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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (52026)	8/7/2013 9:29:10 PM
From: Spekulatius	Read Replies (1) of 78625

I don't think IPI is a food buy. hile it may be trading at book value it is a high cost producer with a cash cost of ~200$ton (or 200$/tonnes). Uralkali's cash costs are 62$/tonne, POT is at ~120$/tonne and Kali+Salz at close to 200$/tonne. I think MOS cost is in between POT and Kali+Salz (haven't checked). The cost of building a new mine in Canada (with supposedly low costs, similar to POT , I assume) is roughly 1700$/tonne for BHP gigantic project and a little more than 2000$/tonne for Kali+Salz Postash One project. you can calculate that at 300$/tonne net sales price and 120$/tonne cash production cost (like POT) those projects will generate way less than 10%ROA, which very likely makes them non-economic Even at 400$/tonne, the ROA won't look great, so I think many of these expansion projects will end up getting cancelled. Going back to IPI, I think this company barely will break even at 300$/tonne (cash cost does not include depreciation, overhead and other costs!) and the stock will look awfully high valued. In fact I would say that POT and MOS at 300$/tonne pricing will be overvalued, although they will till be profitable.

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