‘Salty’ Junior Stock Could Turn Into a Sweet Speculation

Atlas Salt (TSXV:SALT) has such a great looking chart in what has been a very tough junior market

Keith Schaefer, Investing Whisperer | February 16, 2022 | SmallCapPower: Salt deposits are an investor’s dream. They are all the same: very large (as in, will produce for decades) high grade, homogeneous deposits.

(The following article was originally published on investingwhisperer.com)

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That’s likely why:

  1. Junior investors don’t see many of them—they are only developed by majors
  2. Atlas Salt (TSXV:SALT) has such a great looking chart in what has been a very tough junior market—especially resource!

Other than frac sand back in the early 2010s, the Market has found industrial minerals boring—despite the fact that gravel has minted many more millionaires than gold.

But The Great Atlantic Salt Deposit has a flurry of incredibly bullish attributes:

  1. High grade – 95%+ NaCl
  2. Size—880 million tonnes at 95%+ (annual production could be 4 M tpa—that’s a VERY long mine life)
  3. Jurisdiction—Newfoundland (needs jobs!)
  4. Logistics—deep sea port 4 km away (2.5 miles), airport 20 miles away, highway crosses property
  5. Atlas Salt owns an operating gypsum mine that already uses the deep sea port
  6. Shallow—the top of the deposit is roughly 600 feet below surface
  7. Management—President Rowland Howe ran the largest salt mine in the world in Goderich ON for Compass Minerals (NYSE:CMP)
  8. $7.7 million in the bank/no debt
  9. North America imports 7-10 million tonnes of salt a year from faraway Egypt, Morocco and Chile. Atlas Salt’s new deposit could produce 2-5 million tonnes from western Newfoundland!

There’s actually a few more but you get the picture. Here’s a large, high-grade deposit near the largest market on the continent—the eastern seaboard of the US—that has to import salt from another continent.

The latest bit of good news for investors—SALT announced on Monday they’re confident they can ramp into this deposit—which could reduce capital costs by 25% over a vertical shaft. And they’re also drilling 500 metres closer to port to test for an extension of The Great Atlantic Salt deposit.

When you think they want to sell four million tons of salt a year—saving half a kilometre trucking is a big deal!

The financial numbers here have a shot at being something special.

Based on their Goderich Technical Report in their filing with the SEC, Compass Minerals’ all-in production/shipping costs in 2021 fiscal year was CAD$45 per metric tonne.

You can sell road salt in North America for CAD$75/tonne. In the press release, Howe said they want to make the Great Atlantic Salt Deposit the lowest cost producer on the continent.

But let’s just use CAD$30/t as a gross margin. Sell 4 million tonnes and you’ve got CAD$120 million a year.

The market cap today is roughly $160 million fully diluted, which would also leave the company with more than $20 million cash.

There are no capex estimates, but it will be a mine with no big crushing or chemical/secondary processing costs—which can often be well over half the cost of a mine. Atlas Salt’s deposit is basically an underground quarry with 100% ore.

I’m not even going to start to talk about Atlas Salt’s small operating gypsum mine that sends its product to the same port the salt deposit could use one day (a few miles from the deposit)—that is generating positive cash flow. Yes, Atlas Salt actually operates an industrial mineral mine that produces revenue right now!

Nor will I talk about their salt dome, which is different (and only a few miles away) from The Great Atlantic Salt Deposit. It would be used for storing hydrogen—an up-and-coming energy source.

Not every stock I profile works out this well. But this remains a large position for me, and in a tough junior market, I’m still excited about Atlas Salt.

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