The Outsider Club folks are pitching a junior mining stock again, and this time it’s all about phosphate — not the drink that was wildly popular in soda fountains 100 years ago, but the mineral that forms one of the basic ingredients in modern fertilizer.
They’re calling it the “Miracle Mineral” in this particular ad, which is a pitch for Nick Burgess’ Junior Mining Trader ($1,999/yr, though they do actually offer a 90-day refund period, unlike most higher-cost letters). Here’s the intro to the ad:
“REVEALED:
“How This Little-Known “Miracle Mineral” Could Hand Investors up to 16,335%
“It’s one of the most important natural resources you’ve never heard about
“The United States, China, Russia, and India are locked in a global race to find it
“One tiny company will soon control virtually the entire world’s supply… and its share price is about to skyrocket!”
There is a chance that the world of phosphorus production could be shaken up meaningfully if Morocco’s reserves disappear, since they claim to have something like 75% of the global commercial reserves of rock phosphate… and Morocco is certainly a hot spot, particularly in the Western Sahara where some of its production comes from, so you can argue that if Morocco is taken off the board overnight then perhaps this little company that plans to build a phosphate mine will be in the catbird’s seat… or that US production is going to be in trouble because of problems with pollution and runoff at some of Mosaic’s Florida projects… but you can’t turn three million into 20 million or 200 million, they just wouldn’t physically have the capacity to meet all that much of the world’s demand.
Doesn’t mean they can’t benefit if supply challenges and strong demand drive the price up, however, as has been the case with phosphate over the past year or so. Let’s check it out and see who the Thinkolator sez we’re dealing with here, and what their current situation might be…
The tease is laid on pretty thick, as usual:
“This is your chance to secure generational wealth for yourself, your kids, and maybe even their kids.
“Because even as Western Sahara teeters on the brink of chaos…
“A new Miracle Mineral supplier recently stepped onto the world stage.
“It’s still a tiny company.
“Its shares trade for less than $1.
“But this tiny company is sitting on a deposit of Miracle Mineral so large that it could completely replace the world’s dependence on Western Sahara.”
That part is true, Morocco has in the past exported about 2.5-3 million tonnes a year from Western Sahara — that’s a small part of Morocco’s production, the country has total exports of close to 40 million tonnes a year, but it’s the Western Sahara part that is, we’re told, at most political risk… and has been rejected by some of Morocco’s other customers because of disputes over Western Sahara. That production has been lower in recent years, which, depending on who you ask, was either because of lower prices or because customers don’t want to be involved in that fight over that disputed land (Western Sahara was a Spanish colony for years, then effectively occupied by the Kingdom of Morocco 50 years ago when Spain retreated, and is home to a long-running war with the native Sahrawi independence groups that became a long-running stalemate… with a UN peacekeeping force that was recently renewed, partly because the cease-fire has been broken).
So yes, Western Sahara is a significant unknown when it comes to future phosphate production, and Morocco itself, which effectively is a one-nation OPEC for phosphate, is a far bigger variable.
Back to the tease…
“Not only can this company supply more Miracle Mineral..
“But it can do it at a cheaper cost…
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just click here...“With none of the political instability.
“And as China, the U.S., and Europe line up to buy their share of this company’s Miracle Mineral…
“Its sub-$1 share price could hit the moon… and then some.
“I’m Predicting That Early Investors Could See 16,335% Gains — At Least….
“According to CRU, a leading agricultural research firm, once this company activates its mines, it will be the ‘lowest cost… producer’ of phosphate in the world.”
Well, we’d have to say “Maybe” to that “lowest cost” bit. Most phosphate is not produced by pure-play public companies who report their production costs, so it’s tough to generate any comparable projects to examine. But that’s a good clue to match… if someone says they’re “lowest cost,” then I’m sure the company is bragging about that.
More from the ad:
“Currently, Morocco can only pull 2.6 million tons of phosphate out of Western Sahara each year.
“But this small company?
“It’s going to be cranking out three million tons a year.
“Starting from day one.
“And that’s not its investor relations department trying to build hype.
“Those figures were independently validated by not one, not two…
“But by 11 top geological consulting firms. “
OK, so that “independently validated” part means there’s probably some kind of feasibility study available for this project — it’s not just a “discovery,” but someone has actually looked at what can be produced, and assessed the size of the reserves and the cost of production. That’s good.
