Stockhouse Short Report: Can a quarry be worth $50 billion?

Peter Kennedy Peter Kennedy, Stockhouse
0 Comments| May 3, 2012


Despite the recent selloff in large and small resource sector stocks, fertilizers remain a much sought after commodity.

So it’s not surprising to see a stock alert promoting Potash America Inc., (OBB: PTAM, Stock Forum) an OTC Bulletin Board company that is supposedly sitting on top of $50 billion worth of calcium montmorillonite in Nevada.

Calcium montmorillonite (or Bentonite), in case you hadn’t heard, is a type of living clay that exists just below the earth’s surface and can be applied in fields like agriculture, cosmetics and medicine.

Major producers include American Colloid Co. (AMCOL) (NYSE: ACO, Stock Forum), which is mining calcium montmorillonite in Alabama.

Potash America, which is also exploring for potash in Newfoundland, was recently brought to our attention by an email alert from Stock Rock & Roll.com.

It describes the company as “the first and only Montmorillonite pure play on the planet, and promises a 2,935% gain for every $1 invested.

“Act today and you could watch $5,000 turn into $146,750 or $10,000 explode into $293,500,” it says.

Traded at 96 cents this week, Potash America has a market cap of $135.7 million, based on 147.6 million shares outstanding.

That seems high for a company with no historical revenues, and just under $30,000 in cash at the close of the quarter ended December 31, 2011, when it posted a net loss of $229,130 or $0.00 per share, compared to a year earlier loss of $6,399 or $0.00 per share.

As it turns out, the Stock Rock & Roll alert is really a paid advertisement that cost $950,000, money that was paid by Bowmore International Group S.A., which in turn was hired by PTAM to provide public awareness, according to the fine print in the footnotes.

M3 Profit Accelerator, the author of the report, received a $5,000 “editorial fee,” the disclaimer notes say.

PTAM’s Calcium montmorillonite project is located near Sodaville in mid-western Nevada (between Las Vegas and Reno).

But based on PTAM’s press releases and documents filed with the U.S. Securities & Exchange Commission, it is impossible to understand how PTAM’s montmorillonite project (or any montmorillonite project for that matter) can be worth $50 billion.

On May 2, 2012, the company said drilling to ‘3-D’ map the “Pit#1 Quarry is about to commence, subject to weather conditions.

Potash America President and CEO Barry Wattenberg said he believes this drilling project will provide the company with a plan for development of the quarry and advance the commercial development of the Calcium-Montmorillonite deposit(s).

But there are no other details in this week’s press release to support a valuation of $5 million, let alone $50 billion.

We were unable to reach Mr. Wattenburg, who left a message with Stockhouse last Friday saying he was en route to Canada, presumably to check the company’s potash exploration property in Newfoundland.

Press releases show Potash America has a mineral rights license covering 11 claims located 65 kilometres south of Stephenville and 110 kilometres southwest of Corner Brook.

Historical drilling on the Newfoundland property has recorded the presence of potash, according to an evaluation report that was prepared in order to satisfy the listing requirements of the TSX Venture Exchange.

However, as exploration appears to be at very preliminary stage, one can only conclude that Potash America little more than a highly speculative investment and anyone thinking of buying the stock should seek the advice of a qualified analyst or advisor. 


Tags: INDUSTRIAL METALS & MINERALS COMPUTER SYSTEMS SHARES OUTSTANDING CONSUMER ELECTRONICS

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