I had the pleasure today of attending a presentation by Passport Potash Inc. (TSX.V:PPI & PPRFT:OTCQX) that is “Cultivating Global Growth” in its pursuit of profits. It is an interesting story. Let me share it with you. Words: 560
Global Potash Market Fundamentals
Potash is one of the three key nutrients essential for plant growth. It improves root strength, plant’s resistance to disease, as well as increase overall crop production. The United Nations has projected global population growth in excess of 33% by 2050 which is a very significant number when compared with arable land availability. Another factor that will continue to impact the demand for potash is the fact that in rising economies the traditional diet switches from grains and starches to a more elaborate diet consisting of protein and fruits requiring an additional 3 to 5 times the amount of grain needed. As David Delaney, COO of Potash Corp. states, “Demand for potash will likely grow more than 36%, or 15 million tons, yearly over the next decade.” See a great video on the merits of potash here.
The Demand/Supply Ratio for Potash
A look at the current demand/domestic supply ratio in India, China, Brazil and the U.S. alone shows a major imbalance of almost 8:1 which highlights the major future potential for any new supplier.
Passport Potash Transportation Infrastructure to the World
Passport Potash has acquired a strategic position (121,000 acres in total of which over 70,000 acres is private surface and mineral rights) in the Holbrook Salt Basin in north-eastern Arizona which is one of the most mining-friendly jurisdictions in the U.S. The Holbrook Basin has world class infrastructure that allows for immediate access not only to the prolific U.S. domestic market but also to the world. The Burlington Northern main rail line intersects the northern section of the project and Interstate 40 is located just north of the project. The railroad provides direct access to the ocean ports in California and Texas which allows for export potential to the largest potash consuming nations in the world as mentioned above.
The Passport Potash Project
Having assembled a leadership team that is second to none in the junior exploration space, the goal of creating a producing potash mine is taking shape. Much of the ground work has been completed including a 50 hole drill program and a 100 line mile seismic program. This data has been used to complete an updated NI 43-101 resource calculation (see here) with the intention of completing the preliminary economic assessment (PEA) by Q1 of 2013 and the Feasibility Study by Q1 of 2014.
The depth of the passport Potash deposit is a key advantage in that it lies between 275-400 metres deep which is very shallow by industry standards.. This is extremely significant when factoring the capital expenditure and construction costs required to create a potash mine and processing facility.
Passport Potash Profit Potential Assessment
Passport Potash stock would be an excellent pick if we were at the early stages of this economic cycle but, with a slowing of the world economy, it is doubtful that demand in the short term will increase sufficiently to justify the need for a new potash supplier.
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Naturally, one should do one’s own due diligence before making investment decisions and, as such, a visit to Passport Potash’s website (www.PassportPotash.com), reviewing their corporate presentation which was the basis of this article (see here) and/or contacting their investors relations department (Andrew Bond at ABond@PassportPotash.com) would be appropriate.