BC regulator flags Passport Potash

The British Columbia Securities Commission (BCSC) has gently reproached Passport Potash (PPI-V) for making several iffy disclosures while touting its early stage Holbrook potash project in Arizona.

One such disclosure was 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 removed the misleading comparison from its presentation.

The regulator also raised concerns over the way Passport had been referencing a 2008 Arizona Geological Survey (AGS) report in its materials. Based on historic data, the report estimated that the entire Holbrook basin contains  a resource volume ranging from 682 million to 2.27 billion tonnes grading 6% to 20% potassium oxide. The BCSC believes Passport may have misrepresented the estimate as a resource, and in one of its several examples pointed to the company’s corporate fact sheet, which stated the project had the “potential of 2.5 billion tons of potash” as a competitive advantage. 

The regulator said the information was misleading because the potential was not expressed as a range. 

The AGS range was also an estimate for the whole basin, spanning 1,553 sq. km, of which Passport holds 362 sq. km, or one quarter. The company didn’t include cautionary language either, explaining the potential quantity and grade is conceptual in nature. 

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

In its recent management discussion and analysis dated Aug. 1, 2011, Passport noted 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 addressed the risks associated with its project’s proximity to the Petrified Forest National Park.

Passport said it had included a map in its materials to indicate what areas of the basin fell within the park boundaries, which the U.S. Congress expanded in 2004. It added that it saw minimal risk in being near the park, but noted that its location could 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 boasted of the project’s undetermined viability. It then suggested the company was not providing in a timely fashion any results from the work it had completed at Holbrook.

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

Before the BCSC review, the company released two holes from these 19 newest holes. On Sept. 12, it posted results from five new holes, which all intersected potash mineralization. The company is waiting for 12 more sets of assays and expects the initial resource estimate in October.

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.