Karnalyte Resources (KRN, TSX)
58 cents | Market Cap $24 million
A bar graph is worth a thousand words.
After Canada, the Top 3 fertilizer producing countries are Russia, Belarus, and China.
Last week Bloomberg said force majeure was declared at the largest Potash mine in Belarus. All shipments had stopped.
Will supply continue to flow freely from Russia? China?
Mosaic (MOS, NYSE), a major fertilizer producer, warned of Potash shortages in a call with analysts Wednesday.
Knowing this we can quickly see how crucial Canada is. And we better hope absolutely nothing gets in the way of fertilizer companies in Canada advancing toward production.
Fertilizer, as an industry, is back in the spotlight.
The New York Times put out a piece with the title Obscure but Crucial Commodity Fuels Geopolitical Tussle in Eastern Europe.
Obscure? Maybe. Crucial – absolutely.
Top soil is the lifeline for almost every person on Earth.
Mega corporate farms, the ones who grow a huge portion of our food, require some amounts of NPK (Nitrogen, Phosphorous, and Potassium) on an ongoing basis. They require NPK on an ongoing basis because these corporate farmers aren’t building the soil. Their dirt is devoid of the thousands of living organisms you’d find in rich black dirt (soil), therefore they must apply NPK (fertilizers).
Located in Saskatchewan, 190 km east of Saskatoon, Karnalyte’s 100%-owned Wynward Project comprises 90,766 acres of mineral rights. Karnalyte also owns 4,100 acres of surface lands.
Karnalyte’s mineral leases contain 147 million tonnes of Proven and Probable Potash reserves. It also contains 153 million tonnes of Magnesium.
Such a magnitude equates to a mine life of 70 years. At full scale Karnalyte’s 100%-owned reserve would produce 2.1 million tonnes of Potash per year (more than Chile, Brazil, Spain, and the U.S.). You need a big calculator for that. We’re talking $1.2 billion per year in revenue assuming $600 per ton.
Big.
And if you want to be super successful speculating with resource stocks you’ve got to go big. Those who’ve done it warn against buying small projects because small projects have all the potential problems big projects do, minus the potential to make mega money.
Major opportunity staring you in the face here and it continues masquerade as a $25 million nano cap stock.
- 147 million tonnes of Proven and Probable Potash reserves, plus 153 million tonnes of Magnesium
- Estimated 70-years mine life with potential to generate $1+ billion annual revenues
- After-tax net present value (NPV) for all phases of development $3.4 billion
At this moment in time Karnalyte has a really tight float, 42 million shares outstanding. So while a 10-cent move seems like a lot, or a nice percentage increase, every 10 cent move is only a $4.2 million increase in market cap.
Gujarat, a state sponsored fertilizer corporation in India, owns 38% of all KRN shares. They made their first $40 some million strategic investment at $8 per share. Gujarat’s strategic position should make it tough for KRN to not climb closer to something approaching fairer value. I don’t know what that number is but I know it’s nowhere near 60 cents per share. Arguably $2 per share would still be cheap.
I think the chart is shaping up beautifully.
On Thursday KRN briefly dipped to 48 cents intraday.
By day’s end it was trading 60 cents and finished the week Friday at 58 cents. The EMA-8 and EMA-20 should continue to support the price.