What else? We get hints about some of the owners of this company:
“The government of Quebec recently purchased over three million shares.
“The Global Resources Fund, a world-leading mutual fund specializing in natural resources, has added 1.5 million shares to its books.
“And PI Financial, one of Canada’s fastest-growing banks, recently purchased over $4 million worth of shares.”
And it’s got a deal with India, a major importer:
“This Company Recently Struck a Deal to Become One of India’s Main Phosphate Suppliers
Again, this company is still worth less than $100 million.“But it’s about to penetrate a $276 billion market.”
Again, let’s return to that context — whether or not it “penetrates a $276 billion market” it’s still only got, we’re told, a plan to produce three million tonnes of phosphate to sell per year. If the recent spot price from Morocco of $150/tonne reflects what the market might be when this company is producing, then perhaps their theoretical total future production would sell for around $500 million a year. That’s a big number, but the only reason to throw around a number 500X higher than that, the “$276 billion market,” is to make you daydream about how to fit the kids (or grandkids’) carseats in a Ferrari.
And then we finally get some more specific clues about the property being teased…
“In a tucked-in corner of the Canadian wilderness.
“This isolated lake is a 6-hour-and-42-minute drive from Quebec City, the nearest population center.
“Though you wouldn’t guess it from the hundreds of miles of fir trees stretching to the horizon in every direction…
“This entire region was once at the bottom of an ancient sea.
“And over the course of millions of years, billions of organisms fell to the bottom of this sea floor and decomposed, leaving behind nothing except the topic of our conversation today: phosphate.
“A whole lot of phosphate.
“78 million tons of it.”
And, you guessed it, that property is controlled by “one tiny company”…
“This Massive Treasure Trove Was Discovered by a Tiny, No-Name Company…
“Which Has Acquired All the Mining Rights for This Multibillion-Dollar Paydirt
“As we speak, this company is hovering around a $70 million market cap…
“And trading for less than $1.
“But it’s sitting on 78 MILLION tons of phosphate.
“How much is that worth?
“Well, right now, the price of phosphate is $147 per ton.
“So 78 million multiplied by $147…
“As soon as it starts pulling this phosphate out of the ground, this company could be worth $11.5 billion!
“That means this small explorer’s share price could skyrocket 16,335% and turn every $500 into $82,175!”
That’s not how mining works, of course — any mineral or other extracted product is worth much less buried underground than it is on the futures exchanges and trading floors. Junior gold miners are generally fortunate to get valued at 5-10 cents on the dollar for their proven gold reserves, for example, and something like one cent per dollar for their inferred gold resources, though sometimes it does go higher than that, particularly during the first flush of an exciting discovery or during a manic market surge for junior miners. Remember, it often takes decades and massive investments, both capital costs to build the mine and operating costs to dig up the phosphate (or gold, or whatever) and process and purify it and ship it to end users. This isn’t some cryptocurrency they’re trying to “mine,” it’s real physical stuff, and it’s heavy and dirty. It’s expensive work to dig it up and process it and move it to where it’s needed.
But that does, at least, help to confirm the company in question — this is another tease for Arianne Phosphate (DAN.V, DRRSF), which is one of the few publicly traded “pure play” phosphate juniors (and has been teased by these folks before — Nick Hodge touted it way back in 2015 when he was with this same publisher). Back in 2015, when I first looked at Arianne Phosphate, I mentioned that it was at an extremely early stage of development and didn’t yet have financing for its big potential Lac à Paul phosphate mine in Quebec, so I wanted to wait for some evidence that they’d be able to get a billion dollars to build the mine… and here, six years later, they’re still moving slowly toward development and still trying to raise money, most recently through offtake agreements with fertilizer companies.
The project is indeed huge, and could become far larger — they claim a 26 year mine life so far, but also say they’re sitting on several huge zones of phosphate rock and haven’t found the ends of them, and the resource base is likely to be capable of supporting a mine for 50 or more years. They are still basing all of their numbers on the 2013 Feasibility Study, which is supposed to be that last step before you get financing and move forward on development, but, to be fair, they did have some long-run permitting processes still underway until pretty recently — they say they have now received all the “major permits” to commence construction.
