of the past," warns Dr. Dana Cordell of the Institute for Sustainable Futures (which is part of the University of Technology in Sydney, Australia).
So it’s not surprising that BHP Billiton’s recent record-setting US $39 billion dollar offer for Potash Corp of Saskatchewan factored-in a valuation of around US $11 billion for the fertilizer giant’s phosphate and nitrogen assets. At least that’s the assessment of the leading U.S. investment banker, Morgan Stanley.
Investment industry analysts are now all proclaiming that the fertilizer sector is on the cusp of a boom that could last for the foreseeable future, partly due to a looming global shortfall of high-grade phosphate. And that’s music to the ears of one small Australian mining company called Legend International (NASD-OTC: LGDI). 
Legend’s Executive General Manager Craig Michael agrees that there’s a “critical need” to ramp-up the worldwide application of phosphate-based fertilizers to provide sufficient food for a surging global population. And a pending supply/demand squeeze promises to translate into higher phosphate prices, he says.
 
“By 2050 the population is estimated to be over nine billion people and phosphate demand is highly correlated to this growth,” Michael adds. “Quality, mineable, accessible phosphate rock deposits are dwindling around the world which is why Legend is aggressively pursuing its quality phosphate development project in Queensland, Australia.”
By way of background, all agricultural crops require phosphate, which is an essential element for plant growth. And it cannot be substituted with anything else. Unfortunately, the academics at Sydney’s University of Technology believe ‘peak phosphate’ could become a reality as soon as 2030.
They also include Professor Stuart White, who suggests that the price of this indispensible soil nutrient could then skyrocket as supply is consequently eclipsed by demand. In turn, such a shortage could pose a serious threat to global food supplies as much higher prices for crop staples become a stark reality. Ominously, wheat prices have jumped about 40 per cent just in the past few weeks, compared to their average of US $5 per bushel for the year to date. And this has happened in spite of a global bumper harvest last summer. 
Professor White’s concerns are echoed by Dr. Michael McLaughlin, chief research scientist in the Environmental Biogeochemistry program of CSIRO Land and Water (a nationwide biophysical resources research agency) in Australia. He warns: “Fertiliser is one of the major input costs now for farmers. So, as you increase the price of the raw material, food prices could increase."
Furthermore, none of the issues that caused the global food crisis in 2008 have gone away. Notably, agricultural production is still lagging behind pre-recession levels. Then there’s the looming imperative to virtually double crop yields in emerging economies, which have a history of seriously under-utilizing fertilizers due to cost considerations. Additionally, as incomes rise in heavily-populated developing nations like China, there’s a corresponding increased demand for animal-based protein, which is heavily reliant on grains as feed for livestock.
Hence, alarm bells are beginning to sound about the world’s shrinking phosphate reserves. This problem is compounded by the fact that just four countries -- Morocco, China, South Africa and Jordan -- control 80 per cent of the world's reserves of usable phosphate rock. This is a particular concern for the U.S. as its own reserves are estimated to run out in as little as 15 years.
Australia is also another country that needs to find a way of ramping-up its domestic production as it only generates about half of its annual needs. And its large agricultural industry is especially dependent on fertilizers because this sprawling continent is so arid and increasingly prone to droughts.
This reality is proving to be a call to action for Legend. The company is planning to commercialize its Paradise deposit in the phosphate-rich Mt. Isa region of Queensland by either 2012 or 2013, depending on phosphate prices.
The Paradise project promises to become one of the world’s few remaining high-grade phosphate mines. Pre-production trials have already been successfully completed. Also, an initial mine life of at least 30 years has been projected in the company’s independently calculated feasibility study (a blueprint for a mine), with a production rate starting at 600,000 tonnes per year.
“However, Legend controls over 1.2 billion tonnes of phosphate rock, which is spread out over a total of seven deposits,” Michael says. “This means we could easily produce over one million tonnes per annum for the next 100 years or more.”  
The fact that Legend’s “high quality and high grade” phosphate can easily be upgraded to a rock concentrate that is free of impurities such as iron, aluminium and silica gives the company a key competitive advantage, Michael adds. Especially since the cost of extracting phosphate elsewhere in the world is escalating, mostly due to an overall decline in quality and a related increase in extractions costs.
Accordingly, the company even has an agreement in place to potentially sell some of its future rock output to IFFCO (Indian Farmers Fertilizer Cooperative), India’s largest farmers’ co-operative, which manufactures and distribute fertilizers across India. It is also the single largest phosphate importer in the world. To underscore its commitment to doing business with Legend, IFFCO has already taken a 15% equity stake in the Australian mining company.     
Legend’s crucial role in bolstering Australia’s high-grade phosphate supplies hasn’t gone unnoticed by the global investment industry. For instance, one leading fertilizer analyst -- Joel Jackson of the big league North American investment bank, BMO Capital Markets -- gave Legend a strong endorsement earlier this year in a research report about the company.
In the report Jackson noted that Legend is poised to capitalize on a business that has a strong growth profile: “Phosphate fertilizer pricing fundamentals have been particularly robust…as supply/demand balances became progressively tighter with the onset of stronger demand.”
A growing chorus of research analysts with other major North American investment banks is also loudly hailing the arrival of a secular bull market in fertilizer inputs. They include Patricia Mohr of the Scotia Bank Group. He just published a research report entitled: “Nitrogen & phosphate fertilizer prices are currently on fire, pushed up by the recent surge in U.S. corn prices.”
 
