Out Fox The $treet

Summary Potash Corp generally exceeded Q214 estimates based on strong cost controls. The potash market to remain under pressure even if new growth targets are hit. Investors should consider the recent rebound in Potash Corp a gift that is contrary to the long-term fundamentals in the main fertilizer. The latest quarterly report from Potash Corp (NYSE: POT ) shows some improvements in the fertilizers markets. In a previous article , the question was whether any value existed in the potash stocks going forward. The real concern is that large miners like Rio Tinto (NYSE: RIO ) and BHP Billiton (NYSE: BHP ) have sights clearly on establishing potash mines and expanding market in this area due to historically higher margins. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

  The surprising decision by Rio Tinto ( NYSE: RIO     ) to move forward with a new potash mine has negative implications for the sector. The commodity already faces an oversupply issue, and BHP Billiton ( NYSE: BHP     ) desperately wants to move forward with a massive mine in Canada that would further pressure the commodity.  The news continues a bearish trend for PotashCorp ( NYSE: POT     ) , which continues to face increasing threats from competition that wants a share of the high margins for the commodity. The stock has seen a sharp rebound to the levels it traded at prior to the collapse of the Belarusian marketing arrangement about a year ago. Does the recent news from Rio Tinto portend a trend of supplies ready to pounce on any increase in potash demand that will halt the rise of potash stocks?  Read the full article here .  Disclosure: No positions mentioned. Please read the disclaimer page for more deta...

Summary Potash stocks have rebounded too much in the last year. Demand regularly fails to meet growth forecasts. Mining giants continue to explore entering the potash market. Following a year rebounding from the collapse of the Belarusian marketing arrangement, the potash stocks of Potash Corp. ( POT ) and Mosaic ( MOS ) sit in a precarious position. Investors are now bullish on the stocks, yet several market situations suggest the market doesn't have the long-term potential most continue to project. Read the full article at Seeking Alpha. Disclosure: No positions mentioend. Please review the disclaimer page for more details. 

The highly profitable fertilizer business continues to remain under pressure as the thesis is that the supply/demand equation remains challenged. To address its substantially lower earnings during the first quarter,  Mosaic  ( NYSE: MOS     ) rehashed its intent to eliminate 500 positions as part of a long-term plan to cut costs by $500 million. This follows the recently implemented plan by Potash Corp ( NYSE: POT     ) to reduce costs following the crash in potash prices after the Belarusian marketing arrangement between Belarus and Russia broke up. With margins still relatively high in the potash market and the prime additional customers in the emerging markets of China and India unable to afford high prices, one has to wonder if the fundamental growth prospects aren't flawed. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

The fertilizer industry continues to struggle as the long-term demand thesis is under pressure. Investors are learning the lesson that price matters in the commodity business. In the case of potash fertilizer, the substantial gross margins of the past may never return after to the breakup of the Belarusian marketing arrangement. First quarter earnings for The Mosaic Company ( NYSE: MOS     ) were mostly disappointing, with declining prices for phosphate and potash pushing down operating income. The numbers follow those of PotashCorp ( NYSE: POT     ) , where analysts continue to forecast a substantial drop in earnings for this year. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Over the weekend, PotashCorp ( NYSE: POT     ) announced that an external mining executive had been chosen to replace longtime CEO Bill Doyle. While investors have been unhappy with the company's stock returns, the industry as a whole faces numerous fundamental issues that will override the effect of the  CEO selection. T he recent breakdown in the Belarusian potash marketing arrangement and new market entrants such as BHP Billiton ( NYSE: BHP     ) will have bigger impacts on the stock. PotashCorp is the leading contributor to the North American potash marketing organization called Canpotex. The new leader will have to stabilize demand for this arrangement with the disruptions caused by Russia and determine how to deal with  high margins for potash that are drawing global miners into the market. Read the full article here .  Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Back in November, Devon Energy ( NYSE: DVN     ) announced a deal to acquire Eagle Ford assets from privately held GeoSouthern Energy. The company heralded in the new Devon concept along with the deal that included several positive financial metrics. Considering every deal involves a seller, one has to wonder whether the presented facts will materialize or what encouraged GeoSouthern to cash out of such valuable assets especially considering Blackstone Group ( NYSE: BX     ) will exit its stake with this transaction. Off the top, the biggest concern is the limited acreage of only 82,000 net acres acquired and the likelihood that GeoSouthern has already maxed out the potential reserves. Did Devon just buy these acres at peak prices? Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Last week, BHP Billiton (BHP) officially announced the delay of the major expansion project at Olympic Dam. While not a complete surprise due to falling commodity prices and escalating costs in Australia, a prime beneficiary in Freeport McMoRan Copper & Gold (FCX) hasn't gained much from the announcement. Freeport-McMoRan is a leading international mining company with geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. The portfolio of assets includes the Grasberg minerals district in Indonesia, the world's largest copper and gold mine in terms of recoverable reserves; significant mining operations in North America and the Cerro Verde and El Abra operations in South America; and the Tenke Fungurume minerals district in the Democratic Republic of the Congo. Read the full article at Seeking Alpha. Disclosure: Long FCX. Please review the disclaimer page for more details. 

