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The stocks of potash producers are predicted to outshine those of more nitrogen focused companies, due to what brokerage firm Goldman Sachs calls “peaking corn prices.” In a statement issued this past Monday, Goldman Sachs (NYSE:GS) noted that the current corn price of $6 to $7 per bushel is unsustainable.
By Leia Michele Toovey-Exclusive to Potash Investing News
In a statement issued this past Monday, Goldman Sachs (NYSE:GS) noted that the current corn price of $6 to $7 per bushel is unsustainable. “Increasing global corn supplies, falling demand for feed and diminished political enthusiasm for ethanol in the U.S. will combine to lower corn prices by 2012,” said Goldman.
The price of nitrogen has a closer connection, compared to potash, to the price of corn; therefore, Goldman Sachs announced that it favored fertilizer producers tied to potash, rather than nitrogen. “We favor potash among the three nutrients (nitrogen, potash and phosphate), given more robust demand prospects and a continued tight supply backdrop in the intermediate term, ” said the company in its statement.
In concert with this statement regarding “peak corn prices,” Goldman Sachs issued some downgrades and upgrades. Goldman cut nitrogen focused fertilizer company CF Industries (NYSE:CF) to “sell” from “neutral” and raised Potash Corporation of Saskatchewan (NYSE:POT) to “buy.” The brokerage also raised Intrepid Potash to “neutral” from “sell,” while downgrading Agrium Inc. (TSX:AGU) to “sell” from “neutral.”
A few other firms issued downgrades and upgrades, including Barclays Capital (NYSE:BCS) who raised their price target on shares of Intrepid Potash Inc. (NYSE:IPI) from $26.00 to $30.00 and rated the stock as “underweight.” Also, analysts at RBC Capital (NYSE:RY) upgraded shares of Intrepid Potash Inc. from a “sector perform” rating to an “outperform” rating. They now have a $44.00 price target on the stock, up previously from $38.00.
Since 2010, potash companies have been able to consistently raise their prices for the crop nutrient. Great Salt Lake Minerals Corp. is the latest company to announce a price increase. Last Thursday, the company announced an increase in the price of sulfate of potash specialty fertilizer products by $50 per short tonne on orders placed or shipped on or after April 1. Great Salt Lake Minerals operates on the shores of the Great Salt Lake near Ogden, Utah, where it produces sulfate of potash, salt and magnesium chloride using solar evaporation.
Company news
Encanto Potash Corp. (TSXV:EPO) released the results of the NI 43-101 Technical Report prepared by North Rim Exploration Ltd. of Saskatoon, for their Muskowekwan project in Saskatchewan. Two resource calculations were prepared, one for solution mining extraction method, and one for conventional mining extraction method. The resource for the potential solution mining intervals (Patience Lake and Belle Plaine members excluding interbeds) are calculated as follows: Indicated Resource: 1,144.2 MMt in place sylvinite grading 29.4% KCl or 18.6% K2O (79.1 MMt of recoverable KCl, or 49.9 MMt recoverable K2O) and Inferred Resource: 868.4 MMt in place sylvinite grading 29.2% KCl or 18.5% K2O (60.5 MMt of recoverable KCl, or 38.2 MMt of recoverable K2O). The resource for the potential conventional mining intervals (Patience Lake and Belle Plaine members) is calculated as follows: Indicated Resource: 461.5 MMt in place sylvinite grading 36.2% KCl or 22.9% K2O (45.9 MMt in recoverable KCl, or 30.0 MMt recoverable K2O) and Inferred Resource: 327.4 MMt in place sylvinite grading 36.4% KCl or 23.0% K2O (32.7 MMt recoverable KCl, or 20.7 MMt recoverable K2O).
The resource estimates are restricted to the Home Reserve only and do not take into account the Treaty Land Entitlement (TLE) Reserve lands (15,500 acres contiguous to the Home Reserve).The TLE Reserve lands and minerals are currently undergoing a designation process to surrender the mineral rights to Canada, these rights are then returned back to MFN. Once the TLE lands are designated, North Rim will recalculate to include those resources in an amended NI 43-101 Technical Report and has the potential of adding up to15,500 acres, or 90% to the resource area.
Russian potash miners Uralkali (LON:URKA) and Silvinit (PINK:SLVNF) expect to produce a combined 10.6 million tonnes of potash this year, up from 10.3 million tonnes in 2010, according to Uralkali’s CEO Vladislav Baumgertner. Baumgertner also said that its Belarusian Potash Co. export joint venture will sign a new contract with India in the coming months at a sharply higher price. “The contract will be signed in the next few months and the price increase will be serious,” he said. Belarusian, in January signed a deal to sell 600,000 tonnes of potash to two major Chinese buyers at $400 per tonne.