Fertilizer Markets and Finance

Brazilian global miner Vale SA signed an accord with the Argentine government to leave the $6 billion Rio Colorado potash mining project where it suspended work in December, a company press spokeswoman told Reuters on Friday.

There are times that the small cap mining investor must key an eye on the comings and goings of the industry giants.

Vale’s withdrawal from the huge Rio Colorado potash project in Argentina is a case in point.

Across the market generally it could be taken as a warning shot, the latest sign that industry leaders are backing away from major projects and their big start-up costs.

Indeed, Rio Colorado was officially shelved earlier this month as capex estimates spiralled to US$10.9bn from US$5.9bn. The project would have been the biggest of its kind in the world.

But, for investors in Toronto-quoted Verde Potash(TSE:NPK) which is developing the Cerrado Verde project in Brazil there are some significant positives implications, and perhaps even opportunities.

First and foremost, with Rio Colorado on the shelf, the Canadian junior’s project becomes South America’s largest ‘active’ potash project, with resources weighing in at 2.8bn tonnes at 8.9% potassium oxide.

Read more at Proactive Investors UK

RIO DE JANEIRO – A Brazilian fertiliser deposit owned by Canada’s Brazil Potash has potash reserves equal to at least 18 years of Brazil’s potassium-fertilizer needs, a source with direct knowledge of the project told Reuters.

The mine project has total potassium reserves of about 500-million tons of which at least 125-million, or a quarter, is made up of at least 25% potassium chloride, a high-enough grade for commercial production, the source said. He added that the grade estimate was “conservative.”

Toronto-based Brazil Potash, whose investors include Canadian merchant bank Forbes & Manhattan as well as Australian investors, hopes to begin production at the site near Autazes, Brazil in the state of Amazonas in 2017 or 2018, according to the source, who declined to be named because he is not authorised to speak to the press.

The Brazil Potash asset is one of several potential potash projects in a 400 km potash belt south of the Amazon river. Brazil’s mines and energy ministry believes the region could produce enough potash to eventually make Brazil one of the world’s largest producers.

Read more at Mining Weekly.com

Brazil set a new record for potash consumption last year with an intake of 8.1 million tonnes, according to data released Monday by the country’s national fertilizer association ANDA.

This is a a 9.3% increase year-over year and marks the second consecutive year in which Brazil was the largest potash importer in the world. During 2012, 7.5 million tonnes was imported.

The country’s use is growing faster than other major consumer. However, it’s domestic potash production has declined in recent years and this downward trend will continue. Brazil’s only domestic operating mine is expected to run out of ore in 2016.

Verde Potash (TSX: NPK), a mineral exploration and fertilizer development company, is working on building a strip-mining operation — Cerrado Verde — in the western state of Minas Gerais. It is also developing a nearby companion limestone project, Calcario.

Currently, the company is in negotiations to sign off-take agreements with potential partners as well as waiting on the outcome of the permit process with the Brazilian government.

Image courtesy Verde Potash

SAO PAULO—Brazil’s national development bank BNDES said Wednesday that it approved a 2.2 billion Brazilian real ($1.1 billion) loan to help finance the construction of a fertilizer plant by state-run oil company Petroleo Brasileiro SA (PETR4.BR).

Petrobras, as the company is known, is building the country’s biggest fertilizer plant in the center-west state of Mato Grosso do Sul. The plant is set to begin operations in 2014. Located close to the natural-gas pipeline coming from Bolivia, the plant will supply neighboring states—responsible for most of Brazil’s agricultural exports—with fertilizer, BNDES said.

The BNDES didn’t provide a total cost of the plant.

Petrobras has been expanding its fertilizer business, and Tuesday said it was taking over a fertilizer plant owned by behemoth mining company Vale (VALE5.BR).

In an asset swap worth $234 million, Petrobras will take over the plant that has a capacity to produce annually 1.1 million metric tons of ammonia and urea from asphalt residue supplied by Petrobras’s nearby Presidente Getulio Vargas refinery.

Oslo (2012-12-07): Yara International ASA has entered into an agreement to acquire Bunge’s fertilizer business in Brazil, significantly strengthening its fertilizer position in the country. The proposed transaction is valued at USD 750 million, and will be subject to the approval of Brazilian competition authorities (CADE) and other customary approvals. Yara and Bunge have also agreed to enter into a long-term fertilizer supply agreement, enabling Bunge to continue supplying fertilizer to farmers as part of its grain origination activities and creating a framework for logistics and other commercial activities.

