potash_evaporation_ponds_near_moab_utah

This One Mine is Worth All of IPI – and the Company has at Least 3 More

Almost a month ago, I posted a blog on why I think IPI is a compelling investment opportunity.  I wanted to follow-up with one of the main reasons why I think this company presents an interesting opportunity for investors.  That said, I want to remind you not only about the disclosures of this site, but also that you should always do your own due diligence when making your own investment decisions.  

One of the two holdings in my personal portfolio is IPI, which currently has a market capitalization of $85.8mm.

What does this mean?  Basically, for $85.8mm + $155mm in net debt, you would get:

screen-shot-2016-10-24-at-9-52-42-pm

Is that worth it?  Well, to keep things short let’s totally forget about the “Underground” extraction muriate of potash mines, since the cost of production for those mines are really high.

However, we know that the cost of production for a solution / brine evaporation mine is around $110 to $125 per ton (per the CEO) vs. an average sale price of $244 per ton (per Mosaic).

This means that the company is generating over $100 per ton in gross profits in its solution / brine evaporation mines, with potash prices likely at a multi-year low (translation: potash prices expected to increase from here).

This means that one mine, the Carlsbad HB mine, which has 6,540,000 proven product tons of potash has a net present value of $237mm compared to the enterprise value of $241mm.

screen-shot-2016-10-24-at-10-22-29-pmThis means that you’re getting 2 other solution / brine evaporation mines with a life expectancy of 30 to 100 years for free.  And we haven’t even talked about the sulfate of potash magnesia mine which also likely has some value.

BOTTOM LINE: If the net present value calculation above is right, at today’s price you get four mines for the price of one, plus two potentially valuable mines currently valued at $0, and over $100 million of deferred tax assets that very few other investors are looking at!

I’m super excited, but not crazy.  So I only have about 12% of my portfolio in this stock since smaller cap stocks are more risky / less susceptible to scrutiny / can be weird.

That said, the CEO and Executive Chair of the company has been a huge buyer of IPI shares since September 2015 when the stock was trading at $7.29, and I expect potash prices to not decrease and probably increase for the foreseeable future.

Do you think I’m missing anything here?

2 thoughts on “This One Mine is Worth All of IPI – and the Company has at Least 3 More

  1. Hey Jason,

    How much does the CEO own? What’s his overall net worth, and what’s been his increase in position since 2015?

    1. Hey Dion! Thanks for your questions!

      The CEO and Chairperson owns: 11,686,912
      The Co-Founder and Executive Vice Chairperson owns: 8,518,051

      Together, they control 26.4% of the company.

      Since the stock was at $7.29/share in 2015, the CEO has spent $2.3mm on additional shares.

      Not sure what their overall net worth has been.

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