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CANADIAN STOCK EXCHANGES
E. A. Schiller June/July 2009
DISTRACTIONS AND REACTIONS – POTASH IS PROPITIOUS
Floods and fires are playing havoc here and abroad and NHL Stanley
Cup Hockey playoffs are dominating our TV screens, and the Toronto
Blue Jays are leading the American league baseball standings (surprise,
surprise). So with bad and good news seen every day in print and
on TV, depending on whether you are filling sand bags to contain
raising river levels or hosing down blazing forests or a Red Wing/Blackhawk
or a Hurricane/Penguins, hockey fan one might be too distracted
as to current market conditions. Metal prices are showing signs
of strength with gold trading to $960.00 and silver hovering around
$14.75. For those of you long on oil stocks, oil edging over $60.00
a barrel must put a smile on your face. Gas here in the B.C.’s
Okanagan shots up over a dollar to $106.9 a litre.
The commodity that deserves attention these days
is uranium at $51.00 a pound in the spot market and rising gradually
on a weekly basis. Led by the world’s largest producer of
uranium, Cameco Corp (CCO-TSX) was trading close to $30.00 up
from $20 in March. In hindsight the astute investor had he bought
a basket of uranium explorers in March would have benefited with
Denison Mines (DML-TSX) going from $1.00 to close to $2.30, UEX
Corp (UEX-TSX) doubling to $1.60 than backing off to $1.45 Pitchstone
Resources (PXP-TSX-V) doubling also to 40 cents, JNR Resources
Inc (JNN-TSX-V) advancing from 25 to nearly 40 cents, Hathor Exploration
(HAT-TSX-V) and partner Terra Ventures (TAS-TSX-V) rising from
$2.00 to 2.30 and 40 to 50 cents respectively, and Forum Resources
(FDN-TSX-V) going from six to 10 cents. All the explorers are
gearing up for aggressive programs this summer in Saskatchewan
and Nunavut.
Moving to the US and abroad Uranium One (UUU-TSX)
traded around $3.50 up from $2.30 in March based on good first
quarter production figures. The company has producing mines in
South Africa and Kazakhstan. In the US the company has applied
for a licence to construct an ISR facility in Wyoming and has
an ISR project in the advanced stages of completion in Texas.
In Australia they have another ISR project in the advanced stages
of completion. ISR refers to insitu recovery using ISL methods
– insitu leaching which is the current method of uranium
recovery in the US and other countries in the world. Another US
uranium explorer moving forward on ISR projects in Texas and New
Mexico is Uranium Resources Inc. (URRE-Nasdaq). URRE stock has
move up from 50 cents in March to $1.25 in mid May. The sleeper
stock of the month is U308 Corp (UWE-TSX-V) working diligently
near the Roraima basin in Guyana.
Recently, drilling intersected 8 meters of 0.119%
U308 in the albitite-hosted breccias zone on the Accori North
C target on the Kurupung batholith. Addidtional targets have been
drilled and delineated suggesting a significant uranium district
is in the making. These unique deposits lie adjacent to Roraima-type
unconformity uranium occurrences similar to those in the Athabasca
basin in Saskatchewan. The uranium occurrence is a “ look
a like” to similar uranium deposits in Labrador’s Michelin,
Australia’s Valhalla deposits in Queensland and others in
Brazil, the Ukraine and Russia. UWE stock has risen nicely to
the 65-70 cent level from 30 cents earlier this year.
Uranium demand by Asian buyers is becoming more
evident pushing spot prices higher towards the $69.00 long term
fixed price. If one is a believer that uranium is the energy commodity
of the future and this seems to be the signal we are getting from
uranium prices, the wise investor has to have a position in one
or more of the above explorers.
A commodity that is dear to my heart is potash.
I use it as an ingredient for fertilizer for my grapes, fruits,
vegetables and lawn. The NPK that appears on all conventional
fertilizer bags refers to nitrogen, phosphate and potassium. The
world needs fertilizers to grow everything we eat or to produce
biofuel source agriculture products. Three companies, Potash Corporation
of Saskatchewan (POT-TSX), Agrium Inc (AGU-TSX) and Mosaic Co(MOS-NSE)
produce potash from underground mines in Saskatchewan and New
Brunswick. All three stocks have appreciated considerably since
2008 and since March 2009 have gone from $90.00 to $129.00, $45.00
to $58.00 and $40.00 to $56.00-57.00 (US) respectively in mid
May.
A U.S. potash producer worth a look at is Intrepid
Potash Inc (IPI-NSE) with producing mines in Utah and New Mexico.
Since March of this year it has doubled to over $32.00 (US) and
a year ago it was $75.00. Two Canadian potash explorers Athabasca
Potash (API-TSX) and Potash One Inc (KCl-TSX) have displayed impressive
gains since March. Like wise API has risen from $2.00 to $5.60,
then back off to $5.10 and KCl has moved from $1.40 to $2.80 in
the same period.
The dramatic rise in price of KCl in mid-May was
due to the appointment of Robert Friedland as chairman of the
company. Mr. Friedland needs no introduction. He is chairman of
Ivanhoe Mines (IVN-TSX), holders of extensive deposits of copper,
gold and coal in Mongolia. He engineered the sale of Diamond Fields
Resources’ nickel deposit to Inco (now Vale-Inco) in 1996.
What potash prices will do in the future will determine how these
stocks will shake out. The market is taking an optimistic view
that demand will remain stable or improve. The three producers
have had highs of $245.00, $115.00 and $160.00 for POT, AGU and
MOS respectively one year ago. When you look at the countries
with expected high growth for potash demand one need only to look
to China. China’s population is growing at a rate of fifteen
per minute.
In June, 2006 China had about 1,314,000,000 citizens,
12 months later the total reached 1,322,000,000. For those who
can afford it have gone from rice and wonton soup to a side order
of hamburgers and French fries. Since 1992 when the first McDonalds’
opened its doors in Beijing, the company with the yellow garbed
clown now has over 1,000 restaurants in 2008. The Colonel of Kentucky
Fried Chicken fame has nearly 1,700 franchises in China. I do
not have any statistics on pizza or taco joints but I am sure
these and other fast foods have left their foot print in the diets
of the Chinese. What is my point! Cows to produce meat and feed
to nourish chickens all need hay and grain. Sunlight and water
can do only do so much to grow crops.
The staff of life is fertilizer and China is a huge
importer of Saskatchewan potash. To go with the burgers and the
bucket of chicken, French fries are now a popular dietary add-on.
J.R. Simplot of Boise, Idaho and McCain Foods of Florenceville,
New Brunswick both have large potato processing plants in China.
China is now the world’s largest producer and the world’s
largest consumer of potatoes. But the U.S. out does China in potato
consumption per capita – 66 kilos to 30 kilos per year. I
am not advocating eating French fries but think potash in your
portfolio.
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