POTASH: The Contrarian Commodity
By Dick Phelps 16 Dec 2008
Mankind can forego many things, such as jewelry baubles-gold, silver, and diamonds-but eating isn't one of them. Moreover, with rising world population of some 75 million/year, and the populace of developing nations wanting higher quality protein (grain converted to meat by poultry, pigs, cattle etc.), more productive agriculture is crucial. And, among the commodities, there's a tacit recognition that bulk minerals like potash are different from metals and fuels. Indeed, one could say that, with lower cost agricultural inputs (steel, copper etc. for machinery and oil for fuel), farmers' margins are somewhat enhanced by the world financial-sector downturn. So they can more readily afford greater outlays for fertilizer to enhance crop yields.
CHICAGO (ResourceInvestor.com) -- There's an old adage in mining, if it can't be grown it has to be mined. Potash (K2 O) is a 'two-fer' in that observation. It's increasingly essential in the agricultural sector's growing intensity of use of fertilizer, given the inexorable pressures for higher crop yields per hectare, i.e. phosphorous (P, from phosphate rock), potash (K, from K2O salt), and nitrogen (N) which are the principal elements contained in commercial fertilizer. Potash prices have risen in recent years and that trend is expected to continue. And one analyst has just boosted expectations for potash; see the news from Merrill Lynch.
Resource Investor interviewed Paul Matysek, CEO of contrariancompany with a contrarian commodity, Saskatchewan-based Potash One (P1). No stranger to mining, Matysek has a geological background spanning and success in developing a new mining company (with a market cap of $1.8 billion when it was sold) and raising capital-some $200 million in less than a decade. He sees the current economic situation as an opportunity of sorts for P1 and, using a hockey analogy: 'player' costs (steel, energy, labor etc.) are lower, and the opposition (potential competitors) is more inclined to play defense than offence, waiting for brighter a 'power play' to come their way (rejuvenated national economies). Clearly in P1's view, now is the time for a new entrant to get 'on the ice;' it's 'power play' time for the potash junior-play with strength when the opposition is undermanned.
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