The world has a growing appetite and I think I have a first class investment to take advantage of it. The company is TSX listed Stonegate Agricom (ST, Financial). Stonegate is 54% owned by Sprott Resource Corp which is interested in only one thing, that being maximizing value per share of their Stonegate holdings.
I’ve written before about Sprott Resource:
http://www.gurufocus.com/news.php?id=98509
Stonegate’s stategy is to take two world class phosphate projects toward completion and thereby increase the value of those projects enormously along the way. One project is called Mantaro and is located in Peru and the other is Paris Hills in Idaho.
Phosphate of course much like potash is a crucial part of fertilizer. And fertilizer demand has been growing for a decade and will keep growing for decade. Why ?
1) The World’s population is growing so more food is needed
2) The diet in emerging economies is moving to a higher protein base
3) There are limits on available arable land
4) Government policies to enhance farm yields
5) Global programs to increase use of biofuels
It is pretty simple really. More people, and diets everywhere moving towards the developed world. Both add to demand for fertilizer. The Food and Agricultural Organization of the United Nations has forecast the fertilizer consumption is forecast to grow by 45% from 2005 to 2030.
And it isn’t just growing demand that makes phosphate reserves valuable. It is also because phosphate deposits are limited. More than half of the world’s 16,000 million tonnes is in Morroco or China. We need additional resources in order to feed the world going forward.
What might Stonegate be worth per share ?
In 2010 60% of Vale’s Bayovar Phosphate project was acquired by Mitsui/Mosaic for $5.25 to $6.25 per tonne. Applying this price to Stonegate’s 38 million tonnes at Mantaro and 26 million tonnes at Paris Hills results in $2.25 to $2.85 per share.
The current share price is $0.80.
Patience will be required here as there is a lot of work to be done to develop these projects. But should you dig deeper you will also find that there is some very large exploration upside at Mantaro that is not factored into this estimate.
