Potash stocks punished after US vote to end $6bn ethanol subsidies
Shares of Potash Corp. of Saskatchewan, the world’s largest fertilizer producer, are down just shy of 8% for the week after losing almost 2% in late trade on Friday despite being upgraded to a buy by analysts at TD Newcrest.
Others in the sector fared even worse with newcomer Karnalyte Resources shedding 4.3% while heavyweights Mosaic and Agrium lost over 4.4% and 2.3% respectively after the US Senate on Thursday voted overwhelmingly to eliminate some $6bn in annual subsidies for the country's ethanol industry.
The research firm [TD Newcrest] has a $61 price target on Potash, which is nearly $10 above where the shares currently trade. TD Newcrest cited valuation and overreaction to a recent ethanol vote in the U.S. Senate as reasons for the Potash upgrade.
While that bill isn’t likely to become law, it does indicate that it will be difficult for ethanol supporters to extend the 45-cent-a-gallon tax break and the 54- cent-a-gallon tariff beyond their scheduled expiration at the end of this year.
Junior potash miners fared better with tiny Encanto up 4.55% on Friday after joining the highest tier of the OTC Market last week while Allana Potash also managed to stay in positive territory. On Monday MINING.com reported on TSX-Venture-listed Allana's share price bounce after positive drilling results:
Stock in Allana Potash Corp jumped by more than 10% to $2.14 with almost 3m shares changing hands – more than double the daily average – by noon on Monday after the company announced it has intersected three zones of potash mineralization – one of which returned the highest grade potash on the project to date – in the southwest portion of the company’s land position.
Listed on the TSX-Venture exchange Allana’s major focus is on a previously explored potash property in Ethiopia with among others the backing of the World Bank. The counter is up close to 200% so far this year and most of the assets at the company’s 160 square km Dallol project are still being quantified.