“Corn normally requires heavy fertilizer application,” Mohr says in his report. “And stronger world grain and oilseed prices auger well for increased fertilizer application in the spring-2011 planting season.”
 
Certainly, the relentless drumbeat of higher food prices as the global recession recedes and as the world faces the daunting prospect of feeding an additional 75-80 million mouths each year signals a very bright for phosphate prices. And Legend International clearly seems to understand the golden adage of the investment business: ‘Timing is everything.’ 
 
The principals of www.BNWnews.ca do not directly or indirectly own shares in any of the companies mentioned in this article. 


Disclosure: No positions]]> Mon, 25 Oct 2010 01:45:17 -0400 By Marc Davis, BNWnews.ca
Potash may be a hot commodity garnering plenty of headlines as of lately. But in the quest to feed a burgeoning global population, phosphate may eventually steal the limelight. That’s because this lesser-known but equally indispensible key ingredient in fertilizer is expected to run out long before potash ever does.
"While the exact timing may be disputed, it is clear that already the quality of remaining phosphate rock reserves is decreasing. And cheap fertilizers will be a thing of the past," warns Dr. Dana Cordell of the Institute for Sustainable Futures (which is part of the University of Technology in Sydney, Australia).
So it’s not surprising that BHP Billiton’s recent record-setting US $39 billion dollar offer for Potash Corp of Saskatchewan factored-in a valuation of around US $11 billion for the fertilizer giant’s phosphate and nitrogen assets. At least that’s the assessment of the leading U.S. investment banker, Morgan Stanley.
Investment industry analysts are now all proclaiming that the fertilizer sector is on the cusp of a boom that could last for the foreseeable future, partly due to a looming global shortfall of high-grade phosphate. And that’s music to the ears of one small Australian mining company called Legend International (NASD-OTC: LGDI). 
Legend’s Executive General Manager Craig Michael agrees that there’s a “critical need” to ramp-up the worldwide application of phosphate-based fertilizers to provide sufficient food for a surging global population. And a pending supply/demand squeeze promises to translate into higher phosphate prices, he says.
 
