Following the money: Ringbolt Ventures makes potash play in Utah

With food and fertilizer prices at record highs, mineral exploration company Ringbolt Ventures (RBV-V) has spied an opportunity to make hay while the sun shines.

The Vancouver-based junior, which currently has one uranium property in the Hornby basin, northwest of Yellowknife in the Northwest Territories, is now seeding investment in the coveted fertilizer sector.

In March, it unveiled its plan to buy a 90% stake in a private Utah company that has 23 prospecting permits and one exploration permit covering a total of 348 sq. km of land in the major potash mining district of the Paradox basin.

Potash is a potassium-based mineral that is mined for its use in fertilizer. It is a nutrient essential for plant growth and has become a cornerstone of modern agricultural fertilizers.

With soaring prices for commodities such as wheat, corn, soybeans and palm oil, farmers are using more fertilizer to boost crop production, a trend that has sparked a boom for potash and other essential fertilizer ingredients.

World prices for fertilizer have risen steadily since 2004. Last year the price of fertilizer soared more than 200%.

According to the Fertilizer Institute, world demand for potash grew by 19% from fiscal 2001 to 2006.

“It’s a commodity that is going well and it’s going to be needed for the years ahead,” Derrick Strickland, Ringbolt’s president, told The Northern Miner.

The reasons for higher fertilizer prices range from growing populations, new demand for food crops, especially corn or maize for ethanol and other biofuels, increasing energy and freight prices, and higher demand for grain-fed meat in the emerging economies of China, India and Brazil. High natural gas prices in the U. S. are also fuelling rising fertilizer production costs.

Currently, the United States imports more than half the potash it consumes. Last year, all the potash producers in the U. S. only produced about 12% of the country’s consumption, according to Ringbolt, and the balance had to be imported.

The world’s largest producers of potash are Canada, the U. S., Russia, Belarus, Germany, Israel and Jordan.

Top potash producers such as the Potash Corp. of Saskatchewan (POT-T, POT-N), Russia’s Uralkali, Mosaic Co. (MOS-N) and Agrium (AGU-T, AGU-N) are all benefiting from tight potash supply and rising prices.

Potash is a general term covering several types of potassium salts, of which the most important is potassium chloride, the mineral sylvite. It is commonly found in the brine deposits of ancient seas or salt lakes.

As phosphate and potash supplies continue to struggle to keep up with rising demand, Ringbolt Ventures thinks its venture into potash will pay off in the long-term.

“There’s nothing stopping potash with the rejuvenation of farm income,” Patricia Mohr, vice-president of industry and commodity research at Scotiabank, recently told a gathering at the PDAC convention in Toronto. Mohr predicted the spot price for potash will move to about US$400 per tonne in the second quarter of this year, up from about US$319 per tonne in early March.

Ringbolt recently traded at about 59 a share. It has a 52-week trading range of 25-81 per share, with 4.3 million shares outstanding.