The Speculator

PORTFOLIO POINT: An enthusiastic research report values Potash West at up to 20 times its current price.

Western Australian fertiliser hopeful Potash West (PWN) might be considered a long-shot nest egg for the grandchildren if recent analyst projections on a “fair value” price range for its shares come up trumps.

New York investment research house Arrowhead Business and Investment Decisions LLC says Potash West’s “fair value” share price should be within a range of $A2.03, at the conservative end, to a more optimistic $A4.84.

However, Potash West’s shares traded today at just 21c, near the bottom end of their 12-month low of 15c and their more recent high of 35c.

At 21c, Potash West’s 84 million issued shares carry a market capitalisation of $17.64 million, with 38% of the shares escrowed from sale until May 2013.

As pointed out in this column on May 16, I first added Potash West to the portfolio in March last year at 20c, after visiting the company’s exploration tenements covering some 2,900 square kilometres over the Dandaragan Trough on the sand plain country north of Perth.

The company’s tenement holding contains one of the world’s largest deposits of glauconite-bearing greensands, a source of potassium oxide, with near-surface grades of above 4% identified in 10 target zones over 140 kilometres of strike, following a 153-hole, 8300-metre drilling program completed in February.

Beneficiation work through screening and magnetic separation has yielded a clean glauconite concentrate of 6% potassium oxide after six hours’ leaching.

The company continues to focus on areas identified with high grades and expects to define a JORC-compliant resource estimate by September 2012.

Leaching tests on a 2,000 kilogram bulk sample have demonstrated a 95% extraction of potassium after six hours’ leaching. A finished scoping study is scheduled for delivery by the end of this year.
The company is targeting bringing into production a potash plant with an output of 250,000 tonnes per year by mid-2016.

New York-based Arrowhead BID first contacted Potash West after completing a study on fellow WA prospector South Boulder Mines (STB), reported in this column on January 25.

South Boulder has a huge but yet-to-be-defined potash deposit in the African country of Eritrea. That location didn’t inspire my enthusiasm, despite a very positive assessment in Arrowhead’s 32-page report on South Boulder.

Potash West scored a passing mention in a peer group comparison of a dozen other emerging potash mining companies. Since then, Potash West has also commissioned a report from Arrowhead. The 27-page report was delivered to the company on May 24.

Potash West managing director Patrick McManus was in Sydney last week to brief investors, although all the encouraging assessments are yet to impress the current market.

McManus, who has a degree in minerals processing from Britain’s Leeds University and an MBA from Perth’s Curtin University, has more than 30 years’ experience in operational, technical and corporate roles with firms such as Rio Tinto, RGC Ltd and Bemax Resources.

Potash West last appeared in this column on May 16 after it released a commissioned report from Australian Independent Investment Research Pty Ltd, a Sydney-based company formed in 2004 under Aegis Equities Holdings.

That report, prepared in early May when Potash West shares stood at 24c, gave the company a base-case share price valuation of 65c – more than three times the company’s current price.

Readers who wish to see both reports will find them on Potash West’s website.

-The Speculator portfolio, as at June 6
Company	Code	No of shares	Bought	Purchase price	Current price	Current value
Image Resources	IMA*	15,000	31/12/2010*	0.362 av	$0.280	$4,200
Viralytics	VLA	19,995	20/12/2011	$0.308	$0.290	$5,799
Robust Resources	ROL	6,000	31/12/2010*	$1.49 av	$0.980	$5,880
Scotgold Resources	SGZ	27,500	31/12/2010*	5.5 av	$0.067	$1,843
GoConnect Ltd	GCN	250,000	31/12/2010*	0.034 av	$0.029	$7,250
Minemakers	MAK	20,000	25/01/2011*	0.425 av	$0.145	$2,900
Platsearch	PTS	20,000	8/02/2011*	$0.130	$0.070	$1,400
Broken Hill Prospecting	BPL	20,000	22/02/2011*	$0.160	$0.091	$1,820
Austpac Resources	APG	40,000	2/03/2011*	$0.060	$0.031	$1,240
Potash West	PWN	11,050	30/03/2011*	$0.200	$0.210	$2,321
Cortona Resources	CRC	25,000	13/04/2011*	0.146 av	$0.090	$2,250
Golden Gate Petroleum	GGP	408,500	20/04/2011*	0.0145 av	$0.013	$5,311
TNT Mines	TNT	4,440	22/07/2011*	$0.000	$0.250	$1,110
Quickstep Holdings	QHL	20,000	23/11/2011*	$0.185	$0.155	$3,100
Orpheus Energy	OEG	19,250	17/08/2011*	0.164 av	$0.115	$2,214
Black Mountain Resources	BMZ	10,000	17/04/2012	$0.300	$0.250	$2,500
Gullewa	GUL	40,000	22/05/2012	$0.063	0.085	$3,400
Total value of portfolio						$54,536
Cash at bank						-$6,610
Total						$47,926
Portfolio change since January 3, 2012 (started with $50,000)						-4.15%
All Ordinaries change since January 3 2012 (then 4155.22)						-1.51%
*Shares held from previous year, carried at their December 30, 2011 closing price.

Cortona updates progress at Dargues Reef gold mine

Emerging gold miner Cortona Resources (CRC) put on a brave face today with an update to the ASX on progress at its Dargues Reef gold mine, 60 kilometres south-east of Canberra.

Mostly it involved a stream of approvals through a maze of red tape and statutory bodies.

Managing director Peter van der Borgh announced the issue of an environmental protection licence issued by the NSW Environmental Protection Authority, and the approval of the final two Dargues Reef management plans and the environmental management strategy. That brings the number of management plans for which Cortona has secured approvals this year to 11.

A mine operations plan has also been approved, with “only a couple” of modifications outstanding before clearing the way to developing Dargues Reef.

In common with so many others, Cortona’s shares have tumbled from a year’s high of 19.5c to a recent low of 8.9c, with some modest recovery today to trade at 9.2c.

Some hope may emerge in the last paragraph of Cortona’s announcement today: a drilling rig has been secured to test further promising targets around the mining project.

David Haselhurst writes a monthly column for Money magazine. Please note that he is not able to provide personal replies to emails.