Western Potash Corp. (TSXV: WPX) – Favorable Scoping Study on Milestone; Plans to Raise up to $40 million

Fundamental Research Corp. | December 14, 2010 | 9:55 am

Investment highlights.

On November 22, 2010, K+S AG, Europe’s largest potash producer, agreed to acquire Potash One Inc. for $4.50 per share – reflecting an implied enterprise value (EV) of $396 million. This is highly encouraging for WPX as Potash One’s Legacy project is very similar to WPX’s Milestone project.
The acquisition price reflects an EV/resource ratio of $0.58/tonne. WPX’s EV/resource is just $0.25/tonne Bindicating that WPX shares are significantly undervalued.
In September 2010, WPX announced results of a positive scoping study on the Milestone project. A pre-feasibility study should commence shortly.
The scoping study indicated that the project is of sufficient size and grade to support solution mining for more than 40 years at a production rate of 2.5Mt/yr.
Base-case NPV10 of $5.2 billion; After-tax and royalty IRR of 27%.
Engaged Lockwood Financial to advise the company onfinancial and strategic matters.
The company recently announced its plans to raise up to $40 million.
All outstanding warrants and options are currently in the money. The company can raise up to $35 million if all these options and warrants are exercised.