Fertilizer Markets and Finance

In a report that looks at the 10 major themes likely to emerge in the minerals space, Goldman identifies potash as the commodity for the next decade as the pressure to feed the world by achieving greater yields from nutrient deficient soils in China, India and elsewhere grows.

Goldman said potash could be to the next decade what the boom commodity of iron ore was to the last.

BHP’s pending exposure through the development of Jansen is a key factor in why BHP and two other companies — Freeport (copper) and Uralkali (potash) — are considered by Goldman as the likeliest to benefit from their “late-cycle commodity exposure”.

Read more at The Australian

The Australian-based fertilizer and explosives group joins the list of companies rushing to exploit America’s rich reserves of low cost shale gas

Australia’s Incitec Pivot unveiled $850m plans to build an ammonia plant in the US, joining the long list of companies rushing to exploit America’s find of huge reserves of shale gas.

The explosives and fertilizer group said that it is to construct a site in Louisiana in the southern US with capacity for 800,000 tonnes of ammonia, and scheduled to start operations in the third-quarter of 2016.

The decision follows two years of preparatory work on the scheme, which will “capitalise on… [America’s] competitively-priced energy, labour productivity and responsive regulatory environment”, James Fazzino, the Incitec chief executive, said.

US gas prices, while moving historically in line with European ones, have fallen well behind since the shale gas revolution kicked off in 2010, and dropped below $2 per million BTU (British thermal units) last year, from $12 in 2008.

Indeed, the low gas prices, coupled with the use of cutting edge ammonia manufacturing technology, means “the plant will sit in the bottom quartile of the global cost curve”, Mr Fazzino said.

Read more at Agrimoney

There is a certain poetic justice in the difficulties that Potash Corp. of Saskatchewan Inc. is having as it tries to acquire a controlling interest in Israel Chemicals Ltd., although the government of Israel should not stand in its way, yielding to economic nationalism. In 2010, the management of Potash Corp. was quite willing to let Canadian economic nationalism work against its proposed takeover by BHP Billiton Ltd., an Australian-British mining corporation; in the end, the federal government took the position that BHP’s purchase would not be of net benefit to Canada.

Yair Lapid, the new Israeli Finance Minister, has gone so far as to say that a takeover by Potash would be “an un-Zionist act.” Such an opinion as applied to a Canadian company presents a striking contrast with the Canadian government’s emphatic support for Israel, expressed in Prime Minister Benjamin Netanyahu’s invitation to John Baird, the Minister of Foreign Affairs, to help revive the Middle East process; Mr. Baird has described himself as a “true believer.”

Read more at The Globe and Mail

The Port of Vancouver is expected to continue to keep a key piece of property off the market in hopes of landing a potash export facility planned by a global mining company.

Port administrators are recommending the Board of Commissioners approve extending exclusive negotiations with BHP Billiton, with an eye toward wrapping up a final, long-term lease agreement with the company in October.

The board will vote on the recommendations during its regular public hearing today.

At stake is a project that’s expected to generate thousands of temporary construction jobs, trigger at least $250 million in private capital investment and significantly boost the port’s cargo tonnage.

The port originally anticipated securing a final lease deal with the Melbourne, Australia-based mining giant at the end of 2012. Construction would have followed shortly after that. But softening global demand for commodities forced the company to delay its plans to build a potash export venture at the port’s Terminal 5.

Potash is a fertilizer ingredient used to boost crop yields.

Under an exclusivity agreement the port signed with the company in August 2010, the port agreed to not market roughly 45 acres of Terminal 5 to other prospective tenants. That enabled both BHP Billiton and the port to hammer out the details of a deal and to make some initial improvements to the site.

Read more at The Columbian

Bergman Photographic Services

The Port of Vancouver and BHP Billiton are expected to agree to extend exclusive negotiations on roughly 45 acres of Terminal 5, pictured above, where the Australian mining giant hopes to build a potash export facility. Softening global demand has slowed the original schedule for building the facility.

Perdaman Chemicals & Fertilisers Pty, which is developing a fertilizer plant in Australia, sued ICICI Bank Ltd., claiming the Indian bank restrained Griffin Coal Mining Co. from supplying coal to the project.

ICICI “used unfair tactics and acted in bad faith,” Perdaman said in its lawsuit filed Jan. 3 with the federal court in Western Australia. Lanco Infratech Ltd. (LANCI), an Indian power producer, acquired Perth-based Griffin Coal in 2011 using financing from ICICI.

