Saturday, 5 October 2013

PhosCan Resources TSX:FOS $0.28

PhosCan resources is a development stage mining company with a Phosphate project in Ontario. The company has $58 million in net cash on their balance sheet, and they've suspended operations on developing their project, so cash burn is very low. At the current price of $0.28, the market capitalization is $45 million, so the company is trading at only 77% of its net cash asset value. (NCAV).

The company's mining project is something I generally consider myself unqualified to evaluate, but they have built some infrastructure into the area, and the nearby Agrium phosphate mine closed this year as it reached the end of its mine life. Agrium has experience in mining phosphate in the area and might be a potential acquirer for a FOS' similar resource. Agrium has a contract with a company from Morocco to purchase phosphate until 2020, and would likely be able to build this mine in that timeframe to avoid disruptions to its fertilizer manufacturing operations. That adds potential upside, although I still believe the primary reason to buy shares in the company is the chance to buy $1.00 for 77 cents.

Disclosure: Long FOS

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