“I am pleased to announce this important move in Brazil, building further scale for Yara following previous acquisitions in 2000 and 2006. Brazil is a key growth market where there is significant further potential for acreage and yield increases. Today’s agreement also creates a strong platform for future growth opportunities within the Brazilian fertilizer industry,” said Jørgen Ole Haslestad, President and Chief Executive Officer of Yara.

“Our talks with Bunge to reach this agreement have been conducted in a positive and constructive manner, and we look forward to expanding our cooperation with Bunge in our role as a key input supplier to Brazilian agribusiness,” said Jørgen Ole Haslestad.

Bunge operates 22 blending units across Brazil, delivering 4.8 million tons of fertilizer products in 2011, with revenues of USD 2,648 million and an adjusted EBITDA of USD 77 million.

The USD 750 million enterprise value comprises a net operating capital value of USD 385 million and other assets valued at USD 365 million. The operating capital value is subject to post-closing adjustment.

Read more at Reuters

* B&A is owned by Agnelli’s AGN group, bank BTG Pactual

By Sabrina Lorenzi

RIO DE JANEIRO, Dec 4 (Reuters) - B&A Mineração SA, the mining venture co-founded by former Vale SA Chief Executive Roger Agnelli and investment bank BTG Pactual Group, has offered to buy all of Toronto-based Rio Verde Minerals Development Corp , a source with direct knowledge of the situation told Reuters on Tuesday.

B&A Mineracao has made a non-binding proposal to buy the remaining 70 percent it does not own of Rio Verde, which is focused on the exploration and development of fertilizer projects in Brazil, said the source, who is not allowed to speak about the plan on the record.

The source declined to detail terms of the proposal, such as the price offered for Rio Verde.

Rio Verde has a market capitalization of about $44 million, according to Reuters data.

A statement on Rio Verde’s website confirmed that the firm “is in negotiations with B&A regarding the potential acquisition of the company.” Rio Verde added that it formed a committee and has hired financial and legal advisers to handle the process.

Agnelli and his partners at AGN Participações SA, a mining, fertilizers and logistics company, teamed up with BTG Pactual to found B&A in July. The executive was ousted from Vale , the world’s second-largest mining company, last year after a decade at the helm.

Read more at Reuters

Verde Potash (TSX.V:NPK) is set to receive a major boost from measures unveiled by the Brazilian government to expand its domestic fertilizer sector.

ProInvestors reports that the measures unveiled by the Brazilian government Friday last week will come into effect in 2013 and seek to foster the growth of the domestic fertilizer industry while diminishing export reliance.

Toronto-listed Verde is well placed to reap benefit from the new measures. The company has devised a process which creates potassium chloride – the most common form of potash -from a potassium silicate rock which is commonly found near the surface of the company’s Cerrado Verde project in Minas Gerais State.

This confers Verde with a pivotal advantage compared to its Russian and Canadian rivals who have traditionally dominated global potash production. Russian and Canadian potash deposits are buried deep beneath the earth’s surface and their successful extraction entails billions of dollars in capital spending.

Verde’s potash project enjoys the additional advantage of being situated within one of the key markets for the fertilizer ingredient – Brazil itself.

(Reuters) - Uralkali OAO (URKA.MM), the world’s second-largest producer of potash fertilizer, is looking to buy potash assets as well as a distribution network for its products, its chief executive said in an interview.

“We would like to implement M&A in the potash sector, and we’re still looking for potash assets,” CEO Vladislav Baumgertner said. “Though there are not too many opportunities.”

Potash is one of the most-important nutrients applied to crops. While demand slipped this year due in part to the U.S. drought and a cut in a key Indian government subsidy, it is expected to be brisk next year as high prices for corn and other agricultural commodities lead to more plantings.

Uralkali, formed last year in a merger with fellow Russian potash producer Silvinit, primarily produces in Russia’s Perm district, but it is looking around the world for potash assets, Baumgertner said.

The Russian company is also interested in directly overseeing shipment of its fertiliser rather than hiring another company to do so.

“It makes sense to consider whether some logistical and distribution assets can be acquired,” Baumgertner said. “We’re still waiting for the right moment.”

Uralkali is most interested in distribution networks in China, Brazil and Russia, he said, adding that the company is not interested in buying nitrogen or phosphate fertilizer assets.

Read more at Reuters

Soaring corn prices have, in the beef market, put southern hemisphere producers in the driving seat by favouring the economics of pasture-fed cattle over those fattened on grains, Rabobank said.

Producers in Argentina, Australia and Brazil “may already be benefiting” from the market dynamics which have left many peers in the northern hemisphere, and notably the US, facing squeezed margins as high grain prices raise feed bills while soft economic growth keeps demand in check.

