Potash prices in September were 26% lower than a year earlier and at their lowest levels since the beginning of the early 2000s cyclical upswing
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PortfolioDirect
Potash prices in September were 26% lower than a year earlier and at their lowest levels since the beginning of the early 2000s cyclical upswing. The huge variation in prices illustrated in the chart challenges investors to make a judgement about what to assume in valuing an existing or prospective producer of potash. The example of Highfield Resources is illustrative of the implications flowing from this decision. In a feasibility study released in May 2014, the company estimated that its Spanish potash development could be generating EBITDA in 2018 of $234 million based on a potash price of $435/tonne. At recent market prices, however, the profit would be nearly halved. The project valuation would be cut by 60%. Using the PortfolioDirect valuation model, the base case assumptions in the feasibility analysis imply a potential share price in 2020, once the company is comfortably in production, of $2.20-2.80. The same valuation framework using the lower price assumption implies a price target below the current share price of 60 cents.
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![John Robertson](https://assets.livewiremarkets.com/rails/active_storage/representations/proxy/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBWXc9IiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--c2aa664b1ca2f7744d0c90464e98577955b66fe6/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaDdCem9MWm05eWJXRjBTU0lKYW5CbFp3WTZCa1ZVT2hOeVpYTnBlbVZmZEc5ZlptbHNiRnNIYVFISWFRSEkiLCJleHAiOm51bGwsInB1ciI6InZhcmlhdGlvbiJ9fQ==--a788536266c8d052a67a95e113f2ebbff3ad0a97/f9fff80c906634d4cd45b7e8cf6082d01376379067.png)
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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![John Robertson](https://assets.livewiremarkets.com/rails/active_storage/representations/proxy/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBWXc9IiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--c2aa664b1ca2f7744d0c90464e98577955b66fe6/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaDdCem9MWm05eWJXRjBTU0lKYW5CbFp3WTZCa1ZVT2hOeVpYTnBlbVZmZEc5ZlptbHNiRnNIYVFISWFRSEkiLCJleHAiOm51bGwsInB1ciI6InZhcmlhdGlvbiJ9fQ==--a788536266c8d052a67a95e113f2ebbff3ad0a97/f9fff80c906634d4cd45b7e8cf6082d01376379067.png)
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...
Expertise
No areas of expertise