Potash prices at record high

By Leia Michele Toovey- Exclusive to Potash Investing News

Potash prices at record high, whereas company share values low.Potash prices have soared in recent years. What was once a commodity worth about $200 a tonne is now expected to fetch $1,500 by 2020.

According to Scotiabank economist Patricia Mohr potash purchasers are currently paying US$872.50 per tonne at the port of Vancouver. “It is at a record high,” she added. UBS Investment Research reduced its forecast for the period 2009-2011 from $1,100 per tonne to $920 per tonne, a cut of 19 per cent. However, potash is holding up much better than other fertilizers – the UBS researchers slashed their price forecast for the same period for nitrogen-based fertilizer urea by 36 per cent, from $690 per tonne to $440 per tonne.

The rising value of potash has been reflected in the revenue and profits of potash producers. For example, Potash Corp. saw potash sales hit $932 million for the three months ending December 31, 2008, nearly twice as much as the $479 million the company posted for the same quarter one year earlier. Profits are, however, not translating into increasing share values for potash miners. Potash Corp. of Saskatchewan has seen its share price fall by more than 60 per cent from its 52-week high. Mosaic Co., is in even worse shape, off almost 80 per cent from its year-high. Potash One’s shares are off 80 per cent; Intrepid Potash, is down 74 per cent; Athabasca Potash Inc., down 86 per cent;

In the past, potash producers would have panicked and slashed prices to keep their piece of the agricultural market. Nowadays, however, the five major potash producing countries generally reign in output to deal with slumping markets. Early in 2009 many of the big players announced their intentions to curb output during the year.

Company news

Intrepid Potash Inc said on Wednesday it would temporarily halt production and then cut shifts at its New Mexico facilities to pare back inventory as sales of crop nutrients remain weak. “While Intrepid anticipates that this reduction in our production rates to be short-lived, the timing of market demand and sales conditions will ultimately drive the level of production,” the company said in a statement. Two of its three facilities in Carlsbad, New Mexico, will shut for two weeks starting February 9, followed by a two-week shutdown at the third one after that. Operations would then resume with three crew shifts instead of four.

Rio Tinto has completed the sale of its undeveloped potash assets to Vale for a cash consideration of $850-million.The transaction included the Potasia Rio Colorado potash project, in Argentina, and the Regina exploration assets, in Canada.  Rio Tinto will use the proceeds from the divestment for repaying its debt. The potash divestment was part of a larger transaction that included the Corumbá iron-ore mine, in Brazil, and the associated river logistics operations in Paraguay. The Corumbá transaction is anticipated to be completed in the second half of 2009.

Potash miner Uralkali could face an expense bill in excess of $86 million after the Russian government ruled it could have done more to prevent a mine flood in 2006. The renewal of the probe has stoked investor fears of a possible asset grab by the state. Uralkali, citing the commission’s report, said on Wednesday the government had incurred expenses of 3 $85.8 million resettling local residents and building a 6-km rail link around a sinkhole caused by the flood. The government report said Uralkali would be liable for these damages, plus possible future costs including mineral resource losses, expenses incurred relocating power utilities and by state railway monopoly Russian Railways, Uralkali said.” There has to date been no judicial decision requiring Uralkali to reimburse the expenses listed in the report,” the company said.

Potash One Inc is taking over Potash North Resource Corp in an agreed deal that will see Potash North shareholders relinquish each of their shares in return for 0.3125 Potash One share. The exchange ratio represents an approximate 29 per cent premium for the share price of Potash North over the 20-trading day period prior to the execution of the binding letter of intent which fixes the terms of the business combination, Potash One said in a statement. The deal will create one of the strongest junior potash development companies in Canada. Potash One will be fully funded through to completion of feasibility on its solution mining amenable potash development property located in southern Saskatchewan – the Legacy project. Current cash of the resulting company would be approximately CD$50 million. The transaction is expected to close by May 15, 2009.