And while they’ve improved the estimates from that Feasibility Study of eight years ago, making adjustments to improve efficiency and reduce their operating costs, and getting more information about the extent of the high-grade reserves on site, as far as I can tell they have not talked about any final financing agreements or a development or construction schedule. Their investor presentation, last updated in November, does a good job of going into the potential, and the need for more phosphate, but not so much on predicting the timing of their construction or production.
They do have a few offtake agreements, made in 2018 and 2019, to sell to some major fertilizer companies and into the Indian market, though the announcements of those agreements are pretty short on detail, and they are talking with partners about possibly building a processing plant at the port they intend to use, and that all sounds impressive, but none of those agreements seem to have come with initial capital commitments — having those kinds of agreements in place should eventually help Arianne to get financing from banks, but they are also market-price offtake agreements, they’re not at set prices and haven’t been prepaid, so the prospects for phosphate prices and the risks of prices falling again in the next five years will certainly be on the minds of bankers as well. Which means we don’t know when they might get the $1.2 billion they probably need for construction, when the project might begin, or what phosphate prices will look like when they begin production.
And that’s why, of course, the company which owns a massive project that could theoretically produce $500 million of phosphate a year is valued at $100 million. They need to raise at least a billion dollars and spend several years building a mine before they can get to production, and that brings in lots of uncertainty.
That’s all-too-familiar to folks who have dabbled in junior mining investments before — so if that’s you, you’re probably used to being extremely patient with companies whose projects seem appealing and well-positioned for commodity pricing trends, waiting for financing eight years after the feasibility study came out won’t be shocking for you. But many investors who are new to these kinds of companies get caught by surprise when these “sure thing” projects that have a great story and seem so perfectly placed end up being in limbo for a decade as they fail to get financing, hit permitting snags, or caught by surprise during a collapse in commodity prices. There are always great 1,000% gainers in the junior mining sector that capitalize on big discoveries and build big mines and keep people excited, but there are also many more companies that spend 20 years selling shares, diluting their shareholders away, and never quite break through to becoming meaningful miners. I don’t know which of those Arianne will be, just keep the risk in mind if you’re thinking about an investment.
Right now, phosphate prices are indeed surging. the Morocco phosphate price is about $150/metric ton, so it has roughly doubled since the pandemic trough of June 2020, though prices are still below the 2012 commodity boom peak a decade ago (that led to the initial excitement over Arianne’s discovery, incidentally), and prices actually soared over $400 for a brief moment in 2009. Before the surge in Chinese demand in the late 2000s, prices were pretty flat, in the $30s and 40s for decades. The same sorts of drivers move all the fertilizer prices, and in fact most commodity prices tend to follow similar cycles (iron ore and copper were both far more boring before China’s emergence as a massive buyer, too). Here’s what Moroccan phosphate and potash prices have looked like over the past few decades — you can certainly see that phosphate has moved more rapidly than potash over the last year or so, probably due primarily to the supply concerns in Africa, but over time the big moves have similar drivers:
There have been alarms sounded about the potential shortfall in phosphate for decades now, since it’s the fertilizer component that is most specifically required by plant life and which is least available in high concentration in the earth’s crust (or atmosphere, in the case of nitrogen), and it’s hard to know when more production might be brought online to ease the reliance on Morocco (or, indeed, when Morocco might settle down as a political hot zone). There was a good article in the Guardian that made some of the same points as Burgess does in his pitch, but that was back in 2019… and it’s tough to get a handle on the timing of these big cycles in commodity prices.
That’s always true, but it may be doubly true for phosphate, if only because a lot of the production is sort of hidden away from the traded phosphate market… most phosphate is actually produced by vertically integrated major fertilizer companies, like Mosaic or Nutrien in North America, and never traded on the spot market. That doesn’t mean they have endless supplies, but it means that when we talk about Morocco or other hot spots (including Syria) being responsible for 80% of the excess reserves, we may well be exaggerating Morocco’s reserves… but we’re also not necessarily including the yet-to-be-discovered reserves that will continue to be steadily produced by Mosaic in Florida, or by the big fertilizer producers in China or South America.
