Red Moon Rmk-tsxv Is The Salt Of The Earth Play

Red Moon Resources (RMK:TSX.V) is the chance for investors to get in on the ground floor with a company that I believe is poised to be North America’s next commodity cash cow, and major salt producer.

Its Great Atlantic Salt Project is right at a producing industrial mineral port in Newfoundland (gypsum is already being shipped from there).

The deposit is MASSIVE and HIGH GRADE—it has a valid 43-101 resource estimate that’s more than 900 million tons of 95% NaCl.  At US$58/ton–the going rate for road salt–it’s an incredible cash cow that will attract not just retail and institutional investors, but strategic industry players.

What major mineral producer would not want a 50+ year cash flow–and from a Canadian asset, no less—right on tidewater and with a local port that is already shipping products into eastern Canada and the US?

In fact, Red Moon’s gypsum production has made it cash flow positive for the last three quarters.

I honestly could not make this up if I tried! It’s one of the best set-ups I have ever seen.

There is a $500 million market opportunity for salt in North America—the US imports 8 million tons of salt a year, and it’s worth US$58/ton.  

It comes from SO FAR AWAY—mostly Egypt and Chile.

 
As I explained yesterday, North America is chronically short of salt supply.  We have a permanent supply and demand mismatch—— the United States has to import MILLIONS of tons of salt from SO FAR AWAY—mainly from Egypt and Chile–thousands of miles away!

The demand for salt is driven by the heavily populated US Northeast.  There are tens of millions of people living and driving every winter on roads that require salt for de-icing.

We never talk about it, but salt is an essential commodity.

Many believe that the salt supply situation is actually considerably worse than it seems because several of the major existing mines are aging…..BADLY.  The mines are old, some dating back to the late 1800s. It wouldn’t take much for one of those mines to go down and create an even bigger North American supply hole.

Chile and North Africa are the biggest sources of our imports and require up to 25 days of travel by sea for the salt to get here–which means major transportation costs. 

And these foreign producers have their challenges. The Chilean salt has to go through the very busy Panama Canal.  North African supply presents all of the challenges that you would expect from the region where nothing is easy.

The transportation costs required to move it from thousands of miles overseas are HUGE.  That is really all the background you need to know to understand why I’m so excited about Red Moon Resources’ Great Atlantic Salt Project.  This is all about location, location, location…

It’s right beside the biggest source of salt demand on the planet——the northeastern United States.

Perfectly situated in Newfoundland on the water with just a little skip down the Atlantic Coast to get to Boston, New York, Philadelphia, Washington and millions of winter drivers.

How can a salt producer in Egypt or Chile situated 5,600 nautical miles away with the exact same commodity compete with one that is just a fraction of the distance away from market? 

(This is NOT a trick question.  They can’t.)

Red Moon has a very obvious opportunity to displace major tonnage of salt that is coming from far-flung places of the Earth.

An opportunity that has attracted a management group that knows the salt business better than almost anyone——which is the most tell-tale sign of high-impact potential that a ground floor opportunity like this could ever have.
  All Of The Upside We Are Used To
Without The Geological Risk  

When looking for investment opportunities Warren Buffett is found of saying “I don’t look for 7-foot bars that I have to jump over, I looks for 1-foot bars that I can step over”.

He wants the no-brainer; the easy decision.

Buffett would be much more interested in a junior salt company like Red Moon with an obvious, permanent cost advantage in an undersupplied market….than he would be in a junior gold or precious metal exploration punt.

Who wouldn’t opt for the opportunity that carries less risk and similar upside? 

Red Moon’s Great Atlantic Salt Project doesn’t just have proximity to market in the USA going for it.  The project itself is also set-up very well to provide for low operating costs and a rapid development scenario.

Existing infrastructure at Great Atlantic includes:

– Nearby deep-water ports (Turf Point and Port Harmon)
– Airport within 20 minutes of property (Stephenville)
– Trans Canada highway and multitude of secondary roads across property
– High voltage power line crosses the property
– Mining-friendly jurisdiction, Newfoundland & Labrador
– Skilled workforce with mining experience in nearby communities

You get none of these things with a project in the Andes in South America or in a desert in Africa.  Those are hard slogs.

Again, one-foot bars folks.  This one isn’t complicated.  This project has a safe, secure location with roadwork in place and located right beside the ocean for easy and cheap transport down the coast.

Not just the shortest possible supply chain but the Great Atlantic deposit is also big. Red Moon completed a National Instrument 43-101 compliant Mineral Resource Estimate on this deposit which confirmed a massive Inferred Resource of high purity salt.

With Red Moon management expecting the project to produce at a rate of 2 million tons per year that gives it a life of WAAYY more than 50 years. 

And it’s environmentally friendly–no chemical processing. It’s a very straightforward mine, crush, screen, ship process.

And NOBODY KNOWS this story.  Now is when you get in on the ground floor.

  You Measure Junior Mining Potential
By The People Involved  
I have a checklist for evaluating junior commodity producers.

I want low-cost.  Red Moon’s project high grade and proximity to market will give it that. All new equipment will also ensure that.

I also want a commodity that is worth producing.  Red Moon has that with salt which is going to have predictable demand as long as cars keep driving in the winter—I’d rather bet on the future of salt than I would on the future of oil. 

There aren’t billions of dollars being spent every month to transition our de-icing away from salt!!

Most importantly I want a management team that is proven, successful and amongst the smartest in the game——which is the specific reason that Red Moon captured my full attention.

Red Moon’s Rowland Howe knows more about salt mining than I know about my kids.  I shouldn’t say that but it might be true!! 

Howe led the expansion of largest and most productive salt mine in North America for almost two decades. 

He took the Goderich, Ontario salt mine up to 7.5 million tons of production and shareholders of owner Compass Minerals (CMPS-NYSE) now enjoy a $2 billion plus valuation.

Goderich is probably the most strategically placed mine. It has a great location by Lake Huron close to a market that uses a lot of salt and access to deep water——you cannot move salt any cheaper than by boat.

Sound familiar?  Yep….it sounds just like Red Moon’s Great Atlantic deposit.

Howe told me that when he first saw Great Atlantic, he immediately thought that it has the same sort of DNA; the same “bones” that he was looking at in Goderich. He noticed the same access to deep water and that the salt is pretty much an even deposit just like Goderich.  

He says Great Atlantic is shallower than Goderich, which in mining is a production cost advantage.

Now——I don’t know much about building a big, profitable salt mine in North America.  But Rowland Howe knows more than likely anyone.  The fact that he jumped at the chance to join Red Moon’s Great Atlantic project tells me all I need to know.

As I will always remind you there are no guarantees in the junior mining game, but Red Moon looks like it has everything going for it.

Location, grade, size, management and a chronically undersupplied market.  Plus a fresh story that the Street will love.

Getting in on this ground floor opportunity sounds pretty sexy to me. I am LONG!!!