POTASH CORP OF SASK. (T-POT) $154.86 +3.11
AMAZON MINING (V-AMZ) $2.65 unch.
GREAT QUEST METALS (V-GQ) $1.43 +0.02
Amongst the interesting people we've gotten to know over
the last while, there is one who stands out and that’s former
Sprott mining analyst Jed Richardson. He left the job with
Sprott to take over the Vice President role at Amazon Mining and
over the last year or two, he’s given us some interesting stock
picks.
Of note, is that when he was doing some research for Amazon,
he came across Great Quest Metals, a company he helped
a bit and ended up becoming a director on after he had given it
as a stock pick. That stock pick has since become a fourbagger
since he suggested it.
He finally has time to e-mail us a comment from Brazil, this is
what he writes:
“Life has comeback in a strong way to the fertilizer and agriculture
sectors. My two favourite companies Amazon Mining
and Great Quest Metals have begun to benefit. The catalysts are
more macro than the achievement of company specific milestones,
though our successful nutrient availability test at Amazon
is good reason for renewed investor confidence. Drought in
Russia, has prompted that government to halt exports of wheat
to ensure the country can feed its populace, with Ukraine
threatening to curtail export quotas for the same reason. By
2009 estimates Russia was the world’s third largest exporter of
wheat and Ukraine was the 6th largest. To add insult to injury
Australia the world’s 4th largest wheat exporter announced lack
of rain could reduce their wheat for export by 33% this year.
Share prices across the sector have climbed, as savvy investors
gobbled up their favourite agriculturally related investments
to help them pay for groceries this fall. Prompting the
most exciting development of all BHP’s bid for Potash Corp.
This is great news for Amazon and our shareholders. BHP
was planning to build the largest new potash project in the
world, the capital investment a staggering $10BB with production
expected late this decade. I see BHP’s bid as an admission
that building a new conventional mine is not a feasibly economic
way to enter this sector as a major player. Confirming
what Bill Doyle, CEO of Potash Corp has been saying all along
and our thinking at Amazon, that new conventional potash
mines are not good investments, the thinking that lead us to
embark on our lower CapEx shorter build time Cerrado Verde
ThermoPotash project. I do expect BHP will be successful in
acquiring Potash Corp, but they will have to increase the bid.
Potash Corp. of Saskatchewan
Amazon Mining
David Pescod T: 780.408.1750 Debbie Lewis T: 780.408.1748 Fax: 780.408.1501 Page 2
However don’t hold out for a white knight Vale is the
only company that has the firepower and appetite to compete
for PCS and after the mess their takeover of Inco has
caused Prime Minister Harper would be committing political
suicide if he didn’t stop a Vale takeover of another major
Canadian asset. While investors may be rooting around
for the next takeover, the surest way to make money after
one these multi-billion dollar pure plays are gobbled up is
to position yourself for the back draft created in the Canadian
market. Upwards of $43 billion of capital is currently
tied up in Potash Corp all of it wants to be invested in fertilizer
and exposed to agriculture. After the company is swallowed
into BHP a diversified mega-miner most of that capital
will be looking for a new home. The purchase of Inco
made Sherritt and FNX Mining must have equities for institutional
investors across Canada, in the same Rio Algom
then Noranda/Falconbride, was a boon for shareholders of
First Quantum and Teck Resources. Even more recently
Red Back Mining’s merger with Kinross has institutions
scrambling for a new exposure to West African gold in
names like Semafo, Keegan and Golden Star. At Amazon
we want to position ourselves as an emerging potash producer
worthy of some of that capital as investors look for
new ways to participate in fertilizer and agriculture.”
Disclosure: Potash Corp. of Sask: Canaccord Genuity covers this stock and has a Buy rating on it. (Buy: The stock is expected to generate
risk-adjusted returns of over 10% during the next 12 months.)
DEB’S DITTY:
My boyfriend has no trouble committing...adultery.
PRIMARY PETROLEUM (V-PIE) $0.395 -0.005
I’m always looking for excitement from my stocks, even
in a very lacklustre junior oil market. Keith Schaefer, editor
of Oil and Gas Investments Bulletin, says to look at
Primary Petroleum, a large grassroots oil play in the Montana
Bakken. He told subscribers about it three months
ago at 16 cents. Yesterday, the stock is up 20% on over a
million shares to 38 cents. The reason, he says, is because
of a new research report out by Clarus Securities,
with two paragraphs that appeals to one’s sense of greed:
Over 10x Potential Value:
• Based on data from Rosetta and similar economics to SE
Sask and North Dakota Bakken plays, PIE could have 127
mmbbls of un-risked recoverable resource on Its two land
blocks in Montana (assuming a 50% WI farm-out). On a
risked basis, PIE has a potential NPV10 of $3.00 per FD
share. (Exhibit 4).
• High prices at recent land sales suggest significant value
for Primary's land. At the July 7/10 land sale price of
$1,450/acre (Exhibit 1: land near the Alberta/Montana border),
Primary's land position in western Montana alone
results in a value of $160 million ($1.34/ FD share).”
Schaefer does point out there are more than 40 million
shares from an eight cent financing coming free trading in
September, each with a full warrant. But with that kind of
geological upside, there could be volume in the stock to
absorb it.
Great Quest Metals
Primary Petroleum
E-mails were sent to clients holding Equal Energy today. |