“By 2050 the population is estimated to be over nine billion people and phosphate demand is highly correlated to this growth,” Michael adds. “Quality, mineable, accessible phosphate rock deposits are dwindling around the world which is why Legend is aggressively pursuing its quality phosphate development project in Queensland, Australia.”
By way of background, all agricultural crops require phosphate, which is an essential element for plant growth. And it cannot be substituted with anything else. Unfortunately, the academics at Sydney’s University of Technology believe ‘peak phosphate’ could become a reality as soon as 2030.
They also include Professor Stuart White, who suggests that the price of this indispensible soil nutrient could then skyrocket as supply is consequently eclipsed by demand. In turn, such a shortage could pose a serious threat to global food supplies as much higher prices for crop staples become a stark reality. Ominously, wheat prices have jumped about 40 per cent just in the past few weeks, compared to their average of US $5 per bushel for the year to date. And this has happened in spite of a global bumper harvest last summer. 
Professor White’s concerns are echoed by Dr. Michael McLaughlin, chief research scientist in the Environmental Biogeochemistry program of CSIRO Land and Water (a nationwide biophysical resources research agency) in Australia. He warns: “Fertiliser is one of the major input costs now for farmers. So, as you increase the price of the raw material, food prices could increase."
Furthermore, none of the issues that caused the global food crisis in 2008 have gone away. Notably, agricultural production is still lagging behind pre-recession levels. Then there’s the looming imperative to virtually double crop yields in emerging economies, which have a history of seriously under-utilizing fertilizers due to cost considerations. Additionally, as incomes rise in heavily-populated developing nations like China, there’s a corresponding increased demand for animal-based protein, which is heavily reliant on grains as feed for livestock.
Hence, alarm bells are beginning to sound about the world’s shrinking phosphate reserves. This problem is compounded by the fact that just four countries -- Morocco, China, South Africa and Jordan -- control 80 per cent of the world's reserves of usable phosphate rock. This is a particular concern for the U.S. as its own reserves are estimated to run out in as little as 15 years.
Australia is also another country that needs to find a way of ramping-up its domestic production as it only generates about half of its annual needs. And its large agricultural industry is especially dependent on fertilizers because this sprawling continent is so arid and increasingly prone to droughts.
This reality is proving to be a call to action for Legend. The company is planning to commercialize its Paradise deposit in the phosphate-rich Mt. Isa region of Queensland by either 2012 or 2013, depending on phosphate prices.
The Paradise project promises to become one of the world’s few remaining high-grade phosphate mines. Pre-production trials have already been successfully completed. Also, an initial mine life of at least 30 years has been projected in the company’s independently calculated feasibility study (a blueprint for a mine), with a production rate starting at 600,000 tonnes per year.
“However, Legend controls over 1.2 billion tonnes of phosphate rock, which is spread out over a total of seven deposits,” Michael says. “This means we could easily produce over one million tonnes per annum for the next 100 years or more.”  
The fact that Legend’s “high quality and high grade” phosphate can easily be upgraded to a rock concentrate that is free of impurities such as iron, aluminium and silica gives the company a key competitive advantage, Michael adds. Especially since the cost of extracting phosphate elsewhere in the world is escalating, mostly due to an overall decline in quality and a related increase in extractions costs.
Accordingly, the company even has an agreement in place to potentially sell some of its future rock output to IFFCO (Indian Farmers Fertilizer Cooperative), India’s largest farmers’ co-operative, which manufactures and distribute fertilizers across India. It is also the single largest phosphate importer in the world. To underscore its commitment to doing business with Legend, IFFCO has already taken a 15% equity stake in the Australian mining company.     
Legend’s crucial role in bolstering Australia’s high-grade phosphate supplies hasn’t gone unnoticed by the global investment industry. For instance, one leading fertilizer analyst -- Joel Jackson of the big league North American investment bank, BMO Capital Markets -- gave Legend a strong endorsement earlier this year in a research report about the company.
In the report Jackson noted that Legend is poised to capitalize on a business that has a strong growth profile: “Phosphate fertilizer pricing fundamentals have been particularly robust…as supply/demand balances became progressively tighter with the onset of stronger demand.”
A growing chorus of research analysts with other major North American investment banks is also loudly hailing the arrival of a secular bull market in fertilizer inputs. They include Patricia Mohr of the Scotia Bank Group. He just published a research report entitled: “Nitrogen & phosphate fertilizer prices are currently on fire, pushed up by the recent surge in U.S. corn prices.”
 
“Corn normally requires heavy fertilizer application,” Mohr says in his report. “And stronger world grain and oilseed prices auger well for increased fertilizer application in the spring-2011 planting season.”
 
Certainly, the relentless drumbeat of higher food prices as the global recession recedes and as the world faces the daunting prospect of feeding an additional 75-80 million mouths each year signals a very bright for phosphate prices. And Legend International clearly seems to understand the golden adage of the investment business: ‘Timing is everything.’ 
 
The principals of www.BNWnews.ca do not directly or indirectly own shares in any of the companies mentioned in this article. 


