The Globe and Mail

RESOURCES
Tiny miner swept up by potash frenzy

ANDY HOFFMAN

MINING REPORTER

June 5, 2008

What's a potash permit worth? About $38-million, judging by the stunning share price increase posted by Potash North Resource Corp. yesterday.

The junior miner, which was previously a shell company called Timer Explorations Inc., saw its stock climb 670 per cent on the TSX Venture Exchange in its debut as a potash play after disclosing it had won an exploration permit from the Saskatchewan Mines Branch.

The new resource play, whose backers include the high-profile mining entrepreneur Robert Friedland as well as Lukas Lundin, the successful scion of the Lundin family mining empire, is just the latest example of the frenzied interest in all things potash related.

"People are going be paying big money for these situations," said Craig Angus, a gold industry veteran who has been named president and chief executive officer of the new venture.

Potash North doesn't have reserves or even a resource estimate for how much of the mineral used to make fertilizer might be contained in the permitted 91,000-acre land package.

The site is east of Regina near the Manitoba border and just 20 kilometres from a pair of potash mines operated by Mosaic Group Inc.

Its few drill holes are historical, mostly from oil and gas explorers.

Still, by the end of trading yesterday, the new potash play could boast a market value of about $41-million.

Saskatchewan hasn't seen a new potash mine for nearly 40 years, in part because of a decades-long slump in prices and the fact that deep potash mines are particularly expensive to build.

Industry experts estimate it will take a minimum of five years for a new mine to be built at a cost of at least $2.5-billion.

Yet soaring prices, which have reached more than $600 (U.S.) a tonne from around $100 four years ago, have helped create a junior potash sector seemingly overnight. It is a phenomenon not dissimilar to the scores of uranium exploration companies that sprouted in 2006 and 2007 amid a rapid rise in the radioactive commodity's price.

"It's the start of an emerging trend you're going to see. It's much like the oil sands industry was 10 or 15 years ago. The potash industry was a sleepy little industry for a number of decades until the dramatic price increases," said Mr. Angus.

The new Potash North CEO believes that sustained high prices, driven by increased fertilizer demand from China and the developing world, will make long-dormant potash deposits in Saskatchewan economically feasible to develop.

The market capitalization of industry giant Potash Corp., the worlds largest producer, has swelled to more than $66-billion (Canadian), and the company has recently vied with banks and Research In Motion Ltd. as the most valuable company on the TSX.

As investors have piled into major producers such as Potash Corp. and Agrium Inc., some interest has now shifted to the new batch of smaller players which are competing to develop the next potash project.

"They are thinking 'I want to find the next play and go further downstream,' so they are looking at the junior space," said Robert Winslow, an analyst at Wellington West Capital Markets, who covers junior potash firms.

The sector got a lift last month when global mining behemoth BHP Billiton Ltd. bid $284-million in cash for Calgary's Anglo Potash Ltd. and its 25-per-cent interest in a potash development project in Saskatchewan. (BHP already owned the remaining 75 per cent.)

"Now, suddenly, you've got a new opportunity in the junior space that hasn't had that lift so investors are trying to get in as early stage as possible," Mr. Winslow said.

Vancouver-based Potash North expects to soon win a second exploration permit for another land parcel. Mr. Angus said the company plans to begin drilling its property this summer and hopes to have an official resource estimate by next year.

Mr. Friedland, is helping the company with "strategy," Mr. Angus said. He wouldn't disclose how much stock Mr. Friedland bought in the private placement. Mr. Lundin will have a 9.9-per-cent stake in the company once the deal closes and Potash One Inc., another junior which once owned the Potash North properties, will have a 13-per-cent stake.

POTASH NORTH (PON)

Close: $1.54, up $1.34