It’s very rare to see a JSE stock double in a month…let alone rally +300% higher… Typically, we see BIG gains like this in offshore small caps, and usually new tech start ups and right now, AI stocks. But Kore Potash has nothing to do with these sectors…
Kore Potash, tiny miner with HUGE future potential…
Kore Potash (JSE: KP2) calls itself “an advanced stage mineral exploration and development company.” It’s a tiny company valued at around R2.5 billion. And its shares have been on a tear in 2024.
The main commodity the company is looking to produce is Potash.
Potash is a key fertilizer that provides nitrogen to crops. Around 90% to 95% of potash is used in agriculture as fertiliser.
The most common type of potash is Potassium Chloride, which is essential for soil fertility, plant health and agricultural productivity.
The demand for potash is expected to rise as world population continues to rise, while arable land per person decreases.
As of today, potash in SA is dominated by a few major players such as BHP and Anglo American. Meanwhile, Canada dominates the potash market globally with China and Russia the next biggest potash producers.
So, why the sudden run in share price?
In February 2024, Kore received an Engineering, Procurement and Construction (EPC) proposal from PowerChina International Group for the Kola Potash project in the Republic of Congo. Its share jumped +20% on the back of this news.
The flagship Kola mine is set to produce 2mtpa at a very low-cost. This is due to high-grade potash deposits, low depth of mine, proximity to ports and target markets.
However, the Kola mine requires around $1.8 billion in capital expenditure to get it running. Plus, it will take around 40 months for construction.
As of today, Kore is awaiting the final financing proposal from PowerChina. It’s been unexpectedly delayed since April.
But this hasn’t stopped investors from pushing Kore’s shares from 24c on 17 May to around 68c as I write this.
In fact, the Australian Stock Exchange even sent Kore Potash a price query, which means they noticed an unusual uptick in price and volume in the stock and wanted to understand if there is any information that should’ve been disclosed that could have leaked into the market.
Kore reiterated that no formal legal agreements have been entered into with PowerChina. So, the recent surge in share price is likely down to speculators buying in anticipation of the EPC agreement announcement.
Should you buy Kore Potash after such a huge rally?
Before you join the speculators, there are risks, despite Kore’s future potential.
For instance, development of the mine still needs to take place. It’s not uncommon to see new mines take longer to develop with more costs associated. Any setbacks can hurt the share price.
It’s exactly what happened to another small JSE copper miner Orion Metals. In January 2021, its share price more than doubled in a month thanks to big developments. However, since then a few setbacks have seen the share price drop back down to 23c.
So, just be very aware of buying into small miners with no production after their shares have rallied. It’s an easy way to lose money.
Of course, we’ll keep an eye on Kore’s future. And if everything goes well with its contract and production, it may be a worthy investment in the future.
Not a subscriber to Money Morning?
You can get free daily recommendations like these with Money Morning eletter. Just sign up here.
