Fertilizer Markets and Finance

With China and India back to buying potash after an extended hiatus in 2012 (global shipments were down 9% in 2012 from 2011), we expect demand growth of close to 10% in 2013. Potash prices should firm up from prevailing Saskatchewan spot levels around $420 per metric ton as the year progresses, although we don’t expect a return to the heady levels of late 2011 ($550 per metric ton). 

Read more at MorningStar

The share price of Potash Corp. (POT) has risen by 14% over the past 30 days. At $43.72, the stock is trading near its 52-week high of $46.16 and offers a solid dividend yield at 3.2%. However, due to the recent rally, the stock valuation appears to have reverted back to the fair range, meaning a buy rating is likely not warranted. My view is based on the following five reasons:

Read more at Seeking Alpha

Mosaic has decided to delay by one or two years expansion of its Saskatchewan potash mines, the company said on Monday. Lawrence Stranghoener, CFO said on a conference call with analysts that the company is deferring the final 2 million m.t./year potash expansion because of unfavorable market conditions and high labor costs. The project was expected to cost “upward of $2 billion.”   “By waiting a year or two, we may see improved labor conditions in Saskatchewan that might help bring down the cost of this project,” Stranghoener said

Read more at Chemical Week

There is a boom in the Saskatchewan economy, and economists all point to increasing exploitation of our resource industries. A major factor has been the expansion of the capacity of the potash industry.

Over the past few years, all of the potash corporations in the province have invested capital in their existing mines. The three existing potash corporations are adding new capacity that will total 14 million metric tonnes (MMT). “Greenfield” mines being developed by K + S Potash Canada and Western Potash will add an additional 5.0 MMT.

BHP Billiton has spent $2 billion developing its Jansen Lake mine and is using state-of-the-art borer machines to construct the two shafts. It is hard to believe it will actually put this development on hold. The first phase of this mine will provide four MMT, with capacity to be doubled down the road.

Read more at Leader Post

Employees at Israel Chemicals Ltd. (ICL) plan to protest a proposed takeover by Potash Corp. of Saskatchewan Inc., in what would be the Middle East’s biggest acquisition, the head of a workers committee said today.

“We are protesting against the intention of the government to approve a merger with Potash,” Armond Lankry, chairman of the workers committee at Dead Sea Works Ltd. a unit of Israel Chemicals, said in a phone interview with Bloomberg today. “If the deal goes through, workers will shut down all plants.”

The demonstrations come as Calcalist reported today that Potash Corp. is prepared to pay more than $20 billion for control of the company and that officials met in the past week withIsrael Corp., which holds a controlling stake in Israel Chemicals. Prime Minister Benjamin Netanyahu met on Oct. 31 with Potash Chief Executive Officer Bill Doyle about a possible merger with the company in which it already has a 13.84 percent stake. The government can block takeover bids of the country’s second-largest company by market value by using its so-called golden share, allowing the state to prevent a takeover to protect natural resources.

Around 5,000 workers from the country’s 10th-largest private sector employer will demonstrate at major intersections in the country’s southern Negev district to oppose the sale, Lankry said. Workers are concerned a merger would lead to job losses as the company’s extraction of minerals from the Dead Sea to make potash and fertilizers is transferred to Jordan’s Arab Potash Co. (APOT) in which the Canadian company has a stake.

Read more at Bloomberg

If you are going to build a new potash mine, Saskatchewan is at the top of the list, says David Waugh.

Waugh, CEO of North Atlantic Potash, recently talked at a Greater Saskatoon Chamber of Commerce luncheon where he highlighted the key drivers of success in potash development.

North Atlantic, 98 per cent owned by JSC Acron, a Russian group of companies and one of the leading global mineral fertilizer producers, owns property across the province.

It has focused most of its attention on property near Foam Lake, but it also has a joint venture project with Rio Tinto south of Regina and property near Esterhazy. In his talk, Permits, Gamma Logs and Railcars, Waugh said potash projects need a proven deposit, political stability in the area and solid infrastructure.

Saskatchewan ranks high in most of those categories, especially compared to other parts of the world.

“You have to have a geopolitically stable place to do business,” Waugh said, adding there has to be very good deposit (high-grade, simple mineralogy).

“The more complex the deposit, the more it costs to mine,” he said.

“(And) if you don’t have infrastructure, you won’t have a mine.

Read more at The StarPhoenix

Given that Premier Brad Wall shies away from using the word “boom,” it’s unlikely that he would admit the great Saskatchewan boom could soon be finished.

And he would be even less likely to admit that in a week when employment numbers for January increased by nearly 25,000 from last year - a nation-leading 4.7 per cent growth rate that lowered Saskatchewan’s unemployment rate to a Canadian low of four per cent.

