March 27, 2014 / Rockstone Research's mining analyst, Stephan Bogner (Dipl. Kfm., FH) made a startling discovery when recently investigating potential M&A synergies between several aspiring new market entrants in Saskatchewan's multi-billion Dollar potash mining business.
And unfortunately for Rio Tinto and its Russian joint venture partner, JSC Acron, it must be a shocking oversight. In fact, it is one that may seriously complicate plans to commercialize what is being hailed by the Russian fertilizer giant as a "massive" potash discovery that is "world-class". Rockstone is referring to the KP405 potash project in Saskatchewan, which Rio Tinto recently upgraded to a "Tier One" status. This is big-league mining industry parlance for a project that exhibits the preliminary potential to become a large, profitable mine.
So what is the problem with this seemingly rosy picture for Rio Tinto - the project operator at KP405? It is the fact that some of its potash riches belong to someone else. Specifically, some of the KP405 land holdings are messily intermingled with land leases owned by the company's next-door neighbor, Western Potash Corp...
To read the full research update #2, use one of the following links:
- Recently, Rio Tinto just wrote two words in its annual report on its KP405 Potash Project in Saskatchewan, Canada: "Tier One." What is the reason for this secrecy?
- Meanwhile, Rio Tinto's JV partner, JSC Acron is hailing KP405 as a "massive" potash discovery that is "world-class." What is the reason for this different kind of disclosure?
- Maybe because JSC Acron does not know what Rio already knows, namely that a fairly large portion of KP405 belongs to Western Potash Corp.?
- Lately, many have been reporting about KP405 being a sensational new potash find, yet none of them seem to have figured out that Rio made a sensational blunder.
"I have no spur to prick the sides of my intent, but only vaulting ambition, which o'erleaps itself, and falls on th'other…" (William Shakespeare in Macbeth, Act I, Scene VII)
The vaulting ambition of Rio Tinto to become a global potash producing powerhouse has been thrown an unexpected curveball. And it's one that could prove hugely embarrassing for one of the world's biggest and most successful mining companies. I'm talking about a serious strategic blunder that may also prove to be an absolute godsend to its tiniest rival...
Disclaimer: Neither Rockstone Research nor the author was compensated or instructed by Western Potash Corp. to produce or publish this content. However, the author holds shares of Western Potash Corp., and therefore, would financially benefit from volume and price appreciation, whereas it is noted that the author has not sold any shares of Western Potash Corp. since first reporting on the company and does not plan to do so in the next weeks. Please read the full disclaimer on rockstone-research.com as well as within the above mentioned PDF. None of this content is to be construed as an "investment advice" as this article is intended for information use only and the author is not a registered investment advisor.
SOURCE: Rockstone Research