Potash Sales Fizzle in Second Quarter

Potash Sales Fizzle in Second Quarter

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Wed, Jul 14, 2010

Feature Articles

By Leia Michele Toovey- Exclusive to Potash Investing News

match LinkedIn 0diggsdigg Share Monday was a tough day on the market, as resurrecting concerns over China’s demand combined with worries over Portugal’s solvency to send commodities down across the board.  On Tuesday, a relief rally followed, however, potash stocks’ failed to jump on board.

Mosaic Company (NYSE:MOS) shares ended the trading session lower by $3.65 or, 7.91 percent from its previous close. Mosaic’s stock is hitting support at $37.68, and resistance at $46.49. CF Industries Holdings, Inc. (NYSE: CF) is down 1.5 percent at $73.11, with only about 2.1 million shares exchanging hands.  Potash Corp. of Saskatchewan, Inc. (NYSE: POT) shares are down 0.4% at $92.61, and are also suffering from  light volume.

The fact that Potash Corp’s shares have been battered has resurrected rumors that BHP (NYSE:BHP) would make a bid for the potash giant.  These rumours surfaced a few months ago, but were squashed when Potash Corp CEO Bill Doyle admitted that if anyone were to purchase Potash Corp, it would be “expensive.” As Potash shares fail to gain forward momentum, the company potentially becomes a more affordable takeover target.

Relative to the other potash producers, Scotia Capital has confidence in Agrium. On Tuesday, Scotia Capital upgraded Agrium (NYSE:AGU) to sector outperformer from sector performer. The stock closed Friday at $58.17 on volume of 3,030,200 shares, above average daily volume of 1,837,186. Agrium is currently above its 50-day moving average of $54.25 and should find resistance at its 200-day moving average of $58.98.

It will take a change in the fundamentals of the potash market before producers will see an increase in share value.  After a strong start to 2010, fertilizer consumption fizzled in the second quarter.  In a report on the sector, analysts at CIBC world markets commented  that the market is oversupplied, putting prices under pressure. Producers have tried, and failed, to push through price increases. And the supply-demand situation could get worse, as about 21 million tonnes of brownfield production capacity is expected to come on stream in the next five years. “Without a step-up in potash demand in 2011 to 55-60 million tonnes, the potash market appears to be oversupplied for the foreseeable future,” the analysts added.

Company News

Talon Metals Corp., (TSE: TLO) is ready to move ahead with the first drilling program at their Sergipe Potash Project in Brazil. Talon has identified seven potash targets at its Sergipe Potash Project, six of which have potash intersections recorded in previous oil well drilling. Twelve drill sites have been identified for preliminary drilling throughout the seven target areas following an extensive remodeling of the geology of the Sergipe basin, which was based on approximately 234 line kilometers of 2D seismic data and the relogging of 286 historical oil wells in the area. The first phase will focus on drilling approximately 4,500 meters on two targets.  On completion of the first phase of drilling follow up work will depend on the results received in the first phase, but could include a 2D seismic survey, follow up drilling on Targets 1 and 2 and/or the extension of drilling to the other five targets identified.

The Sergipe Potash Project is located on the northeastern coast of Brazil, near the coastline city of Aracaju, the capital of Sergipe State. This project has a comprehensive technical data base, access to excellent infrastructure and good proximity to Brazilian potash markets. It is close to Brazil’s only producing potash mine, Taquari-Vassouras, which is operated by Vale. The commencement of the drilling program is a big step towards Talon’s goal of completing a National Instrument 43-101 mineral resource estimate for the Sergipe Potash Project during 2011.

Encanto Potash Corp. has granted a total of 7,950,000 incentive stock options to directors, officers, charities and consultants of the Company. The options are exercisable at a price of $0.15 per share for a period of 10 years. The offering is part of the company’s Stock Option Plan.

Allana Potash Corp. (CVE:AAA) is pleased to announce that the additional evaluation and sampling of drill hole DK-10-01 has identified shallow potash mineralization. This mineralized zone in DK-10-01 returned 6.55 meters, from 110.80 meters to 117.35 meters (drilled width) of 17.65 percent KCl highlighted by two meters (drilled width) of 19.94 % KCl from 114.15 meters to 116.15 meters.