Most companies only invest to confirm reserves when they need to finance mine construction, if they’re in production and they’ve got ten or twenty years worth of production already booked as reserves, there’s no incentive to drill to find and define more. The potential future shortfall of phosphate seems to be real, at least if we use current assumptions, but that doesn’t mean we can really predict the phosphate price moves over a period of even a few years — there are a lot of producers, a lot of stockpiles in various places in the world, and a fairly volatile demand picture (as we saw from the collapse in prices in 2020), and rising prices always make more discoveries and development projects come out of the woodwork.
Will phosphate be the oil of the 2040s? Will Morocco begin to have the political heft of Saudi Arabia? Will massive price increases for fertilizers bring huge food price increases and social unrest? I don’t know… maybe, but people have been predicting some variation of that since the 1970s, and solutions continue to be developed that dull the impact — the developed world has never spent less on food, as a percentage of income, than it does now, and the mass famines that were predicted because the earth couldn’t support four billion people have not emerged, even as the population closes in on eight billion (there are, of course, still famines in parts of the world, especially areas like South Sudan — and some areas are facing impending catastrophes and likely famines, whether because of war or politics or climate change, but that’s different from the “we can’t produce enough food” fears that I remember as a teen in the 1980s). If you want the spur to action bit, here’s a little more from Burgess’ ad to close it out…
“The reserves of the United States, China, Russia, and India — some of the world’s biggest countries — are expected to face critical shortages as soon as 2030.
“And even Morocco and Western Sahara could be completely depleted as soon as 2040.
“That is, if their political instability doesn’t cripple their supply lines before that.
“Put together, all of this means that the race is on to find another source of phosphate before time runs out…
“And global mass starvation sets in.”
So… ready to throw some money at Arianne Phosphate as they try to get financing and build their phosphate mine in Quebec? Think investors will fall in love with that story and cause the stock to surge sometime soon, or that they’ll actually get the mine built eventually? Let us know with a comment below… thanks for reading!
Right now farmers in Alberta are paying $1300/metric tonne for phosphate.
Personally, I much prefer Brazil Potash.
This may be Ok since Potash Corp. in Saskatchewan has serious water problems. However it will likely 5 years or so to
make an income.
Potash (which is what’s mined primarily in Canada and Belorussian) and phosphate (southern US, China, S America, North Africa) don’t really compete with each other, as I understand it, both are needed — though many of the big fertilizer companies deal in both.
Thanks, Travis , for pointing out that phosphate and potash are two different things. For the uneducated a safer investment would be MOS.
Fertilizer has 3 components.Nitrogen, Phosphorus and Potassium. Potash represents potasium (element K). Phosphate represents phosphorus (element P). And amonia or urea represent nitrogen (element N). All are important in agreculture. None replace the others.
I’ve been following DRRSF for some time and even made some money on it. It’s an interesting project but, as you noted, the world does not have a shortage of phosphate. The world does not have a shortage of any mineral. For the potential producers, price is what gets them into production. If the DRRSF deposit is good enough grade and big enough, MOS or another company will take them over. Most economic mineral deposits are explored by the juniors to the point when a larger company recognizes that they could make a decent margin mining the mineral. DRRSF is best treated as a speculation that a person can make money trading, but the larger payday will be when a major acquires the project.
Like so many Canadian Companies in the mineral space, more promise than profit. Many tiny juniors like this simply float so many shares they end up never able to attract serious investors and get trapped in a perpetual penny stock world, always under-capitalized. But, this kind of speculation is what “Letters” are created to do. I would simply pass on the pitch.
Thanks for this information. I had this one on a list to submit to you. After looking at their website they seem to be a credible junior miner, but as you revealed, the $billion plus capex requirements and timeline to commercial production seem to be overwhelming. I do believe at the current price it would be like owning a cheap long term option with the best possibility of either being bought out and or phosphate resources become more a mainstream subject.
*Does anyone know anything about “Trifuel 238”, the $1.9 trillion energy revolution pitched by Angel Reserve?
Thanks
Covered that one here: https://www.stockgumshoe.com/reviews/the-20-trillion-report/whos-teased-as-the-undiscovered-tech-company-behind-the-coming-trifuel-238-revolution/
Check out IVVV please
No idea what that is, sorry.
Travis, thanks for the article. What ever happened to the guy who used to cover miners for SG. It seemed he specialized in junior miners. For the life of me I can’t remember his name.
Thanks.
