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In tonight’s report…

1. Scintillating SALT Show on the way…

2. There’s Real Power in MAXX Power…

Editor’s note: Part 2 tomorrow covers Crude Oil including 2 cheap Oil stocks.

The Eskay Creek of Salt Deposits

Salt Wars (Part 1)

Atlas Salt (SALT, TSX-V)

This is certain to be a fascinating week for Atlas Salt (SALT, TSX-V). High net worth investors are gathering Wednesday afternoon in London, Ontario, for the company’s first-ever “show and tell” event. BMR will be in attendance.

The timing and location are both conspicuous, to say the least, as drilling continues at Great Atlantic (investors have been expecting a progress report) while London just happens to be the closest city to Compass Minerals‘ (CMP, NYSE) Goderich mine.

How ironic!

Google says: “Goderich is known for its breathtaking shoreline and historic downtown area. Given the charm and character of Goderich, Queen Elizabeth has coined Goderich ‘the prettiest town in Canada’. Uniquely, Goderich is also home to the largest underground Salt mine in the world.”

Atlas‘ Great Atlantic is on track to become the shallowest underground Salt mine in the world, starting at a depth of just 600 feet vs. 1,800 feet at Goderich, and the lowest cost producer with enough of a resource entering  current drilling to keep production going for 100 years. That means it’ll be “checkmate” very soon for Compass and Stone Canyon/Kissner, as neither of those 2 entities who dominate the North American Salt market can afford to have a “disrupter” like Atlas destroy their pricing models with ultra-cheap production from a state-of-the-art “Salt Factory” like Great Atlantic immediately adjacent to a deep water port.

It’s the perfect set-up for an old-fashioned bidding war that would make the recent battle for Noront Resources (NOT, TSX-V) – one we also correctly predicted – look like a tea party.

The North American high-grade Rock Salt market shares some similarities with the Oil and Gas sector, beyond the fact that both Goderich and Great Atlantic were both discovered through Oil and Gas exploration:

• Underinvestment in the Salt sector over the years has created a “security of supply” problem, just like with Oil – we need to produce more;
• The U.S. in particular relies heavily on imports – skyrocketing shipping costs from Chile and North Africa are putting those imports at risk;
• No new mines in the last 20 years and only 1 new discovery – Great Atlantic.

Shipping costs from Chile and North Africa are now believed to exceed what would be the combined production and shipping costs from Great Atlantic, so there’s no way those overseas markets are going to be able to compete.

And in this inflationary environment, the ageing mines in North America including Goderich are suffering disproportionately with respect to costs. Having said that, Goderich is still incredibly profitable. For fiscal 2021, which was just a 9-month period, Compass reported that its Salt segment generated $133.2 million (U.S.) in operating earnings and EBITDA of $186.5 million, increases of 14% and 13%, respectively, from comparable 2020 period results.

Under Rowland Howe’s mine management, Compass ran to $100 (U.S.) a share by 2011 for a gain of more than 650%. Under Rowland, SALT has jumped 138% so far (from 65 cents when he was named President last April to the latest closing price of $1.55).

With Atlas, we’ve got a thoroughbred like Secretariat (also known as “Big Red“) and the very best jockey in “Mr. Salt”. With Howe at the helm we’re going to see much higher SALT prices because, quite frankly, this asset is worth far more than $1.55 a share or $120 million.

Atlas started behaving like it should Friday when it jumped nearly 20% intra-day while the Dow came under more pressure due to higher Oil prices, inflation concerns, and war. Those are the reasons the Dow has been struggling for the past 5 weeks and they’re also reasons why the case for SALT is stronger than ever.

SALT Short-Term Chart

• RSI(14) has landed in a strong support area near 50% and should turn higher this week
• SS is in a favorable low position
• Ideal technical set-up for a near-term breakout above the EMA-50 (EMA-10 on this weekly chart) and the short-term downtrend line
• ADX indicator confirms a continuing bullish trend with plenty of room to strengthen
• Superb support around $1.30 and the rising EMA-200 (EMA-40 on this weekly chart) has held

Feds Take “Hydrogen High Road” 

The Trudeau government is doubling down on its green agenda, even in the face of a lack of Oil supply and surging Oil prices. This is sure to have positive implications for Atlas Salt’s clean energy plans in Newfoundland through a green Hydrogen-wind power combination that takes advantage of world class Salt dome storage potential and an incredible wind resource along the prolific St. George Basin (~200 sq. km of which is owned by SALT).

With opposition at the cabinet table from Quebec, the Feds are holding up approval on a massive offshore Oil project led by Norwegian Oil giant Equinor.

Ottawa said Friday, March 4, in a news release that federal Environment Minister Steven Guilbeault has been granted another 40 days to review the “extensive information” about whether the proposed Bay du Nord Project off the coast of St. John’s will have significant environmental impacts. The project would open a 5th Oilfield in this area where some experts say there’s an estimated 800 million recoverable barrels. Recently, 118 environmental groups (where did all their funding come from?) and academics across Canada signed a letter calling for Ottawa to reject the project, saying it’s incompatible with Canada’s domestic and global climate commitments.

If the Trudeau Liberals do reject this project, which is very possible, you can be sure they will “make it up” to Newfoundland and Labrador with major investments in the green space to drive their Hydrogen strategy. No matter what they decide to do with Equinor’s project, they are going to fly the green flag more vigorously than ever.

Speaking last week at The Canadian Club in Toronto to promote the federal environmental strategy ahead of the release of Canada’s new road map for greenhouse Gas reductions coming at the end of the month, Guilbeault said Canada cannot realistically help Europe replace its Russian Oil imports with Canadian Crude or Natural Gas, but it can and is looking at ways to export renewable energy such as Hydrogen.

“European leaders want not only to reduce their reliance on Russian Oil, they want to reduce their reliance on Oil altogether,” Guilbeault said. “This is where Canada can really help.”

In particular, Guilbeault pointed to Hydrogen.

Hydrogen is still in the early stages as an energy industry in Canada – Canada is in the top 10 of Hydrogen producers globally but makes about 3 million tonnes of it for industrial use. China, the world’s top producer, makes more than 8 times that much.

But Hydrogen was a major part of the conversation between German Chancellor Olaf Scholz and Prime Minister Justin Trudeau when they met in Berlin last Wednesday.

“This is one aspect for a very long-term strategic co-operation between Canada and Germany, because we understand acutely that Canada is a country that can help us import Hydrogen, which will be produced in an environmentally friendly manner,” Scholz said in German.

On March 21, the International Energy Agency (IEA) is hosting a meeting in Paris to discuss options to help Europe. Natural Resources Minister Jonathan Wilkinson is to attend. At the CERAWeek energy conference in Houston last week, Wilkinson also pitched Canada’s Hydrogen potential. “Canada has huge opportunities associated with the production of ultralow carbon Hydrogen,” he said. “Hydrogen will be important for domestic use but can also enable huge international opportunities for supply to geographies including Europe and Japan.”

MAX Power (MAXX, CSE)