Far East Capital Newsletter
South Harz will benefit from soaring potash prices
5 Jun 2022

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South Harz will benefit from soaring potash prices

We might have allowed ourselves to be enthused by the stronger market as our week closed, with some sort of recovery in equity markets starting. However, Friday in New York has pinched out any bud of hope of a continuation this coming week. We are still in a falling market for the majority of listed shares under coverage, but that observation runs contrary to both the Metals and Mining and Energy indices share price movements, and improving All Ordinaries index. The market can still be confusing to some.

There are still plenty of optimists out there who haven't recognised the emerging economic hurricane that Jamie Dimon, the CEO JP Morgan Chase, referred to on Friday. Those optimists will be the source of enthusiasm in rallies that are typical in a market like we have today. Remember that the technical definition of a rally is a recovery within a bear market, as opposed to just a move upwards, in any market. You should continue to be cautious.

We are comfortable that South Harz has a number of potential, long life development opportunities with sound economic merit. The current market capitalisation of $77m is small given the capex is going to be closer to $660-$800m, but the strategic nature of the commodity, taking food security into account and the low technical risk, means that it would likely attract strong government support and user-friendly debt packages.

So, when would be the best time for investors to take a position? That depends upon how patient you are prepared to be. The share price should appreciate with increased certainty over time, based on fundamental analysis. Weakness in the current equity markets may provide good entry points for a company that may develop into a blue chip potash company. 

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