Disclosure: No positions]]> Legacy International Canada’s Aspiring Potash Miners Not for Sale? http://seekingalpha.com/instablog/503819-marc-davis/102372-canadas-aspiring-potash-miners-not-for-sale?source=feed 102372 By Marc Davis, BNWnews.ca
In spite of a flurry of headlines in recent weeks heralding a game-changing consolidation of the world’s lucrative potash mining industry, Canada’s two small aspiring potash miners are standing firm.
Both Western Potash (TSX.V: WPX) and Potash One (TSX: KCL) say they are committed to building mines that will be in business for decades. In other words, they’re not for sale. (Well, at least not at current market valuations).
Athabasca Potash Inc. was the only other Canadian mining junior that also benefitted from a sizeable potash deposit in potash-rich Saskatchewan. It was bought out earlier this year by BHP Billiton Ltd. (NYSE: BHP), the world’s largest mining company. In a deal worth $341 million, Athabasca Potash shareholders were able to cash out at $8.35 a share.
 
Another takeover is also in the works. And this time BHP Billiton has set its sights much higher. Currently, the world’s largest potash producer, Potash Corp of Saskatchewan (TSX: POT) (NYSE: POT), is trying to fend off a hostile takeover bid by BHP Billiton. With a record-setting $39 billion offer already on the table, industry analysts speculate that the potash-hungry mining giant may yet come up with a grander offer that Potash Corp’s shareholders will find too tantalizing to refuse. 
 
The world’s second largest mining company, Brazil’s Vale SA (NYSE: VALE), has also been moving aggressively into the potash mining industry as of lately, having publicly proclaimed that a boom in the potash prices is on the way. Not surprisingly, it already has a strategic foothold in Saskatchewan. This is where it is developing a ‘solution extraction’ potash mine-the-making near Regina.
 
Vale’s project actually borders Western Potash’s Milestone project, with both deposits exhibiting similar geological characteristics. Ones that are likely suitable for the realization of energy-efficient and therefore cost-efficient solution extraction mines.
 
So the big question is why are Western Potash and Potash One predisposed to spurring any advances from the world’s two biggest mining companies and any other deep-pocketed potential suitors? The answer is in the financial projections that attest to both deposits becoming lucrative money makers.
And neither player wants to pass up on the opportunity to cash in on an emerging long-term boom in the global fertilizer business. It’s one that favors the two mining juniors, especially since their projects are situated at the heart of the world’s richest and most prolific potash fields – which already supply a third of global demand. More on this later. 
Western Potash’s decision to stay the course is now underpinned by an important validation of its business model. Specifically, the company recently published a preliminary economic assessment (an initial blueprint for a mine) for its Milestone deposit. It suggests that this solution extraction mine-in-the-making promises to become the lowest cost operator of its kind in North America. It is expected to open for business in 2015.
This independently calculated scoping study also attaches a net present value (the risk adjusted value of the deposit once all the borrowed capital costs are repaid) of $5.2 billion for this project. Due to low anticipated operating costs, an internal rate of return (the average annual total return over the life of the mine) of 27.3 per cent is also forecast. Such a figure is “very healthy” and would bode well for the bottom line of any solution extraction mine, according to a Canadian investment industry mining analyst who is not authorized to speak to the media and asked not to be identified.
With a projected output of 2.5 million tonnes a year at an average operating cost of $63 per tonne, there’s plenty of scope for robust profit margins, according to Western Potash’s president, Patricio (Pat) Varas. This is especially the case with potash prices trading at around $350 a tonne and with the likelihood of prices trending higher as the global recession subsides. (They were as high as $1,000-plus before the economic meltdown caused a slump in demand).  
Meanwhile, Varas says his company’s potential to be extraordinarily successful has not yet been factored-into its share price. And that alone is a compelling enough reason for not putting Milestone on the auction block, he adds.  
 “The markets have not paid attention to the value that has been created in this world-class potash asset that promises to generate as much revenues as some of the world’s biggest and richest gold mines,” Varas says.
“So if our market capitalization doesn’t reflect our net present value, then we need to ensure that we do what is necessary to fully realize the project’s true value. And that’s why we’re now embarking on a pre-feasibility study, which will get underway imminently,” he adds.
Having just returned from China, where Varas and other company directors met with some deep-pocketed mining companies and government-backed investment funds, Varas is in an upbeat mood about his company’s ability to control the future of its prized Milestone asset.
“China has made no secret of the fact that they are willing to buy our potash. And they’d love it if we allow them to own some of the Milestone deposit,” he says. “So they may want to proceed by partially financing the mine’s construction costs, starting with the pre-feasibility study.”
“All told, there are all sorts of different financing mechanisms that have been proposed to us, including ones from Chinese state owned enterprises that have access to very big sums of capital,” he adds. “So we may end up giving up an interest in either the project or the company.”
The Milestone deposit benefits from a resource of 174 million tonnes in the highly reliable ‘measured and indicated category.’ By comparison, Potash One’s Legacy deposit hosts 251 million tonnes in the same category. Both deposits have much larger additional resources outlined in the more approximate ‘inferred category.’
Potash One already has a pre-feasibility study in place for its Legacy deposit and a full feasibility study is nearing completion. The company says its deposit, which is amenable to solution extraction, has a net present value of US $4.47 billion. And it has a projected internal rate of return of 30.1 per cent, based on an annual production of 2.5 million tonnes and a minimum mine life of 40 years. Commissioning and startup of the mine is planned for late 2013.
A spokesperson for Potash One, Joel Kitsul, says he is unable to comment on the company’s decision to become a producer, instead of opting to sell its much-coveted Legacy deposit to the highest bidder. And BNWnews.ca’s efforts to reach the company’s president, Paul Matysek, were unsuccessful.  
However, the race to build up Canada’s potash supplies because of a heightened need to maximize global crop yields is turning all of Saskatchewan’s potash fields into key strategic assets. All of which are destined to becoming increasingly valuable. This explains why the world’s major mining companies are now jostling for position to access these rich potash reserves – against a backdrop of rising crop prices and an additional 75-80 million mouths that need to be fed each year.
Western Potash and Potash One still face the daunting challenge of finding up to around two and a half billion dollars each to commercialize their ‘company maker’ projects. But as long as global demand for potash continues to rebound, then both of these ambitious upstarts know that a very prosperous future beckons them in mining’s big league.  
 