Perdaman had sued Lanco and Griffin claiming a coal-supply agreement was illegally terminated after Lanco acquired Griffin. Perdaman had said then the termination prevented it from getting financing for the construction of the urea fertilizer plant. The present value of the plant is at least $3.39 billion, Perdaman said in its lawsuit.

ICICI, based in Mumbai, declined to comment on the case. The Indian lender has no contractual relationship with Perdaman, Lanco said in an e-mailed statement today.

The case is Perdaman Chemicals & Fertilisers Pty v ICICI Bank Ltd. (ICICIBC) WAD1/2013. Federal Court of Australia (Perth).

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

Perdaman Chemicals & Fertilisers Pty, which is developing a fertilizer plant in Australia, sued ICICI Bank Ltd., claiming the Indian bank restrained Griffin Coal Mining Co. from supplying coal to the project.

ICICI “used unfair tactics and acted in bad faith,” Perdaman said in its lawsuit filed Jan. 3 with the federal court in Western Australia. Lanco Infratech Ltd. (LANCI), an Indian power producer, acquired Perth-based Griffin Coal in 2011 using financing from ICICI.

Perdaman had sued Lanco and Griffin claiming a coal-supply agreement was illegally terminated after Lanco acquired Griffin. Perdaman had said then the termination prevented it from getting financing for the construction of the urea fertilizer plant. The present value of the plant is at least $3.39 billion, Perdaman said in its lawsuit.

ICICI, based in Mumbai, declined to comment on the case. The Indian lender has no contractual relationship with Perdaman, Lanco said in an e-mailed statement today.

The case is Perdaman Chemicals & Fertilisers Pty v ICICI Bank Ltd. (ICICIBC) WAD1/2013. Federal Court of Australia (Perth).

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

In 2008, the Port of Vancouver and BHP Billiton — the Australian mining giant — started talking about the possibility of the company’s making the port’s Terminal 5 into a home for its planned new potash export facility.

Four years later, the two parties remain locked in negotiations over a project that would create thousands of temporary construction jobs and bring to Vancouver at least $250 million in private capital investment.

That’s nothing to scoff at, especially when you consider a Clark County economy that certainly could use a good jolt.

With 2013 just getting under way, it’s not a stretch to imagine that the public, which owns the port (the port’s 111-square-mile district encompasses 300,000 property taxpayers), might be wondering: When will the talk finally translate into action, to earth-movers’ making way for BHP Billiton’s export venture?

After all, the port — overseen by three elected commissioners — is all about building up its industrial, rail and marine facilities to spur job growth.

Well, it’s not that progress hasn’t been made on BHP Billiton’s proposal. The company wants to lease up to 60 acres of Terminal 5, where it would build an export facility to ship potash, a fertilizer ingredient that environmental regulators consider nontoxic to aquatic organisms.

BHP Billiton, headquartered in Melbourne, Australia, would ship potash by rail to the port, where it would then be loaded onto ships bound primarily for Asia. The company would haul the potash from a mine it’s developing in Canada’s Saskatchewan Basin.

So far, the company, which has a market cap of $210.33 billion (for perspective, Microsoft Corp.’s market cap is $229.35 billion) has done some prep work on the Terminal 5 site. The parties have a preliminary lease agreement, with the port’s commission unanimously agreeing in December to an important extension of that agreement to Feb. 13.

Meanwhile, the port’s executive director, Todd Coleman, is expected in the next several weeks to head to Saskatchewan, where he’ll meet with BHP officials to discuss a new preliminary agreement that would take the negotiations beyond Feb. 13.

Read more at The Columbian

Potash West (ASX: PWN) has been assessed as being undervalued by New York based Arrowhead, on the back of potash production estimates from its flagship Dandaragan Trough project in Western Australia.

Based on production estimates from a local as well as a potential export plant, the research firm has estimated that the company’s fair share value lies in the A$0.77 to A$3.87 bracket.

This compares with its current share price of A$0.25 with a 52 week range of between A$0.18 and A$0.35.

The following is an extract from the report. 

Company presentation

The Dandaragan Trough project is located within the Dandaragan Trough, which is one of the world’s largest glauconite deposits, close to good infrastructure.

Potash West holds the right to exploit potash and phosphate within fourteen exploration licenses and one licence application, covering a total area of 2,905 square kilometres.

The company recently defined a maiden JORC Resource of 244 million tonnes at 3% K20 and 1.6% P2O5 over the Dinner Hill Prospect after completing a 3272 metre drilling program.