Some US protein producers have, unusually, turned to Brazil for corn supplies because of the expense of domestic supplies.

“Record grain prices will shift importers’ focus to the southern hemisphere as grain-based beef production in the northern hemisphere becomes less competitive,” the bank said.

“Countries whose beef production systems are mostly based on pasture will be better-positioned to supply the world at lower prices.”

Read more at Agrimoney

Prices of Brazilian crop land have soared 18% in the past year, to judge by data from one of the country’s biggest agricultural groups, which revealed plans to take sowings nearly to 300,000 hectares.

The 220,000 hectares of Brazilian farmland that farm operator SLC Agricola has owned for more than a year was valued by Deloitte at R$2.05bn, an 18.2% increase year on year.

Including 75,000 hectares bought by SLC over the year, the group’s total portfolio was pegged at $2.32bn.

The increase reflected gains throughout the portfolio, which stretches from Mato Grosso, the top soybean-producing state, in the west to Bahia in the east, part of the increasingly popular Mapitoba frontier.

The group’s Bahia farm of Palmares was the top performer, notching up a 21.7% gain.

Brazil vs US

The valuations, which exclude buildings, improvements and machinery, would appear to show Brazilian land appreciating faster than US farms, which rose in value by 10.9% over the last year, according to the US Department of Agriculture.

US crop land rose by 14.5%, the data, released on Friday, showed.

Brazilian farmland has been particularly prized by many foreign investors, prompting the government to clampdown on foreign ownership.

Read more at Agrimoney

Brazil’s antitrust regulator has approved a deal between Vale (NYSE:VALE) and Petrobras, giving a boost the former’s plan to play a larger role in fertilizers. The deal will enable Vale to develop a new Carnalita mine in Sergipe state of Brazil, which could produce 1.2 million tons per year (mtpy) of potash with many expecting the region to add as much as 2.2 mtpy of potash due to other probable reserves in the same area.

Vale will invest nearly $4 billion on these projects. ^[1] In addition, Vale will be able to continue potash production at Petrobras’s Taquari-Vassouras mine, currently the only potash mine in Brazil. The mine produces about 600,000 metric tons of potash even as it has a capacity of 750,000 metric tons per year. But, it has a productive life of just nine years. ^[2]

We have a $26 price estimate for Vale, which is around 25% ahead of the market price.

See Full Analysis for Vale Here

Agriculture, a sector that is largely immune to recessions, presents a promising future for Vale . To tap the growth potential, the company has been spending billions on its fertilizers business and will shell out around 10% of its $21 billion planned capital expenditure on this division in 2012. Recently, it took its own fertilizer production company, Vale Fertilizantes SA, private. According to our analysis, fertilizer contributes close to 9% to our current price estimate of $26. We expect the fertilizer revenues to increase by 50% by the end of our forecast period.

Read more at TREFIS

Unica said it was preparing to revise forecasts for the cane crop in Brazil’s key Centre South producing area as it warned that heavy rains had continued to leave the harvest lagging well behind last year’s.

Centre South sugar production in the first half of June came in at 1.37m tonnes, a slump of 32% on the same period last year, as rains “virtually every region severely hampered” the cane harvest, the industry group said.

“In fact, the rate of rainfall recorded in several municipalities in traditional sugarcane regions more than doubled compared to the same period of 2011,” Unica said, noting more than 10 cm (four inches) in some parts.

The slow pace of sugar production extended a trend which has lasted since the start of the 2012-13 year, at the beginning of April, leaving total output at 4.9m tonnes, a decline of 28% on the same period last season.

And slowdowns caused by “unfavourable conditions” looked set to show up in data for late June too, with the year-on-year shortfall set to “persist or even increase”.

Read more at Agrimoney

Brazil Potash Corp. (“BPC” or the “Company”) is pleased to announce the successful completion of a US$58.66 million capital raising to further the exploration for potash at the Company’s Amazon Basin project, Brazil. The Project is located in Amazonas State, Brazil, adjacent to Petrobras’ Fazendinha and Arari Potash deposits (see Figure 1).

Existing shareholders and new Brazilian based shareholders participated in the capital raising. One of the cornerstone investors in this round is CD Capital Natural Resources Fund II (the “CD Capital Fund”) which committed US$24.6 million of the total US$58.66 million of the fundraising. The CD Capital Fund is a private equity global natural resources fund that invests in private company mining projects that demonstrate large scale potential and require capital to execute the resource definition stage of development. CD Capital has a strong track record of identifying and investing in world class mining assets from an early stage particularly in Latin America.

Read more at Market Watch