Shares of junior Canadian potash companies Western Potash Corp (WPX.TO) and Karnalyte Resources Inc (KRN.TO) fell sharply on Thursday as market concerns swirled about whether they can develop their projects.
By late morning, shares of Western Potash were down 20 percent and Karnalyte Resources Inc was down 14 percent.
Both companies are seeking investors to build potash mines in the Western Canadian province of Saskatchewan. "Junior" is an industry term that generally refers to a potash exploration and development company that does not yet have a mine in production.
Western Potash came under pressure from market speculation that a deal with a potential Chinese investor in the company fell through, said Andrea Rubakovic, an analyst at Salman Partners. Karnalyte, which is also seeking capital, may have fallen on doubts it will find an investor soon as well, she said.
A spokeswoman for Western Potash was not immediately available for comment.
Ron Love, Karnalyte's chief financial officer, said there had been no change in the company's project and was at a loss to explain the steep fall in the shares.
"The poor market has something to do with it." said Love. "People have shied away from junior development companies and risk."
The steep plunge also comes one day after the world's biggest producer of the crop nutrient, Potash Corp of Saskatchewan Inc (POT.N) (POT.TO), said it did not expect any new mines to start production in the next five years.
Potash Corp CEO Bill Doyle's comments may have hurt the junior companies' shares, but they are similar to statements he has made previously, suggesting other factors in the drop, said analyst Robert Winslow of National Bank Financial, who has an "underperform" call on Western.
In a webcast on Wednesday, Doyle singled out a print advertisement from one potash company, which he did not name.
"There was ... a paid ad by one of these promoters, and they showed the fellow sponsoring the project at the mine site," Doyle said. "He was standing in a field of grain. There's no mine, no construction, there's not even any equipment, and he says he's going to be on by 2015."
The company Doyle was referring to is Western Potash, Winslow said.
Along with junior miners who are in the planning stages, BHP Billiton Ltd (BHP.AX) (BLT.L) and K+S AG (SDFGn.DE) have started work on potash mines in Saskatchewan.
Big North American fertilizer companies also saw their shares fall early, before trading mixed by late morning. Potash Corp shares were slightly lower in New York and modestly higher in Toronto.
Western Potash shares were down 20 percent at 91 Canadian cents, touching their lowest price since May 22. Karnalyte fell 14 percent to C$5.84, touching an all-time low.
In contrast, Rio Verde Minerals Development Corp RVD.TO shares jumped 19 percent to 22 Canadian cents. The company successfully closed a C$12.77 million private placement, giving it funds to develop its potash project in Brazil. The placement also made AGN, a Brazilian holding company founded by former Vale SA CEO Roger Agnelli, the major shareholder of Rio Verde, bringing a strong global network to the company, Rubakovic said.
Shares of other junior potash miners were mixed with Encanto Potash Corp (EPO.V) flat, and Allana Potash AAA.TO down nearly six percent.