Disclosure: No positions ]]> Mon, 18 Oct 2010 13:58:13 -0400 By Marc Davis, BNWnews.ca
In spite of a flurry of headlines in recent weeks heralding a game-changing consolidation of the world’s lucrative potash mining industry, Canada’s two small aspiring potash miners are standing firm.
Both Western Potash (TSX.V: WPX) and Potash One (TSX: KCL) say they are committed to building mines that will be in business for decades. In other words, they’re not for sale. (Well, at least not at current market valuations).
Athabasca Potash Inc. was the only other Canadian mining junior that also benefitted from a sizeable potash deposit in potash-rich Saskatchewan. It was bought out earlier this year by BHP Billiton Ltd. (NYSE: BHP), the world’s largest mining company. In a deal worth $341 million, Athabasca Potash shareholders were able to cash out at $8.35 a share.
 
Another takeover is also in the works. And this time BHP Billiton has set its sights much higher. Currently, the world’s largest potash producer, Potash Corp of Saskatchewan (TSX: POT) (NYSE: POT), is trying to fend off a hostile takeover bid by BHP Billiton. With a record-setting $39 billion offer already on the table, industry analysts speculate that the potash-hungry mining giant may yet come up with a grander offer that Potash Corp’s shareholders will find too tantalizing to refuse. 
 
The world’s second largest mining company, Brazil’s Vale SA (NYSE: VALE), has also been moving aggressively into the potash mining industry as of lately, having publicly proclaimed that a boom in the potash prices is on the way. Not surprisingly, it already has a strategic foothold in Saskatchewan. This is where it is developing a ‘solution extraction’ potash mine-the-making near Regina.
 
Vale’s project actually borders Western Potash’s Milestone project, with both deposits exhibiting similar geological characteristics. Ones that are likely suitable for the realization of energy-efficient and therefore cost-efficient solution extraction mines.
 