Regards,
Frank
Always enjoyed hearing from that gentleman. Made and lost some money on his reccos. Hazy on his name as well, am thinking Myron . And I’m thinking that I either read or have somehow imagined that he is no longer with us on this plane.
Arianne Phosphate, Mr. Thinker maybe i missed it but are you going to take some type of nibble on this deal? Thanks
No
Is this the same phosphate as that whose excess runoff is harming the aquatic ecosystem? Not your best ESG investment here. If there’s going to be a supply problem, why can’t we just cut back on drinking Coke and Pepsi?
Yes, at least a little part of the possible supply problem could also be mitigated by cutting down on overuse.
Is there phosphate in Coke and Pepsi? If so, why?
Phosphoric acid is used for its flavor, not unlike citric acid… not very much, but it’s in a lot of soft drinks.
This company pays the National Inflation Association to push its stock. Paying to pump the stock is of concern for me.
I will not touch a mining junior even with 10 feet pole…it’s a money pit.I know from experience.Only way to make money ,as Travis said is buy trading on news…if you are in money sell the bigger.Only mining company I have faith and made good money is TECH.B , I only buy it when world is falling and sell in a year.Its a guaranteed 5 bagger.
Thank you for the education! This provides a perfect “note to self” regarding the pains of a long, drawn out investment and also a good look into the world of mining companies.
For @frankw17 and @lookingdog:
Travis Johnson, Stock Gumshoe
Author
18844
Travis Johnson, Stock Gumshoe
August 18, 2019 2:07 pm
Reply to eleanor
Myron Martin, who wrote occasional mining columns for us, sadly passed away last Summer.
2
Reply
Yes, he’s no longer with us. 8 >( RIP Myron
It’s a muted thanks Penny, sorry to hear of Myron’s passing. I think the vast majority of us enjoyed his postings!
Regards,
Frank
Phosphate does the same thing in plants as in animals including us; that is it transfers energy about the organism.
Potash encourages flowering and seed growth, hence increase saleable product.
Nitrogen boosts photosynthesis, more green to your thumb!
NIOBF Niocorp is working on a Niobium Samarium mine in Nebraska.
Their office is about 1 mile from my house in Centennial, CO. May have 1st heard of it thanks to Travis. Year after year, still no mine. BUT, the price has gradually crept UP. 80% since I bot it. JR mining stocks never do that, they creep down. Way to go NIOCORP.
Looks like we are really going full circle. Victory gardens in the past didn’t need phosphate. The didn’t need anything. Farms rotated their crops and everything went smoothly. The phosphate issue isnt a food growing issue its a mega corp issue and the type of farming done. We already discovered that no till faming keeps the network of microbes and fungi that are the rail road of nutrients going and no need for phosphates or anything but compost. Full till and same crop is the issue. Small farms are going to make a comeback.
Maybe so, that’s certainly a more appealing thought… but it’s hard to argue with the idea that modern industrialized agriculture, including aggressive fertilizer use, is what made it possible for the world to feed many times more people than the experts thought was possible 100 years ago.
Happily, there is a movement to produce crops & regenerate soil fertility by return to biology, rather than expensive chemical inputs, using minimum tillage and plant diversity. Incentives to build soil Carbon will greatly accelerate this and farmers who embrace it will enjoy spending less on inputs–chemical fertilizers and defensives–with improved bottom line. Consumers will enjoy better quality food, too.
Plants release carbs into soil near roots to stimulate microbes and fungi that in turn, give plants needed moisture and minerals that they release from soil. Fungi fix the carbs into stable lattice bonds between soil particles, structuring soil tilth which retains water–ten times the weight of the carbon! Any strategic trace minerals missing may be added to soil or foliage, without toxic salts or herbicides that kill the “soil food web.” Rock phosphate and some promising organic fertilizers like Mitsui’s thermophosphate and AMHPF Verde Agritec’s thermopotash and greensand are useful to both orthodox monoculture and regenerative agriculture, giving a slow release of nutrients over 4-5 years.
Long AMHPF / NPK.TO
Since this blog was written in Nov 22 6 months ago, the Arianne Phosphate stock has gone up from $0.42 to $0.67 Nice call, Travis.
Good year for just about anyone in the fertilizer business these days — the much bigger and steadier Mosaic has roughly doubled since November, too,
Thanks largely to the drop in Belarusian/Russian potash exports to the West.