Mining Stocks: This little-known mineral is more important than oil

Posted January 11, 2008

‘Potash is used in the making of fertilizer for agricultural goods and as we’re in the middle of an agricultural boom right now, we see demand just absolutely climb.’ – Andrew Mickey of BreakAway Investor

Baltimore – (TFN): In this week’s TFN Smart Investing with Krista Das, Andrew Mickey of BreakAway Investor gave his pick for the best opportunity in mining stocks available today (watch the financial video). The following was taken from the transcript:

Krista Das: It seems these days that commodities are the way to go. My guest today claims that there are huge profits to be made in the mineral boom with one mineral in particular. This little-known mineral is more important than technology, manufacturing and healthcare. You can even go so far as to say that it’s more important than oil. And best of all, the $61 billion industry is up for grabs.

Andrew Mickey, editor of Breakaway Investor, is an expert in the commodities market and has traveled around the world for his readers in order to find the best profit opportunities firsthand.

So Andrew, what is this mystery mineral that you’re talking about?

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Andrew Mickey:Well, Krista, the mineral is technically potassium chloride, known simply as potash.

Krista Das: And what exactly is potash? What’s it used for?

Andrew Mickey: Potash is used in the making of fertilizer for agricultural goods so as we’re in the middle of an Ag boom right now, we see demand for potash just absolutely climbing right now. And that’s where we want to focus as world population grows and world food demand grows, and that’s where we’re going to capitalize with potash. We don’t just invest in the farms. We take is one step further and go to what the farmers need.

Krista Das: Give us an idea of the demand for this mineral in a global level.

Andrew Mickey: First, the population is set to climb about 20 percent over the next 23 years, which isn’t too much. But once you add to that the fact that they’re getting wealthier and can now afford even more food, we see the stereotypical new Chinese middle class person with a new Mercedes or new cell phone.

Well, the other thing they’re buying is more food. Not just pork but also grains. And when it comes down to it, they’re eating more beef. And that beef comes from here in the U.S. and those cows eat grain. And it all comes down to grain demand.

When we’re looking at the Ag boom, it’s not just coming from the ethanol market anymore. It’s actually coming from worldwide, sustainable demand.

Krista Das: Are there any other commodity booms that you can compare to this predicted potash bull market?

Andrew Mickey: Well, Krista, when I look at the potash market, it reminds me of what was going on in the copper market about four or five years ago. Copper was around $0.80, and then it went to $2.00, and then it went to $4.00 over about a four-year period, and that’s what we’re seeing with potash right now.

Almost two years, to be exact – potash was selling at $80.00 per ton, which is its long-run historical average. And now we see potash has just jumped up to $180.00 per ton, and it’s probably on its way to $400.00. So it’s on the exact same curve that copper is on price-wise. We also see the same supply and demand fundamentals as we saw with the copper market back four or five years ago. So we still have four or five years left in the big first stage of this bull run in potash.

Krista Das: Besides the supply, demand and balance that we’re seeing with potash, what else is there about this industry that makes you so sure it’s a solid buy?

Andrew Mickey: One of the most interesting things about the potash market that most investors don’t realize is that it’s so limited. There’s about five major potash producers in the world right now. And the reason is because there’s such high capital costs. In many industries, like technology, it can be started with just some guy in his garage inventing a new product. It’s not like that at all in potash.

You need the property, and a lot of companies have that. However, you also need the wherewithal to raise $1.5 billion in startup capital just to get your potash mine producing. And it’s that kind of $1.5 million hurtle you have to get past, that separates the eventual winners from the losers. And we’ve seen the large-cap potash plays really take off here, and the next set is going to be the small ones that are able to raise that kind of money and actually put their potash mines into production.

Krista Das: Any advice for those itching to jump back into the market?

Andrew Mickey: Wait for the confirmation that the 20-month moving average is going to hold again.

Andrew Mickey is a regular contributor to the FREE daily e-letter, Taipan Daily. Sign up here to get the late-breaking investment opportunities to help you beat Wall Street to the profits.