Given that the company whose shares POT is purchasing does not pay a dividend, any EPS accretion has to be a function of incremental fertilizer sales to the company. My sense is that that is the real reason they are buying into the company given that they paid more than twice the current trading price for the shares.
55 million hardly a sum to worry about. Should be peanuts for Potash.
No matter its a nice sign they take care of where to deliver all the goods from the upcoming oparational capacity to.
While I certainly agree with you that Potash Corp's phosphate mines have value, that value has diminished greatly over the last few years. At least for the White Springs mine, as that is the only one I have any true knowledge about. They have been curtailing their workforce and production capacity for a number of years, in an effort to extend the life of the mine.
They shuttered one of 2 Chemical complexes at White Springs in 2014. They also are pumping Phosphate matrix 16-18 miles from the draglines to their washer/flotation plants. Basically they are running out of quality acreage to mine. They do have reserves located across I-75, which would entail constructing another dragline across I-75. I have heard the government would never allow a dragline walk across I-75. There are also reserves in neighboring Columbia and Baker county. They would surely have to build a new Washer/Flotation facility, since the state and federal government will never allow matrix to be pumped across the Suwannee River. I'm just not sensing Potash willingness to expend the funds for either scenario.
Another possibility could be someone buying both the NC and FL mines and using the FL facility for mostly chemical Production. They have in the past shipped in phosphate by rail and truck when the mines went down for long term maintenance. Just a thought. There are just too many rumors flying around inside and outside the company something not to be going on.
POT will be purchasing a 9.5% stake in Brazil's Fertilizantes Heringer SA from its controlling shareholders for $55.7 million. The deal is expected to close in the second half of this year, paving the way for a long term potash supply agreement that will allow POT to become Herringer's principal supplier over time. Heringer, one of the largest fertilizer companies in Brazil, delivered 5 million metric tons of fertilizers including about 1 million metric tons of potash in 2013.
Because you brought up the subject of Canadian withholding tax on dividends paid to U.S. shareholders, I thought it worthwhile to add the following. POT will indeed withhold tax on POT shares held in taxable accounts but will not withhold any tax on POT shares held in any retirement accounts. I personally hold my POT shares in both my regular, taxable account at my brokerage house as well as in my ROTH account. One gets hit with the tax while the other does not. I naturally claim the FTC on my return each year for those shares that get hit with the tax.
"SASKATOON , Jan. 28, 2015 /CNW/ - Potash Corporation of Saskatchewan Inc. (PotashCorp) announced today that its Board of Directors has approved an increase of the company's quarterly cash dividend (from $0.35 per share to $0.38 per share), and declared a quarterly cash dividend of US $0.38 per common share payable May 4, 2015 to shareholders of record on April 13, 2015 . "
In fact the strong USD makes an even higher div for Canadian holders of POT. Mutiply by about 1.25 to get the div in CAD. Just a note for US holders, tax may be withheld by your broker, make sure to claim this as a foreign tax credit on your US tax return.
Who would have ever thought there would be so much drama in the fertilizer industry?! All of this would make an amazing reality TV series going all the way back to the whole escapade with Kloppers and the BHP bid, etc etc, it's been quite amusing to watch all the shenanigans in this space. All this amidst very plain charts and graphs which show that the fertilizer producers function on a very long time horizon and change does not happen very frequently. The nature of this industry is of gradual long term fundamental movement, if any at all, yet the characters in this show really seem to make it interesting by operating with high drama in the short term, again and again, over and over. It seems the commodity super-cycle is once again bottoming as potash prices are at a bottom right now and oil and the softs are in the toilet while the US dollar is artificially up in the clouds. Just like what occurred just prior to the 'financial crisis' (which will be shown to be nothing compared to the global debt tsunami that is coming), the commodities will likely sky rocket along with gold/silver while the currencies of the world engage in a race to zero. Potash prices will likely rise up past $900/tonne and POT will likely be trading north of $100/share by then. No one can know the time line for these events or if it will happen exactly like this but the likelihood seems high that protectionism, global war, resource scarcity, sky rocketing commodity prices along with the demise of artificial state currencies which have no real value could wind up happening sooner rather than later.
Anyone who disagrees with such a thesis has to ask themselves how could the powers that be indefinitely maintain the current state of affairs of, interest rates at near zero, falling real economic activity and consumer demand, run-away dilution of the money supply in the midst of ever higher US dollar rates, global debt which can never be paid off and global civil unrest. At some point it all falls.
