Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Despite a lacklustre day for the sector – North America’s big three Potashcorp, Agrium and Mosaic all suffered losses – two Brazil focused potash mine developers attracted strong investor interest on Friday.
Verde Potash (TSX:NPK) received a 4.8% bump to $4.35, bringing its gains for the week to over 9% and valuing the company at $160 million. The company was promoted to the main board in Toronto on 11 April this year after a $26 million bought deal public offer and is now fully funded to produce a a bankable feasibility study next year.
Verde Potash investors are still nursing their wounds however. In the run up to the release of a preliminary economic assessment report for its Cerrado Verde project in the Amazon basin, Verde Potash’s shares were driven all the way up to $8.95, only to come crashing down after the study disappointed investors all round.
The company, founded as Amazon Mining in 2005, has amended that study and now has two production scenarios – 0.6 million tonnes per year costing $598 million with production kicking off in 2015 and ramping up to 3 million tpa in 2019 or initial production of 1 million tpa with capex of $868 million increasing to 4 million tpa.
The boost to another fertilizer player in Brazil on Friday was more dramatic. Early stage Rio Verde Minerals Development Corp (TSX:RVD) shot up 33% after placing shares worth $15 million at a massive 87% premium to its ruling price yesterday.
The company is worth some $27 million in Toronto and its phosphate project could start ramping up to production next year. The proceeds of the placement will go to exploration in Brazil and putting together a pre-feasibility study for its Sergpipe potash project.
Both companies will have a ready market on their doorstep for their output. Brazil has to import some 90% of its potash and is the world’s third largest importer. The country’s farmers consume almost 7 million tonnes per annum.
