Value Microcaps Free-For-All

[kipp440]

KCL.V - Potash One "Lotto Ticket"

I loaded up as the price dipped after the P.P. This stock is going to take off due to the strength of fertilizer stocks. The big story of 2008 is going to be FOOD. The combination of 30 year low grain inventories, added B.R.I.C. demand for higher protein diets, biofuels, and high grain prices will drive fertilizer prices through the roof! Look at Mosaic and Potash Corp of Sask. market caps, both approx $40 BILLION. KCL has a market cap of $75 MILLION.

The 43-101 reserve of 360 million tons at $400/ton is $144,000,000,000???? Is that right? $144 Billion??? I read that there was an estimated 10,000 recoverable tons per acre on the 97,000 acre concession. That figure would be 970,000,000 tons, yes 970 MILLION TONS. The company is using part of the $10 million raised in the P.P. to drill the property and prove the numbers in the report.
Here is a link to the 108 page 43-101 report - http://www.isxresources.com/i/pdf/TechnicalReport20070208.pdf

These numbers are just too big for me to figure so let's just use the Mosaic Belle Plain Mine that is located directly south, adjacent to the KCL property. Here is the map http://www.isxresources.com/s/LegacyProject.asp
Belle Plain produces 2.8 million tons of potash per year through a "solution" mining process. The revenue at $400/ton is $1,120,000,000. *They are currently expanding Belle Plain to increase production by an additional 400k tons per year. The same mineralization being mined by Mosaic extends north to KCL's property.

My feeling is that one of these scenarios plays out:

1. Mosaic buys KCL to prevent them from competing with them AND increasing their proven reserves.

2 KCL gets bought out by a large fertilizer company using their recently inflated stock as currency to do a stock deal.

3. A Sovereign Fund from China or some other country buys KCL.

4. KCL raises the funds to build a mine.

The word of KCL is getting out, look at this recommendation from last week:
http://www.dailybuyselladviser.com/news/blank/249-1.html?type=pf
Mad about potash

Mr. Paquette tells us that as he was writing the latest issue of his advisory, three spirits appeared to him. Well, in a manner of speaking.

Business channel CNBC flickered in the background as he wrote. On came commentator Dennis Gartman. He was asked about his favourite thing right now — “and the first two words out of his mouth were ‘fertilizer’ and ‘potash’.”

Next, it was the turn of Mad Money’s Jim Cramer who, in his inimitable way, came on screen with a pile of dirt, potatoes and corn cobs, hoe in hand, and declared that he was keen on the “AG’s” — agricultural stocks. The first firm that sprung to his lips was U.S. fertilizer giant Mosaic Company (NYSE-MOS), which has a market cap of $35 billion and a big property in Esterhazy, Saskatchewan.

As a rule, says the editor, this kind of consensus comes before a market top, but fundamentals for an agricultural bull market remain in place. Wheat carryovers are holding at low levels and demand still outweighs supply.

Then, as if to seal the deal, up popped well-known Canadian adviser Donald Coxe, and he was singing the praises of potash as well.

The Russian sinkhole and a new name in potash

This sent the Vancouver editor to his charts. “The technicals for the intermediate and longer term potash chart are extremely positive.” Although prices have more than doubled in four years, that doesn’t necessarily mean that a bull market in potash has run its course.

“Meantime, in an already tight market, prices are being goosed by reports of a large sinkhole at a Russian mine that could threaten 10% of the world’s supplies.” Major producers are raising prices.

Which brings Mr. Paquette to a stock that may be ready to ride that trend. You would not have found PotashOne (TSX/V-KCL) listed as recently as the beginning of this month. It was called ISX Resources. Emerging Growth Stocks had already recommended it in October 2006 and seen its price grow from $0.25 to $1.00 by August of this year.

On November 26, the company held its annual general meeting, changed its name and appointed a new President and CEO, Mr. Paul Matesyk, the co-founder of Energy Metals Corp., which was recently bought out by Uranium One. On December 6, PotashOne began trading under its new name, “just in time to catch the wave of investor interest in the ‘AG’ stocks.”

No ceiling on the price

Now it can move forward in a big way. “Given the amount of interest in this sector and the fact they already have a resource of hundreds of millions of tons of the stuff as opposed to looking for it, I don’t think we can put a ceiling on the price until we can estimate what kind of cash flow it could generate and how many shares it might take to get production,” says Mr. Paquette.

There’s a tempting bit of geography surrounding this stock, too. “Mad” Jim Cramer’s fertilizer pick, Mosaic, has its big Saskatchewan property right next door to PotashOne’s. That could spell takeover.

“The ultimate route they take will depend on what the shares do,” explains the editor. “If interest in Potash stays white hot and the stock price continues rising, they could become a threat to other producers and get taken out. Give me more time to come up with a target price,” he asks his readers. The stock closed yesterday at $2.85.