Potash West Builds Strong Investment Case
Potash West has a compelling investment case: pay $145 million ($9 million current market value and $136 million development capital) for a $60 million annual EBITDA stream for 40 years. The fundamentals of phosphate - the primary product of the company in the first phase of its development - are superior to mined commodities relying on Chinese GDP growth. It also lacks the risks of metals like lithium relying on fast paced technological changes which could quickly face obsolescence from more disruptive technologies. The company will also operate in the development friendly commercial environment of Western Australia. As one of many in need of financing in a tough capital market, this late stage Phase I company is operating in the highest risk part of the development cycle. The investment profile would suit a portfolio looking for value-oriented development opportunities likely to operate through multiple future cycles. The company has market opportunities in Western Australia itself which accounts for 38% of Australia’s cereal crops as well as India (and other parts of Asia) which imports its phosphate requirements.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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