Potash Corp of Saskatchewan, the company with the hippest stock symbol in the world (POT), announced today that it was halting production at its Allen mine for 4 weeks. The stated reason: world potash prices are too low, so the company is “adjusting supply.”
Though Potash Corp controls only 20% of global supply (according to its website), it is also one of the lowest cost producers. In addition, Potash Corp markets its product - along with local competitors Agrium and Mosaic - through a company called Canpotex, "an international marketing and distribution company wholly owned by the Saskatchewan potash producers."
If there was ever any doubt that Potash Corp and Canpotex have a virtual monopoly on potash prices, now there is none. By shutting down one plant (the Allen mine) that provides only 10% of Potash Corp’s total supply, the company believes it will be able to stabilize world prices. That is power.
Potash is currently trading at $42.94 CDN on the TSX exchange. It's a reasonable price, but with a forward P/E of 10 and slowing BRIC demand, not a screaming deal. If POT hits $35 or lower, consider loading up.
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"Money is power - and what can one accomplish without power?"
Cecil Rhodes
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