Potash One fka KCL

[Ed Monton]

Potash One Gets Natl Bk Outperf Rtg On Devt Plans, Pricing


TORONTO (Dow Jones)--Citing Potash One Inc.'s (KCL.T) potential inbringing its Legacy potash project to the pre-feasibility stage,together with strong potash prices, National Bank Financial startedcoverage of the company at outperform with a C$12 stock-price target.

"We believe Potash One represents a unique opportunity to invest in apotash solution mining developer," Kelvin Cheung said in a researchreport Wednesday.

Potash One is involved in potash explorationprojects in Saskatchewan and is looking to develop its Legacy projectusing solution mining techniques. Solution mining, also known as insitu leaching or in situ recovery, is an alternative to mechanicalexcavation and is applicable to a range of minerals that are soluble inwater.

Cheung said the Vancouver company has a recentlystrengthened balance sheet, an experienced technical team andexperienced corporate management to advance its current project to thenext level.

The company started trading in Toronto onWednesday after moving over from the TSX Venture Exchange. Its sharesare trading at C$5.35 in Toronto, up 6% from its closing price on theTSX Venture Exchange Tuesday.

The company's Legacy project is adjacent to Mosaic Co.'s (MOS) Belle Plaine mine, the world's largest potash solution mine.

"We do see Potash One as having a good outlook in developing into aneventual potash producer comparable to Mosaic's Belle Plaine solutionmine, potentially differing only by size and technology," Cheung said.

The analyst said that, while the company exhibits many characteristicsthat support its outlook of becoming a potash producer, its shares willbe subject to volatility given the time to potential production.Because of this, the analyst has assigned a speculative risk rating tothe stock.

New potash mines take five to seven years to build,Cheung noted, with capital costs for a solution mine estimated at C$1.6billion.

Cheung believes Potash One's capital payback period at current potash prices would be about two years.

The analyst said potash prices have been rising rapidly over recentyears, with free on board Saskatchewan mine prices now quoted at US$485a short ton, up significantly from US$100 a short ton at the beginningof 2004.

National Bank is forecasting a long-term FOBSaskatchewan price of US$390 a short ton. In 2009, its forecast is forUS$420 a short ton, rising to US$440 in 2010.

Cheung saidthat, given potash supply purchases for this year are already hintingat massive price increases based on demand from China, India andBrazil, international potash fundamentals appear "solid." He also said"our price forecasts appear satisfactory if not conservative for thenear term."

Potash is mainly consumed as a fertilizer.

Company Web site: http://www.potash1.com

-Judy McKinnon, Dow Jones NewsWires; 416-306-2100

(END) Dow Jones Newswires

June 18, 2008 14:05 ET (18:05 GMT)