In mid November, Potash West secured a Chinese cornerstone investor to invest A$3 million through a share placement.

Read more at Proactive Investors Australia

Potash West has received a share price valuation of between A$0.77 and A$3.87 based on conservative potash production estimates from its flagship Dandaragan Trough project in Western Australia.

Australian farm officials cautioned over the potential for another year of US drought, amid continued concerns over the return of the La Nina weather pattern linked to dry US summers.

The Abares commodities bureau nudged higher by $10 a tonne, to $360 a tonne, its forecast for average 2012-13, wheat prices as measured by values of US hard red winter wheat in Gulf of Mexico ports.

The upgrade reflected a cut of 9m tonnes, to 656m tonnes, in Abares’ forecast for world wheat production, curtailed by downgrades to crops in countries including Argentina and Australia itself.

And prices could prove “markedly higher” still if dry weather continues to test winter wheat seedlings in the US and parts of the former Soviet Union.

“If current dry conditions persist in some major producing countries, including the US, world wheat prices are likely to average significantly higher in the second half of 2012-13 than currently forecast,” Abares said.

Read more at Agrimoney

Meet the Herrenknecht, a borer drill the size of a blue whale that is tearing up the Saskatchewan landscape – and with it the economics of the mining industry’s new hot commodity.

Some 32 metres long and as wide as a small house, the custom-made piece of German engineering is embarking on a journey to a point one kilometre below the province’s grain fields. There it will strike prairie gold – potash.

Jansen is slated to be the world’s largest potash mine, twice the size of its closest rival. With a total estimated cost of some $14-billion, it’s a brazen bet by Australian mega-miner BHP Billiton Ltd. that the crop nutrient will be the world’s most important mined commodity for decades as farmers struggle to boost food production for a hungry planet.

Jansen promises to drive a momentous power shift in the global potash industry, dominated for decades by groups of producers, under fire as alleged cartels, that have controlled most of the world’s supply and enjoyed strong profits.

BHP is throwing down the gauntlet on that cozy arrangement. The world’s largest mining company says it will sell its potash independently of any rival marketing group, adding a weighty new competitor to the negotiating table when major consumers seek new supplies of the fertilizer.

Read more at The Globe and Mail

Rum Jungle Resources (ASX:RUM) has upgraded its sulphate of potash resource at the Karinga Creek Salt Lake Potash Project in Central Australia.

The Karinga Creek Salt Lake Project is well located adjacent to the Lasseter Highway and within close proximity of the Central Australian Railway line.

This provides access north to the port of Darwin and proximity to Asian markets and south to domestic markets.  

Also not to be forgotten, Australia currently imports all of its potash requirements.

Earlier, Rum Jungle and Reward Minerals (ASX:RWD) inked a preliminary sulfate of potash resource of 530,000 tonnes based on a depth of only 3 metres.

This resource has now been upgraded to a maximum inferred resource of 5,500,000 tonnes of sulfate of potash at an average aquifer thickness of 15 metres and an average depth to the water table of 1 metre.

Potash of sulfate and schoenite are utilised as high-end fertiliser products globally.

They have a lower salt index than muriate of potash and are often preferred in crops sensitive to chloride or susceptible to fertiliser burn. 

Sulfate of potash and schoenite attract premium pricing in comparison to the more common muriate of potash.

The project is a joint venture where Rum Jungle holds an 85% stake and Reward a 15% stake.

Work is continuing at the massive proposed potash mine project in Jansen. Despite not yet having final approval from their Board of directors, BHP has already invested $1 billion in the site.

Two giant boring machines will burrow twin shafts one kilometer deep into the earth, allowing access to one of the largest potash deposits on the planet. Tim Cutt, the president of BHP’s Diamonds and Special Products Division, says it is not a simple task and the mine is at least three years away from being operational.

“We think by the end of 2015 we should be in the ore body and starting to build production rooms.”

The two shafts will be sunk using only machines, which is a first for any potash mine. Gord Graham, the mine’s Director of Sub-Surface Operations, says the technique will remove some element of danger.

“What makes it safer very specifically is that we don’t have a group of people down in the bottom changing bales on buckets, loading blast holes, being down there with all that activity and hydraulic equipment down there.”

BHP is the world’s largest mining company but this is their first foray into the potash business and they are heavily invested.

“We’ve spent about a billion dollars on acreage and exploration,” Cutt says, “And we’ve spent about a billion dollars to get to the point that you see today.”

Read more at CTV News