Far East Capital Newsletter
Davenport's place in the emerging potash sector
16 May 2021

In This Issue

Davenport's place in the emerging potash sector

It was a week of mixed signals. Our local market powered higher on Monday with strong buying for leading mining stocks. Iron ore stocks were the feature as the iron price moved to even higher highs, while the enthusiasm flowed over into other commodities as well. The senior stocks were stronger due to institutional buying but the junior stocks continued to struggle and speculative situations took a back seat. Surprisingly, that was against a backdrop of rising gold prices.

Fertiliser stocks, principally those in potash and phosphate, have never been of mainstream interest to Australian investors. Very few people have an intuitive feel for the sector (including me), so that when we see companies and projects being promoted we have to go back to square one and reacquaint ourselves with industry fundamentals and the necessary project parameters required for operational success

We start with the underlying thematic that fertiliser companies rely upon the ever increasing global population that needs to be fed. There is no argument there, especially when companies like BHP start to take an interest, as they have done. However, choosing the right investment vehicle is not always easy. Often it is what the companies are not telling you about their projects that is the most important differentiator. Growth in demand is only ever steady, at 2-3% p.a., so the market will be sensitive to any boost in supply. 

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