Mega-wealthy Yorkshireman Jeremy Grantham could be the world’s most successful ever natural resources investor. He is the co-founder and chief investment strategist of Boston based Grantham Mayo van Otterloo (GMO) with more than US $112 billion in assets under management.
Grantham is a critic of the increasing short term profit seeking nature of markets and is quick to point out that such strategies simply don’t work when it comes to investing in natural resources.
|Price:||A$ 6.5 cents|
|Market Cap:||A$ 8.97m|
|Shares in Issue:||138m|
For several years Grantham has been alerting investors to the shortness of secure future supply of essential fertiliser elements, critical in avoiding a looming global food crisis. Such natural resource elements might not seem as newsworthy or fashionable as gold, copper and graphite, but are critical to life as we know it, and indeed to life itself.
In a rare and extensive interview with Barron’s magazine earlier this year Grantham again alerted investors to the fact that phosphorus and potassium rich potash are necessary for the growth of all living things and cannot be substituted for or manufactured. Grantham also points to the concentration of such resources in just a few countries which exist in generally politically unstable regions, and the risks this poses for security of future supplies. Economically viable supplies of these life giving commodities in geo-politically secure countries it seems is not so common.
Enter Potash West (PWN), currently still a relative minnow on the ASX- but maybe not for too much longer. The company owns the Dandaragan Trough Project in Western Australia located 150km north of Perth covering more than 2,000 square km of highly prospective ground including 150km of strike around 20km wide at its Dinner Hill potash and phosphorous resource. Dinner Hill contains a JORC Indicated and Inferred 244Mt of 0.3% potash including 122Mt of 4.2% potash and in addition contains a JORC Indicated resource of 120Mt of 2.8% phosphorous.
PWN is aiming for an exploration target of 1 to 1.5 billion tonnes of greensand containing a hoped for 4.0 to 4.8% of potash and 300-600 million tonnes of phosphate mineralisation grading between 1.5 and 3.0% phosphorous. First steps are plans to develop Dandaragan’s less capital intensive phosphorous deposits in order to generate income leading to development of the project’s large potash resources.
The significant phosphate potential contained within Dandaragan continued to be a major area of focus for PWN during the June 2014 quarter building on the metallurgical breakthroughs announced in the March quarter 2014 and an updated scoping study released in April 2014 for the production of single superphosphate. Significantly Dandaragan is surrounded by a high level of existing infrastructure including high-voltage power, roads and water and is located close to bulk ports.
Besides its significant fertiliser assets, PWN also owns the propriety K-Max process for releasing potash from glauconite - not only from its own project; the process is potentially a valuable asset which could be licensed to other potash-in-glauconite projects as well. But it is in Germany that the company has most recently added potentially substantial fertiliser assets to its portfolio. Germany has a long history of potash production and is today ranked as the world’s 4th largest producer.
PWN recently entered into a joint venture with East Exploration to earn 55% of two highly prospective licence applications covering 450 square km known as Kullstedt and Grafentonna within the South Harz region which boasts over 100 million tonnes of potash production.
East Exploration has commissioned ERCOSPLAN to carry out a review of all the geological data relating to the Kullstedt project including previous potash exploration in the area. ERCOSPLAN has a long association with the South Harz region in its former role as the technical planning group for the East German potash mining industry.
ERCOSPLAN was responsible for exploration drilling in the area and possesses detailed knowledge of work carried out in the region in the 1970’s and 1980’s. Collation, analysis and reporting of the geological data in a manner consistent with JORC reporting is expected before the end of 2014.
With the world’s population forecast to increase from its current 7 billion to 9 billion people by 2050, the amount of arable land available to grow food more than halving since 1960, and the added complications of climate change, the challenge of providing adequate secure fertiliser supplies to optimise future food production is obvious.
Another positive to note is that Directors own more than 25% of the company’s stock, demonstrating their financial commitment in addition to their energy and calibre to extrapolate value and drive projects forward to maximise shareholder value.
PWN offers investors a rare opportunity to benefit from more than realistic multiple opportunities within secure geopolitical risk environs in contributing to potentially large scale opportunities to help meet this challenge. It was Samuel Langhorn Clemens, better known as Mark Twain who said more than 100 years ago “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” It’s probably fair to suggest the majority of investors are not focussed on opportunities such as those offered by PWN- to make substantial profits by investing in secure fertiliser supples to meet fast growing global demand for food production.
With a current market cap of under $9m the current share price appears to offer investors significant potential gains as PWN continues to develop and execute its planned fertiliser production strategies.
Potash West is one we will be keeping a close eye on moving forward.
Director of Operations Australia, MiningMaven
Disclosure: Kevin Jones owns shares in Potash West NL