Event: "Updating our model after a period of restriction from
the $45 million (5.49 million shares at $8.15/share) investment by
Gujarat State Fertilizer &
Forecasts: "We still assume a 2016 start for Wynyard Phase 1
(625k tonnes) and a ramped 2.1M tonne mine (Phase 2) by 2022, but
assume a more back-end loaded ramp. We model Phase I capex of $650
million (versus $593 million from feasibility and our prior $675
million estimate), but lower Phase 1+2 capex to $2.1 billion from
$2.2 billion. Our assumed average potash price is $436â"443/t fob
Vancouver ($450/t previously)."
Valuation: "Our $11 target is 1.0x our $11.10/share 10% NAV
(fully diluted, financed). Our NAV falls to $672 million from $1
billion from slightly lower realized prices; a more drawn out
production scenario; and higher freight and handling costs from a
more global sales mix."
Recommendation: "KRN remains rated Outperform(
), with an $11 target price. Junior mining stocks are depressed,
equity markets are challenged, and many investors are concerned
about rising global potash surpluses. Amid this, KRN is the most
advanced potash junior and most likely to secure mine financing.
involvement and the expectation for a sizable debt package (we
model $325 million) have the potential to entice a broader
institutional equity raise (and perhaps another strategic investor)
to complete Phase 1 mine financing (we
estimate $255 million of additional equity is required including
million from GSFC)."