$POTRF : SOPerior Fertilizer Corp. — Updated Economic Analysis

Probable Realized Market Prices$645/t K2SO4 & $147/t H2SO4
Flagship ProjectBlawn Mountain
Shares Outstanding215,570,000
Market Cap2,953,309
Proven & Probable Mineral Reserves, 3% Cut-Off153,330,000 tons
Payable Product (LoM)*16,096,051 K2SO4Eq tons
Estimated Payable SOP (LoM)10,603,000 tons
Estimated Payable Sulfuric Acid (LoM)24,135,000 tons
Alumina Resources (M&I)**19,418,000 tons
Average Annual Production351,261 K2SO4Eq tons
LoM46 Years
True All-in Cost (TAIC) $546/t
Gross Revenue$10,381,952,895
Operating Cost ($6,813,000,000)
Royalties (5%)($519,097,645)
Property Taxes (2%)($207,639,058)
Operating Profit$2,842,216,192
Total Capital Costs($537,000,000)
Income Taxes($710,554,048)
Net Income$1,594,662,144
Net Profit Margin15%
Absolute Cost Structure (ACS)85%
MTQ Score (Higher is Better)0.2
True Value$7.40/sh.
True Value Discount (TVD)100%
Cash Flow Multiple5x
Average Net Annual Cash Flow 34,774,839
Future Market Cap173,874,195
Future Market Cap Growth5,787%
Target$0.81/sh.***

Notes: All Values in U.S. Dollars

*This analysis hinges on Payable Product tonnages, as opposed to a sum of Proven & Probable Reserves, including: Direct Feed-to-Mill, Medium-Grade Stockpiles and Low-Grade Stockpiles. Analysts will likely be expecting a much larger number (153.3 Mt) for valuation computations. That number isn’t of interest to us in this analysis, today, as our case is predicated on estimated payable product.

Furthermore, we have elected to utilize K2SO4Eq tons in the stead of deducting sulfuric acid credits from our Direct Operating Cost Matrix. This has the effect of raising our independently-calculated True All-in Cost (TAIC) to $546/t, which is an increase of 159% from Millcreek Mining Group’s Cash Cost number ($211/t).

**Alumina, which trades for about $472/t, is classified as a waste byproduct of production. However, efforts are being made to develop a pilot plant 12 miles away from Blawn Mountain in Milford at the site of Tamra’s shuttered copper flotation mill to determine whether or not Alumina waste can be economically monetized.

Conclusion

The value proposition for SOPerior Fertilizer Corp. remains clear. Additionally, a handful of de-risking events have occurred that lend further credence to the SOPerior story. Nevertheless, in spite of the positive news flow, we have chosen to be more conservative with our analysis than in the past.

Net Profit Margins are low and Absolute Cost Structure (ACS) is high. Consequently, we have assigned SOPerior with a conservative 5x Cash Flow Multiple.

Average Net Annual Cash Flow $34,774,839

At 5x Average Annual Cash Flow, SOPerior could sport a Future Market Cap of ~$174M.

***Every once in awhile, you gotta swing for the fences. You can’t do it with all of your stocks, but you can do it with a couple. We’re swinging for the fences with SOPerior. Why? For one thing, the average selling price of SOP is up YoY to ~$594/t. In other words, we are approaching the pilot project’s development incentivization price, which we estimate is just above $600/t.

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