[+ Font] :: [- Font] :: Printable

Peak Oil=Peak Food=Peak People

Bob Moriarty
President: 321gold
Archives
February 7th, 2011

It should be reasonable to most people to understand that energy is an analog for food. If you look at a chart of oil production and compare it to population, it seems obvious that food and fuel are the same thing under a different cloak. Energy is food is population.

That creates a giant problem. Not for me, I'm old. But for you. Peak oil means peak food means peak population. The revolution in Tunisia first; now Egypt and soon in Serbia are not about religion or dictators or police states. We have a police state in the United States; no one cares. No one gives a hoot about dictators until they can no longer afford food. Then they care and the walls come tumbling down.

The uprising in Egypt began as a protest against the rapidly rising cost of food and fuel. Eventually, everyone with an agenda got involved from the Muslim Brotherhood to Israel to the United States. None of them understand the most basic issue because of their agenda which doesn't care about reality or solving the problem.

We passed peak oil back in 2005 or 2006 depending on whom you want to believe. Peak oil means peak food and that makes for peak people. Therein lies the issue. You can cut down on your consumption of fuel by simple driving less or living a more sane existence. For example, the average foodstuff consumed in the United States travels 2900 miles but it's only 2500 miles from San Francisco to New York.

Cutting down on food consumption creates even more problems and cutting down on population is really problematical. Unless of course you are George Bush and Dick Cheney. They were masters at population control.

Estimates say 40% of the population in Egypt survives, barely, on $2 a day. The price increase in basic foodstuff estimated at 40% over the last two years has been devastating. Therefore it's time to riot.

There really is no simple solution. Changing the head of state in Egypt will prove to be as effective as rearranging the deck chairs on the Titanic. We are not out of oil; we are just out of cheap oil. Energy prices will go up and with them, food prices are going up and going to stay up.

What we can do is make more efficient use of the productive land we do have. We need to squeeze out more bushels of wheat and corn from the land we already use. Potash is a perfect solution.

Back in 2008 when oil prices rocketed up to $146 a barrel and dragged food prices with it, the price of potash shot up to about $875 a metric ton, a new record. While every other commodity was plummeting, potash was strong but even potash eventually corrected. The price dropped to just above $310 a ton in early 2010 before stabilizing at about $350 in late 2010.

About 93% of the world's potash consumption is for the use of fertilizers. We need potash for agriculture because it improves yield, water retention, taste, color and the texture of food. It can be applied to almost any fruit or vegetable.

I wrote about a promising potash company some 2 years ago called Passport Potash. (PPI-V) It has been a giant disappointment until very recently. The stock was $.14 a share. It would be an understatement to say the company suffered from weak management. They had a clueless geologist supervising the project and attention once in a great while from Vancouver. It showed in the stock performance as the shares dropped an incredible 90% from $.35 to $.03 in 2008.

A chance meeting with a new investor may have saved the company. Clearly the project was in an advanced state of failure in the fall of 2010 from a management point of view. The company was about to walk away from the project in the Holbrook Basin when a pitch was made to a new deep-pockets investor from Florida.

The investor wasn't a natural resource guy but he understood the issue at once and wrote a check to the company for $750,000 to drill the project. Most importantly, he insisted on a change of management or should I say, an addition of management since they were coming from a state of no management.

Passport used the new money to begin a 16-hole project using two drills to begin defining the extent of the potash beds in the Holbrook Basin.

Historical records from the Arizona Geological Survey indicate the potential for up to 2.5 billion tons of potash in the basin. Passport holds the largest land position in the area with over 107 square miles under their control.

Passport made important management changes in January and moved their base of operations to Phoenix rather than Vancouver and started moving forward aggressively. They expect to complete a 50-liine-mile seismic survey in February, raised an additional $5.5 million in January, are drilling using two state of the art drill rigs and have scheduled a 43-101 to be completed by April 2011.

Passport is now doing what they should have been doing two years ago. The price of potash is at a reasonable level that would allow for profitable exploitation of the basin after two years of price correction.

I love the new Passport under the management of Joshua Bleak as President and CEO. The market does too. On Thursday the 3rd of February, the information about the new investor became public and the stock shot up $.29 to a new high of $.84 before closing at $.75. That investor has a wide range of investors who follow him and put money into everything he invests in. For investors smart enough to be buying at $.035 a year ago, the shares are up an incredible 1900%.

You are no longer able to steal the stock at a giveaway price. I spent most of my time during the last 2 years gnashing my teeth at the blockheads running the company. My biggest bitch with the industry is the tendency of most juniors to be job creation programs where their sole interest is in producing paychecks for as many people as possible. In many companies, nothing much changes from one year to the next. Passport hit the ground running and they are going to produce potash from the Holbrook Basin just as soon as possible.

It's a basin. You aren't trying to discover potash; we know where the potash is and how much of it there is. We just need to know where there best intersections are and how to mine it most efficiently. There is a boatload of potash in the Holbrook Basin.

The world needs potash. Currently the United States imports 91% of the potash we use, mostly from Canada. The US only produces potash from New Mexico and Utah while demand is expected to increase at a 4% yearly rate.

The company is well cashed up with about $7.5 million in the treasury. With about 106 million shares outstanding PPI has a market cap of about $78 million. Without a 43-101 resource in hand, it's hard to figure out where PPI stands in terms of value compared to the other potash juniors but with a commanding land position in the Holbrook Basin they should be valued at least as high as the other juniors. There is still great potential for upside in the shares.

We are biased; I bought into the story two years ago. With the new management team in place, PPI is leaping forward, doing what should have been done years ago. We own shares and we participated in the recent private placement. Passport is an advertiser. You are solely responsible for your own money. Do your own due diligence.

Passport Potash Inc
PPI-V $.74 (Feb 4, 2011)
PPRTF-PK
106 million shares
Passportwebsite

Bob Moriarty
President: 321gold
Archives
February 7th, 2011