Sentiment: Strong Buy
Well, we got back 1/3 of what we lost in one day. But, we are still down about a dollar with no reason....not that the market needs one. POT's had a decent div and it still needs to get back to the 40's when the whole "Russian" monopoly thing happened and caused it to crash. I'll be patient. After all, Obama will be gone in two years, I'll only be 58....so much time to earn money....unless I die. I don't plan to retire.....Obama and his economy has seen to that. Who'll support all the poor people...those who want to work but can't find jobs, those that don't have jobs and don't want one, the teachers and professors of our colleges who teach our kids meaningless majors or want grants so they can study how grass (not pot ot POT) grows. Wow...I got off topic. sorry
We all remember what happened when former Uralkali CEO Vladislav Baumgertner showed up in Minsk, only to be arrested and jailed on a variety of charges. It was Baumgertner who was in charge when the Belarus-Russia cartel was unwound, producing chaos in the potash markets in 2013. Eventually a deal was struck which allowed Baumgertner to return to Russia predicated on his being tried there for the crimes outlined by Belarus in the indictment that they had drawn up against him. However, a few days ago, all criminal charges against the former Uralkali CEO were dropped. It is always possible that civil charges may be brought against Baumgertner but my sense is that the Russians probably never had any intention of bringing criminal charges against Baumgertner given his close ties to a variety of characters in the Kremlin.
I looked at 2 year chart and it started going up from $31 and change in Feb 2014 and near late June it peaked near $39. 5 year chart for 2011, 2012, and 2013 went down for the same Spring period, but 2014 it did very well in Spring from Feb-June. With inflation factored in it should break through $40 hopefully. It all depends if we are really having a Global slow down or not. Actually diversification was a poor choice of words talking about internal fundamental strength. Within this business, Schwab data shows that Potash Corp has a wide economic moat thanks to its low-cost potash assets and high barriers to entry created by staggering greenfield capital costs. Potash Corp is on the low end of the potash cost curve, allowing it to pump out profits even if potash prices should approach marginal costs of production in the future. Have a good one!!!
well as abbaman already pointed out, pot is often good for some extreme stock movements. I personally believe in the potash story. So im often bying more than i should.
Nevertheless i like to look at the technical indicators. On short term we seem a bit oversold. I would like it if we cd close above 36.06 us$. Since that was a resistance in December.
Seasonally march is often still a pretty bad month.
Might need some patience as always.
As concerning your remarks "Pot is a well diversified company". I think they are focusing lately pretty much on potash. I would appreciate they would enforce CAPEX in the nitrogen business since its less seasonal than potash.
Other pps already pointed out the phosphate business doesnt seem to make anyone happy at Pot.
Happy trading everyone
POT is a well diversified company that does very well in the Spring. POT, MOS, and ADM should take off going forward as long as the Global Economy does not have a negative surprise for us. Today POT is up 37 cents, MOS is up 5 cents, and ADM is up near 40 cents.
Dude...At one time Potash was a God in this field. They widely diversified and are a very strong company. Not sure why its seasonal growth factor has not taken off as well as prior Spring quarters, yet officially we are still in Winter. With that said its up nice today and ADM is up nice after its change it announced yesterday that should be a plus overall for the company. Anyone have a comment?
BHP is essentially spinning off its lower growth or non-core assets. Low growth in mining and oil and gas often means they generate a good deal of free cash flow, so a complete spin-off of that hurts available free cash flow that could be used to develop Jansen.
I personally think Jansen has more value to Canpotex members than it does BHP b/c (i) they own the expensive infrastructure needed to transport the potash and (BHP would have to build their own) (ii) it threatens Canpotex’s pricing power long-term.
From a capital optimization standpoint, BHP’s petroleum business has far higher IRR’s than potash. I look at a lot of these projects at work (not necessarily BHP’s) and the returns are far more attractive than what BHP would get out of potash. Oil and gas is very capital intensive, too (eating up available cash flow to develop Jansen), and I think it’s in BHP’s best interest to devote capital to highest returning investments, which oil and gas surpasses by a good margin even with oil at $65/bbl
Ultimately, I think Jansen is JV’ed with Potash Corp and potentially other members of Canpotex b/c BHP needs access to Canpotex’s infrastructure. Mosaic and Potash Corp have been outspoken about the bad economics of the project, which is true by my math. I wonder, however, if capital costs will come down when Potash Corp finishes its Rocanville expansion and Mosaic finishes the Esterhazy K3 expansion in 2017-2018 (due to supply and demand of engineering talent). The question of a potential JV is the price BHP would get for the capital it’s already sunk into the project. I don’t think PCS or Mosaic would give credit BHP for anything already invested at this point but BHP is a well-run company and won’t accept that at this point. Just my thoughts.