North American potash producers got sucker-punched when Russian fertilizer giant OAO Uralkali suddenly said the price of potash could fall in a big way. Uralkali should know. At the same time it made the bold statement, it broke the news that it will back out of Belararus Potash Co. (BPC), its partnership with a Belarus-based fertilizer maker.
The end of the deal could send the price of potash, a vital crop nutrient, to the $300-a-metric-tonne range, from the current price of about $400.
After hearing the news, I called David Salisbury, chairman of Passport Potash Inc(CVE:PPI). The company is developing a potash project in Arizona’s Holbrook Basin.
Salisbury is OK with a big drop in prices. He tells me Passport can make money with prices as low as $300. Most North American producers can’t.
The price of potash has been on a wild ride. It reached $840 in 2009 before plunging to $325 in 2010. It has since gained strength and moved close to $400, but this news from Russia is just one more kick in the teeth for producers.
To the head of Passport, all this stirs a big opportunity for investors. More on that in a minute.
Fertilize Your Portfolio
Potash is the broad term for fertilizer forms of potassium.
Some of the world’s largest known deposits are in Canada, Brazil, Belarus and Germany. There are also large deposits in Arizona’s Holbrook Basin, which is where Passport Potash is working.
Potash rocks – ore at the Passport project looks similar.
The company controls more than 120,000 acres of land in the region. It’s one in a small group of potash companies working in this area. All of them got slammed in this year’s small-cap meltdown.
And any of the miners that weren’t already beaten into the dirt just got extra-slammed when the news of a potash price war broke.
And therein, says my contact, lies the chance to make