According to this Reuters report on CNBC, iron ore demand is set to grow at 11% through 2017. Wait, didn't stocks initially plunge today due to fears of slower demand in China for iron ore? Talk about a confusing market with conflicting currents in the news. The actual news from BHP Billiton (BHP) today was that demand from China was "flattening" or otherwise growing in the mid single digits versus the double digit growth of the past decade. Slower growth, but still growth. How this is news was beyond me. Everybody should know by now that China wants slower growth. Stocks like Alpha Natural Resources (ANR) are down some 75% since early 2011 peaks. The market has already harshly punished this met coal producer to the extreme making the initial 6% drop further signs of a bottom. Remember that met coal is used with iron ore to produce steel. So now basically within 24 hours the media is spinning out reports of massive growth in iron ore demand and the expectations f...

Always interesting to see what the major miners such as BHP Billiton (BHP) are producing and developing. Most noteworthy for BHP are the iron ore, met coal, and copper production figures from their 2nd half 2011 production report . All 3 commodities are in hot demand in China and BHP had all the incentive in the world to increase production in 2011 over 2010. Iron Ore production increased 23% for the 2nd Half (2H). Production in Western Australia delivered a quarterly record. Full year production for 2012 is expected to increase.  Met Coal production dropped 2% in the 2H over 2010. The December quarter did see a 9% increase over last year. No real prediction on 2012 production levels.  Copper production dropped 16% for the 2H and 7% for the Dec quarter. Production is forecast to drop in 2012 These results are consistent with the general opinion that iron ore is relatively easy to mine while copper and met coal are much more difficult and hence will become much more val...

In the financial world these days, information is loosely passed around as fact whether correct or not. Makes the following table interesting because a lot of people talk about copper and investing in the sector, but this has to be the first table I've seen in a while with the updated production leaders in the category based on 2010 production numbers. Freeport-McMoRan Copper (FCX) has been a big on and off investment of Stone Fox Capital. They currently rank as the top independent producer and the 2nd overall behind Chile state owned Codelco. FCX has a big lead over BHP Billiton (BHP) as well.  This list further highlights the focus on FCX as a proxy for copper. Without doing a lot of research, the other public companies listed only have a small focus in copper. Number 9 Southern Copper (SCCO) is the only other option that is at least investable on US exchanges. SCCO has a $30B market cap so it isn't that small considering the big difference in production as compared to FC...

Copper spikes to $3.55/lb today and is closing in on the $3.6 high from earlier in 2010 and will likely eventually push toward the 2009 high around $4/lb. Copper prices now has the benefit of lower grade production from the top miners [ Copper Miners Underproduce Expectations By 6% a Year] , high demand from a country like China that has little supply, and a recovering housing market in the US along with a FED that is pushing the dollar lower. All in all the prices for Copper remain very favorable. Even in the face of rising prices this year, inventories continue to plunge at a fast pace. Mainly because top miners such as BHP and Freeport-McMoRan (FCX) continue to struggle to keep up with production expectations due to lower grade of ores. FCX in its recent Q2 conference call forecasted Copper prices just above the $3 range providing huge upside to any guidance they've provided. Our Opportunistic and Growth portfolios have been heavily invested in the Copper trade via the fore ...

Interesting report from Financial Times that magnifies some of the recent negative reports on copper mining activities. Stone Fox has been very bullish on copper for a while now because of the promise of high demand from China and a return of demand from the US. So far the demand from the US hasn't materialized but the production issues and lower grade ore deposits have more then offset any lagging demand. As the report shows, the top 4 public miners produced 12% less copper then in 2009. Thats while prices have been above historical averages. In the first half of the year, the world’s top four listed copper miners – Freeport McMoran, BHP Billiton , Xstrata and Rio Tinto – saw their collective output drop 12 per cent from 2009. Freeport McMoran (FCX) remains our best pure copper play and operator. They also mine gold which happens to be very positive at this time. Lihua International (LIWA) could be a huge beneficiary of this trend towards lower mining output. LIWA is a Chinese re...