Potash- An Emerging Commodity Clinching Global Attention; Stocks Under Lens- BHP and Salt Lake

  • Jul 11, 2020 AEST
  • Team Kalkine
Potash- An Emerging Commodity Clinching Global Attention; Stocks Under Lens- BHP and Salt Lake

Summary

  • Potash is capturing global attention as a commodity of the future over its importance in agriculture productivity.
  • Many prominent names such as BHP Group Limited (ASX:BHP) are developing assets to get future- ready, and so far, BHP has invested USD 2,700 million over the development of its Jansen Potash Project in Canada.
  • While several prominent miners are becoming visionary with potash, many junior miners such as Salt Lake Potash Limited (ASX:SO4) are not lacking in their pursuit to leverage on the long-term outlook of the commodity and are fast- tracking development and witnessing large interest from other resource companies.
  • For example, Equatorial Resources Limited (ASX:EQX) recently invested $10 million in SO4 through unsecured convertible notes, which as per the Company provides them with discounted and early entry in SO4, which has growth potential.

Potash is currently being regarded as the commodity of future with high growth potential, and many prominent names such as BHP Group Limited (ASX:BHP) are spreading their roots into the supply chain.

Many think tanks of the market are even linking potash with the global economic growth as they believe that the day-by-day improving lifestyle of youngsters would divert them towards health consciousness, which would eventually support the demand for more protein connect in the food, and what could be a better source of protein than agriculture, dairy, and poultry products.

Potash linked to the economic growth concept has thus taken root in academia, research, and market philosophy. A thriving economy means higher income and higher the income more money spent on high protein content food, considering the ongoing drive for health enlightenment.

  • Potash is basically a potassium-based salt, which is mainly used as a fertiliser in order to improve the output and yield of agricultural land, as it serves as a pivotal nutrient for the growth of a plant.
  • Furthermore, potash has been proven to boost the productivity of farming land, and thus, is currently being considered crucial for addressing challenges of the growing population across the globe and need for higher food production and supply to keep them thriving.

BHP Group and Jansen Potash Project

BHP currently holds various exploration permits and mining leases for the Jansen Potash Project, covering 9,600 square kilometres in the province of Saskatchewan, Canada, and the Company is focused on the growth of the potash project.

However, during March 2020, the miner reduced the final shaft lining work at Jansen for two shafts to one shaft at a time in the wake of the reduced workforce due to the response plan of the Company to contain the COVID-19 spread among workforces.

  • Until the June 2020 quarter, BHP had invested USD 2,700 million on the project with a scope to finish the excavation and lining of the production and service shafts and to continue the installation of essential surface infrastructure and utilities.

So far, the Jansen project has been 85 per cent completed, and currently, the shaft completion timing of the prospect is under review.

The market view and its linkage of potash to the global growth are not alien to junior miners, and many who are dedicated to the development of potash projects such as Salt Lake Potash Limited (ASX:SO4) are now fast-tracking the development and witnessing a wide interest from other resource companies.

Salt Lake Completes Key Procurement for Lake Way Potash Project

Salt Lake, which is dedicated to build and run its flagship Lake Way Potash Project announced that the largest procurement package and the process plant crystalliser bounded for the continent at the end of the June 2020 and is anticipated to reach the Fremantle Port in late July, weeks ahead of schedule.

Furthermore, with this commencement of the key procurement, the project is now 90 per cent procured, and all key vendor contracts have already been executed.

The Company has also completed the order of major plant components such as centrifuges, attritioners, floatation cells, and over the coming weeks, structural steel would start being erected on site followed by the arrival of a number of key plant components.

$10 Million Strategic Investment in SO4 by Equatorial Resources

Equatorial Resources Limited (ASX:EQX) subscribed $10 million of unsecured convertible notes offered by Salt Lake on 2 July 2020, following a detailed review by the Company focused on investigating opportunities related to Salt Lake Potash’s current financing requirements and operational progress.

The convertible notes provide an exposure to EQX in Salt Lake as they are structured deferred equity, which could be converted into ordinary shares in the event of a future equity raising by SO4 of at least $10 million at the lower of $0.45 per share, which represents 5 per cent discount to the equity capital issue price.

Furthermore, over its decision to invest in SO4, Equatorial Resources Limited mentioned that the Company believe SO4 is currently undervalued, and the timing of investment is opportunistic.

EQX also suggested that the investment in SO4 provides the Company with a discounted investment entry price at a time when a number of near-term value catalysts have the potential to drive a significant re-rating of Salt Lake Potash’s share price.

In a nutshell, potash is emerging as the commodity of the future, and many market participants, including, many resource companies believe that it has a potential of growth.

SO4 last traded at $0.585 (as on 10 July 2020), up by 2 per cent against its previous closing price on the exchange.

 


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