BC regulator flags Passport Potash

The British Columbia Securities Commission (BCSC) has scrutinized Passport Potash (ppi-v) for making several disclosures touting its Holbrook potash project in Arizona.

One such disclosure includes the company comparing its project with a current potash producer in its corporate presentation based on pro forma sales and cost projections. This comparison led the BCSC to question whether Passport Potash had results of an economic analysis for the project that it had failed to announce. In response, the company shook its head and removed the misleading comparison from its presentation.

The regulator also raised concerns over the way Passport has been referencing a 2008 Arizona Geological Survey (AGS) report in its materials. Based solely on historic data, the report estimates the entire Holbrook basin to contain 682 million tonnes at 6% potassium oxide to 2.58 billion tonnes at 20% potassium oxide.

The BCSC believes Passport may have misrepresented the 0.7- to 2.5-billion-tonne estimate as a resource, and in one of its several examples points to the company’s corporate factsheet, which states the project has the “potential of 2.5 billion tons of potash” as a competitive advantage.

The regulator said the information is misleading because first the potential is not expressed as a range. Second, the range is an estimate for the whole basin, spanning 600 sq. miles (1,553 sq. km), of which, Passport currently holds 140 sq. miles (362 sq. km) or a quarter of. Lastly, the company didn’t include cautionary language explaining the potential quantity and grade is conceptual in nature.

In turn, the company clarified the AGS estimate is not compliant with National Instrument 43-101 and does not indicate a resource. It adds that to date it only controls 23% of the basin, where the thickness of the potash beds vary from 10 to 30 feet.  Passport has recently entered an agreement that will enlarge its foothold in the basin to 190 sq. miles (492 sq. km) or 32%.

To be fair, Passport in its recent management discussion and analysis dated Aug. 1, 2011, did note that its current land holdings could only host 8.61% of the AGS estimate or 58.7 million tonnes at 6% potassium oxide to 222.2 million tonnes at 20% potassium oxide.

Another disclosure that didn’t sit well with the BCSC was the way Passport was addressing the risks associated with the proximity of its project to the Petrified Forest National Park.

Passport in its defense said it had included a map in its materials to indicate what areas of the basin fell within the park boundaries, which Congress expanded in 2004. It added that it views the risk of being near the park as minimal, however, notes that it could potentially cause permitting issues among other delays.

The BCSC also flagged the company as being “overly promotional” and cited several media reports on the junior’s website that boasts the project’s undetermined viability. It then suggested the company was not providing results from the work it had completed at Holbrook in a timely fashion.  

Passport hired SRK last November to conduct an initial resource estimate for Holbrook by early 2011. It explained that deadline was missed due to delays in getting the core assayed, which also pushed back the assay results from the 19 holes it drilled by mid-2011.

Before the BCSC review, the company released only two holes from the 19 holes it had drilled. However, on Sept. 12 it posted results from five new holes, which all intersected potash mineralization. Though, the company is waiting for 12 more assays, it anticipates that the initial resource estimate should be out in four weeks.

On the day the BCSC review was released, Passport Potash shares dropped 25% to 41.5¢ per share on 1.35 million shares traded. A day later, on Sept. 13, the shares gained 4.5¢ to close at 46¢, with 1.46 million shares changing hands.