So the big question is why are Western Potash and Potash One predisposed to spurring any advances from the world’s two biggest mining companies and any other deep-pocketed potential suitors? The answer is in the financial projections that attest to both deposits becoming lucrative money makers.
And neither player wants to pass up on the opportunity to cash in on an emerging long-term boom in the global fertilizer business. It’s one that favors the two mining juniors, especially since their projects are situated at the heart of the world’s richest and most prolific potash fields – which already supply a third of global demand. More on this later. 
Western Potash’s decision to stay the course is now underpinned by an important validation of its business model. Specifically, the company recently published a preliminary economic assessment (an initial blueprint for a mine) for its Milestone deposit. It suggests that this solution extraction mine-in-the-making promises to become the lowest cost operator of its kind in North America. It is expected to open for business in 2015.
This independently calculated scoping study also attaches a net present value (the risk adjusted value of the deposit once all the borrowed capital costs are repaid) of $5.2 billion for this project. Due to low anticipated operating costs, an internal rate of return (the average annual total return over the life of the mine) of 27.3 per cent is also forecast. Such a figure is “very healthy” and would bode well for the bottom line of any solution extraction mine, according to a Canadian investment industry mining analyst who is not authorized to speak to the media and asked not to be identified.
With a projected output of 2.5 million tonnes a year at an average operating cost of $63 per tonne, there’s plenty of scope for robust profit margins, according to Western Potash’s president, Patricio (Pat) Varas. This is especially the case with potash prices trading at around $350 a tonne and with the likelihood of prices trending higher as the global recession subsides. (They were as high as $1,000-plus before the economic meltdown caused a slump in demand).  
Meanwhile, Varas says his company’s potential to be extraordinarily successful has not yet been factored-into its share price. And that alone is a compelling enough reason for not putting Milestone on the auction block, he adds.  
 “The markets have not paid attention to the value that has been created in this world-class potash asset that promises to generate as much revenues as some of the world’s biggest and richest gold mines,” Varas says.
“So if our market capitalization doesn’t reflect our net present value, then we need to ensure that we do what is necessary to fully realize the project’s true value. And that’s why we’re now embarking on a pre-feasibility study, which will get underway imminently,” he adds.
Having just returned from China, where Varas and other company directors met with some deep-pocketed mining companies and government-backed investment funds, Varas is in an upbeat mood about his company’s ability to control the future of its prized Milestone asset.
“China has made no secret of the fact that they are willing to buy our potash. And they’d love it if we allow them to own some of the Milestone deposit,” he says. “So they may want to proceed by partially financing the mine’s construction costs, starting with the pre-feasibility study.”
“All told, there are all sorts of different financing mechanisms that have been proposed to us, including ones from Chinese state owned enterprises that have access to very big sums of capital,” he adds. “So we may end up giving up an interest in either the project or the company.”
The Milestone deposit benefits from a resource of 174 million tonnes in the highly reliable ‘measured and indicated category.’ By comparison, Potash One’s Legacy deposit hosts 251 million tonnes in the same category. Both deposits have much larger additional resources outlined in the more approximate ‘inferred category.’
Potash One already has a pre-feasibility study in place for its Legacy deposit and a full feasibility study is nearing completion. The company says its deposit, which is amenable to solution extraction, has a net present value of US $4.47 billion. And it has a projected internal rate of return of 30.1 per cent, based on an annual production of 2.5 million tonnes and a minimum mine life of 40 years. Commissioning and startup of the mine is planned for late 2013.
A spokesperson for Potash One, Joel Kitsul, says he is unable to comment on the company’s decision to become a producer, instead of opting to sell its much-coveted Legacy deposit to the highest bidder. And BNWnews.ca’s efforts to reach the company’s president, Paul Matysek, were unsuccessful.  
However, the race to build up Canada’s potash supplies because of a heightened need to maximize global crop yields is turning all of Saskatchewan’s potash fields into key strategic assets. All of which are destined to becoming increasingly valuable. This explains why the world’s major mining companies are now jostling for position to access these rich potash reserves – against a backdrop of rising crop prices and an additional 75-80 million mouths that need to be fed each year.
Western Potash and Potash One still face the daunting challenge of finding up to around two and a half billion dollars each to commercialize their ‘company maker’ projects. But as long as global demand for potash continues to rebound, then both of these ambitious upstarts know that a very prosperous future beckons them in mining’s big league.  
 


Disclosure: No positions ]]> WPX Vale SA Potash One BHP BIlliton