Friday, October 29, 2010

Potash (NYSE:POT) CEO Sees Prices Reaching $600 a Ton

Potash Corp (NYSE:POT) CEO Bill Doyle said he sees the price of potash reaching a minimum of $600 a ton by 2013, as the increasing price of agricultural commodities may push farmers to boost production, which would in turn increase the demand for potash, and other fertilizers.

As the ongoing debacle over the BHP (NYSE:BHP) bid winds down, it's hard to trust anything Doyle says though, as his irrational and sometimes, childish, response to the bid, has caused him to be lowered in the eyes of many people and institutions.

In other words, even this assertion could be considered a ploy to affect the decision by the Canadian government on whether or not to allow the bid by BHP for Potash to go foward.

That's because Doyle has been attempting to make it look like Potash is far more valuable than the bid by BHP because of future, but unproven, projections of potash prices.

This doesn't mean there isn't a real support for potash prices moving up, just that the motives for Doyle expressing them are suspect.

Doyle concluded, "In my estimation, by 2013 you are going need prices free-on-board-mine of at least $600 to get to a level that you could get a 10% internal rate of return on a mine.

"And it's a ten year process, [so] you are going to need to move somewhere in that 2013, 2014 timeframe to have enough material available in the 2023/24 time level.

"So we certainly have the pricing power at the moment, and I see that
continuing for the next few years."

In the latest quarter of the company potash prices had average $305.60 a ton.

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