Fertilizer Markets and Finance

Though still bullish on the junior, analysts dropped their share price targets
after Western Potash (TSX: WPX) revealed total capital costs for its
Milestone project of $3.3 billion for the first time.

Octagon Captial analyst Max Vichniakov lowered his 12- to 18-month shar eprice
target from C$1.84 to C$1.40 while Mackie Research analyst Jaret
Anderson scaled back his 12-month target from C$3 to C$2.75.

The analysts took a less rosy view of Western Potash’s share price potential
after the junior filed complete prefeasibility study documents
outlining the Milestone project, a proposed 2.8-million-tonne-per-year
potash solution mine in Saskatchewan, that included previously
undisclosed capital costs.

In a press release at the end of October Western Potash pegged the “total
initial capital cost” of Milestone project at $2.8 billion. The press
release, however, did not include a $542 million capital cost marked as
deferred that Western Potash more fully breaks down in company
securities-related filings.

Including it brought total capital costs to just shy of $3.3 billion.

“We understand this deferred capex is associated with secondary mining and
would take place in the 2018-21 period,” Anderson said in a note to
clients, assuming a 2016 production start date.

Although both Vichniakov and Anderson lowered their share price forecasts, both
remained buoyant about Western Potash’s prospects and maintained their
buy ratings.

 
Anderson also gave Western Potash added credit for a $15/tonne premium he
expects Western Potash would get on most of its potash.

Author: Kip Keen
Posted:  Monday , 19 Dec 2011