To reiterate my view on Passport Potash for 2013--
I am hopeful that this year junior natural resource stocks will get a fresh look. Coal, iron ore, potash, gold, everything got killed in 2012. Passport is trading at just 2% of what I believe the company's Preliminary Economic Assessment, (PEA) will show the project's NPV to be. This belief is based on the $3.8 billion NPV in Prospect Global's PEA. Remember, Passport has 122k acres and Prospect Global 94k acres. Passport's resource is several hundred feet shallower than Prospect Global's.
Since Apollo is willing to loan Prospect Global $100 million, they must believe that Prospect Global is worth at that much. In fact, I'm highly confident that Apollo must think Prospect Global is worth $150 million or more. Why? Because Apollo is one of the most powerful and smartest investor group in the world. They would insist on being over-collateralized, and they would surely get what they asked for.
I've argued that Passport is worth the same or more than Prospect Global. If true, then Passport's fully-diluted shares at a $150 million valuation are worth about 55 cents. I think we have a good shot at 55 cents per share after the PEA comes out in 1q 2013, and a good shot at 80 cents per share if/when Passport gets a strategic investor and/or an off-take agreement AT THE PROJECT LEVEL, meaning no further equity dilution.
Investors have been burned in natural resource stocks. Understandably, investors including hedge funds mutual funds and natural resource funds are scared to take a stand. I think that once Passport's PEA is released the shares will be too cheap to ignore. Unless someone can show me how/why Passport is worth just 25% of what Prospect Global is worth, I think Passport could be a stunning investment in 2013.
Since my rough estimates on valuation are tied to Prospect Global, keep an eye on that stock as well, ticker PGRX. I think PGRX could hit $2 per share within a few months. At that price, the valuation on PGRX would imply a stock price for Passport of 65-70 cents and a price of $1.00 per share would be a possibilty for 2013. All of this predicated on junior natural resource stocks having a strong year and no further equity raises for Passport.