Yet, the fact that 400 fewer aboriginal people were employed than a year ago was a disturbing development in Friday’s job numbers, especially in a supposed period of prosperity. It is why Wall should emphasize aboriginal education and unemployment beyond simply assigning it to a legislative secretary.

But 25,000 more jobs in a normally slow January is great news, making it ridiculously easy for Wall and the Saskatchewan Party to argue that the province is still booming. However, that isn’t necessarily the impression left by the premier’s speech to the Saskatchewan Urban Municipalities Association convention this week.

Wall told the mayors and councillors to brace for the impact of a projected $300-million drop in oil revenue. Of course, he stressed that he was not sounding the same alarm bells as Premier Alison Redford, who told Albertans last month of a potential $6-billion revenue shortfall in her province, due to devalued bitumen.

Read more at The StarPhoenix

There was a time, not so very long ago, when the federal Conservatives’ trade and investment agenda was clear, predictable and not cynically political, at least not obviously so. The best markets were free and open. In came NAFTA. Investment Canada became a rubber-stamp agency for almost anything short of purchases attempted by the Cosa Nostra or the Medellin drug cartel. By the start of the last decade, the Canadian economy was open and unrestricted by global standards, even if some industries, notably banking, remained protected.

Then the Conservatives snapped. In 2010, Prime Minister Stephen Harper sent the world’s biggest mining company, Australia’s BHP Billiton, packing when it came courting PotashCorp. It happened again last year, when Harper erected a barrier around the oil sands. CNOOC, the Chinese oil giant, would be allowed to buy oil sands player Nexen, but after that, no more state companies need apply. Having bucked the global trend toward resource nationalism for decades, the Conservatives have now joined it. Harper is no Hugo Chavez, but they are no longer light-years apart on the economics spectrum.

Which industry is next for the ring-fence treatment?

Read more at The Globe and Mail

Saskatchewan farmer Larry Spratt looks over some of his calves on his farm near Melfort, SK on November 15, 2010. Spratt and his father Don expanded their farm in a modern version of crop sharing where they farm land bought by investors.

(David Stobbe /The Globe and Mail)

WINNIPEG – Saskatchewan, the world’s richest potash-producing region, will not review how it taxes miners of the crop nutrient until late next year at the earliest as it waits to see if BHP Billiton follows through on plans to develop a huge mine in the Western Canadian province.

“We’re going to monitor the market behaviour, and if there’s change in the market structure we’ll take a look at that,” Kent Campbell, Saskatchewan’s deputy minister of energy and resources, said in an interview with Reuters. “If there’s a whole bunch of production that comes on, that could change the nature of the market.

“The BHP decision is obviously a big one.”

Potash taxes in Saskatchewan are the highest in the world, according to Campbell, with producers Potash Corp of Saskatchewan, Mosaic and Agrium collectively paying hundreds of millions annually.

Those companies are investing billions in mine expansions, while new players such as BHP and Germany’s K+S are doing preliminary digging on Saskatchewan’s first new potash mines in 40 years. With crop prices surging in 2008 and again this year on bullish outlooks for food demand, potash has attracted new interest for its ability to boost crop yields.

Saskatchewan’s royalty system is weighted toward the price of potash, rather than production. If too much new capacity comes to market and pressures prices, Saskatchewan’s revenue could drop.

One of the aims of a revised royalty system would be to give additional weight to production levels, Campbell said.

“That’s one of the things you would want to look at, for sure. One of the weaknesses of the current system is it’s highly reliant on price.”

BHP, the world’s biggest miner, has started construction on an eight-million ton potash mine at Jansen, Saskatchewan. A final go-ahead by its board, however, is not expected until mid-2013.

Read more at Mining Weekly

SASKATOON - PotashCorp is temporarily laying off workers at mines in Saskatchewan and New Brunswick because of a slump in demand.

The Saskatoon-based company says the Allan mine in Saskatchewan won’t operate between Dec. 16 and Feb. 9.

The mine in Sussex, New Brunswick is also shutting down for eight weeks between Dec. 30 and Feb. 23.

PotashCorp (TSX:POT) said in October that it will shut its Lanigan and Rocanville (ROH’-kahn-vill) mines in Saskatchewan for eight-weeks starting Nov. 18 and Dec. 7 respectively.

The fertilizer producer reported in October that its third-quarter profit fell 22 per cent from a year ago.

However, chief executive Bill Doyle said at the time that he expects demand to pick up next year.

Two Canadian corporate giants, Potash Corp. of Saskatchewan Inc. and Calgary-based Agrium Inc., are among a list of worldwide potash producers facing a revived U.S. lawsuit that accuses them of acting like a “tight-knit global cartel, similar to OPEC in its heyday.”

