PORTFOLIO POINT: The emerging fertiliser producer Potash West sees itself as significantly undervalued compared to rivals for the investment dollar.
Potash West (PWN) managing director Patrick McManus flew in from Perth to update various east coast investors this week on the emerging potash producer’s progress.
As readers may recall, the company has one of the world’s largest glauconite deposits – a source of potassium, an element vital to all plant life as is phosphorus and nitrogen.
The company is on track to deliver a JORC-compliant (Joint Ore Reserves Committee) resource next month, which should hopefully lift the Potash West share price.
In common with the wider market, Potash West shares have drifted from a high last year of 35c to a more recent low of 15c and closed last week at 18c on a modest turnover of 254,000 shares. His visit must have achieved some boost of confidence, for the shares at the time of writing today have rallied to 22c.
The company now holds 2900 square kilometres of exploration tenements covering a strike length of 150 kilometres long and some 20 km wide across the 60 million years-old Dandaragang Trough.
The tenements run north-south, starting about 50km north of Perth, and include farm-ins for the glauconite on much of Image Resource’s extensive heavy mineral sands prospects.(Under the farm-in agreements, Potash West keeps any glauconite found and heavy minerals found will be retained by Image (IMA).
Shortly after Potash West floated, the company invited The Speculator for a “look see” as it prepared to announced the results of its maiden drilling program.
Previous drilling undertaken by the Geological Survey of WA and other minerals prospectors had widely identified the shallow greensands deposits straddling the Dandarangan Trough, an ancient seabed and already adjudged to be one of the world’s largest known glauconite deposits.
The initial drilling was to test the extent of the glauconite-bearing greensands beds, which typically contain up to 6.6% potassium oxide, with iron and bauxite. (Potassium oxide, potassium chloride and potassium sulphate are generically referred to a potash.)
Results of the maiden program were announced at the end May last year. Seven widely-spaced aircore holes were drilled many kilometres apart to test the broad extent of mineralisation. All seven holes totalling 534 metres intersected significant grades of up to 5.07% potassium oxide (K2O).
In the week I reported on the site visit and drill results, the company’s share price soared from a low of 17.5c to a week’s high of 31c on a turnover of 10.89 million shares before easing to close the week at 25.5c. They later crept back to their present 12-month high of 35c.
With 84 million shares now on issue, the company’s shares at 22c carry a market capitalisation of $19 million, with remaining cash of $3 million and a spending budget to the end of this calendar year totalling $1.5 million. That will cover the company for the completion of the maiden JORC-compliant resource due next month and the completion of a scoping study due to be revealed in December.
The company announced this week that resource definition drilling on 400m x 400m spacing had been completed over 10 square kms covering what it calls the Dinner Plate Project, in the central area of its tenements where initial mining will begin on the geological feature known as the Molecap greensands.
The program comprised 83 vertical aircore holes for 3215m. Best intersections ranged up to 12 metres from 19m grading 4.63% potassium oxide.
During the past 12 months the company has concentrated its efforts on successfully developing cost-effective, laboratory scale leaching, purification and precipitation technologies.
Leading the effort is managing-director Patrick McManus, who has a degree in mineral processing from Britain’s Leeds University and an MBA from Perth’s Curtain University. He has had more than 30 years’ experience in operational, technical and corporate roles with Rio Tinto, RGC and Bemax Resources.
It’s all targeted at delivering a bankable feasibility study in 12 months based on the construction of a pilot plant in the new year.
The establishment of a full-scale plant targeted at producing 250,000 tonnes of potassium sulphate (the preferred potash fertiliser in WA) is aimed at mid-2016.
I expect in the new year, after what seems certain to be an encouraging scoping study is made public, the market can look forward to a probable rights issue to raise somewhere between $5-8 million.
David Haselhurst writes a monthly column for Money magazine. Please note that he is not able to provide personal replies to emails.
The Speculator portfolio (as of September 18, 2012)
|Company||Code||No of shares||Bought||Purchase price||Current price||Current value|
|Image Resources||IMA*||15,000||31/12/2010*||0.362 av||$0.290||$4,350|
|Robust Resources||ROL||6,000||31/12/2010*||$1.49 av||$0.580||$3,480|
|Scotgold Resources||SGZ||27,500||31/12/2010*||5.5 av||$0.063||$1,733|
|GoConnect Ltd||GCN||250,000||31/12/2010*||0.034 av||$0.017||$4,250|
|Broken Hill Prospecting||BPL||30,000||22/02/2011*||0.132 av||$0.110||$3,300|
|Cortona Resources||CRC||25,000||13/04/2011*||0.146 av||$0.089||$2,225|
|Golden Gate Petroleum||GGP||408,500||20/04/2011*||0.0145 av||$0.010||$4,085|
|Orpheus Energy||OEG||19,250||17/08/2011*||0.164 av||$0.077||$1,482|
|Black Mountain Resources||BMZ||10,000||17/04/2012||$0.300||$0.255||$2,550|
|Total value of portfolio||$52,344|
|Owe the bank||-$10,570|
|Portfolio change since January 3, 2012 (started with $50,000)||-16.45%|
|All Ordinaries change since January 3 2012 (then 4155.22)||6.32%|
|All Ordinaries close 18 September 2012||4417.8|