In a surprise ruling, the U.S. Court of Appeals for the Seventh Circuit in Chicago last month revived a potential multibillion-dollar antitrust case filed in 2008 by potash buyers, including Minn-Chem Inc. and Kraft Chemical Co.

Two Canadian corporate giants, Potash Corp. of Saskatchewan Inc. and Calgary-based Agrium Inc., are among a list of worldwide potash producers facing a revived U.S. lawsuit that accuses them of acting like a “tight-knit global cartel, similar to OPEC in its heyday.”

In a surprise ruling, the U.S. Court of Appeals for the Seventh Circuit in Chicago last month revived a potential multibillion-dollar antitrust case filed in 2008 by potash buyers, including Minn-Chem Inc. and Kraft Chemical Co.

Read more at The Globe and Mail.

A U.S. court has revived a lawsuit against some of the world’s largest potash mining companies.

The lawsuit names Saskatchewan producers: PotashCorp, Mosaic and Agrium, as well as four other international companies, accusing them of forming a “global cartel.”

U.S. purchasers of potash claim that the companies inflated prices of the crop-nutrient by internationally decreasing their output.

The plaintiffs say that prices rose 600 per cent from 2003 to 2008, even though American consumption of fertilizer remained steady.

“PotashCorp has both the policy and practice of adhering to any competition laws anywhere we do business, and that’s certainly the case here as well, and these are claims that we will defend ourselves against vigorously when they do go before trial,” said PotashCorp Senior Director Bill Johnson.

The lawsuit was resurrected by the seventh U.S. Circuit Court of Appeals, reversing the decision from last September.

Richard Crosson jokes that his knowledge of potash was “absorbed” early.

The Vancouver-based partner in accounting giant Ernst & Young’s Transaction Advisory Services practice, grew up in Saskatoon and has family ties to Rocanville, from which (he quips) he has “really good potash credentials - it was in the drinking water!”

In a recent interview, he shared this thoughts on potash and uranium, their spinoffs, what he calls “Head Office Saskatchewan” and how others’ “resource nationalism” might work to our benefit.

One of his insights is that the mining industry consists of two parts: the firms that create reserves and those that consume them. The former are the hundreds of “junior” exploration companies. The “consumers” are less numerous, but much larger; the Tecks and the GoldCorps and the Barricks in Canada and, globally, the Vales, BHPs and Rio Tintos -

“If you look at the major companies, they’ve all repaired their balance sheets; they are very well-capitalized. Commodity prices, particularly in the last two years, are generating significant amounts of cash and they have very large “capital-spend” pipelines …

But what’s really different in the market right now - from 10 years ago - is China and, to a lesser extent, India, Brazil and Russia …”

With the precious cargo slung over his shoulder, Vikram Singh strides through his field spreading the white granular stuff where it matters most. “I can’t afford to waste any … I had to buy it on the black market,” says the 38-year-old farmer from Dost-pur Mangroli village in the northern Indian state of Uttar Pradesh.

For the past two decades, Singh has toiled his field for wheat and rice to feed his family of six, using the white stuff to stimulate the crops and his livelihood in India’s once-fertile Gangetic Plain.

“I have to use more and more because the land is not as good as it once was … This is not only expensive, it’s very hard to get,” says Singh, who paid twice the retail amount of 1,200 rupees (about $23) for a boot-leg 50-kilogram bag of the white stuff - potash-based fertilizer.

Like Singh, farmers around the world are demanding better access and prices to the indispensable and irreplaceable pink salt known as pot-ash, which optimizes the delivery of nutrients to plants.

Pressure is also mounting on the governments of fast-emerging economies such as China and India, which view the daunting challenge of providing their booming populations with better quality food as a potential threat to national security.

Read more at The Province

Patricio Varas, the CEO of Western Potash, says there’s no doubt that Saskatchewan is the Saudi Arabia of potash.

Photograph by: Submitted Photo , The Province

The company that’s building the first new potash mine in Saskatchewan in 40 years is the same company that helped build the last new potash mine in the province in the 1970s, before it was taken over by the then-NDP government to become Potash Corp. of Saskatchewan’s Lanigan mine.

But Nobert Steiner, CEO of K+S Group of Kassel, Germany, which is building the $3.25-billion solution potash mine near Bethune, 80 km northwest of Regina, says there are no hard feelings about the forced sale of the former Alwinsal mine to the Blakeney government for $76.5 million in 1977.

“Even more than a generation later, you can hardly believe that such an act could happen in a country belonging to the western world,” Steiner told participants at a sod-turning ceremony at the Legacy project site Tuesday. “However, after so many years, we are not looking back in anger anymore.”

In fact, Steiner said K+S, which first came to Saskatchewan in the 1960s and started producing potash in 1968, was welcomed back to the province by none other than Premier Brad Wall. (Steiner said the K in K+S stands for Kali or potash in German, while the S stands for Salz or salt.)