2012/02 Turkey: Gubretas is seeking to ensure its phosphate supply

Istanbul-based fertilizer maker Gubre Fabrikalari T.A.S. (also known as Gubretas) is involved in the manufacture and sale of chemical fertilizers and phosphoric acid. The company operates two manufacturing plants in Turkey, which are located at Yarimca and Iskenderun, and controls about a quarter of the Turkish fertilizer market.

In 2008 Gubretas bought half of Razi Petrochemical Co., Iran largest fertilizer company, for US$650 million as lower natural-gas prices in Iran spurred production of fertilizer raw materials such as ammonia and urea. Razi sells its products inside Iran and also to markets like China, India and Bangladesh through Rain Trade Co., a company it owns in Turkey.

In the same fashion, Gubretas is now seeking to ensure its phosphate supply, in a country were some 30 percent of the fertilizer production is based on phosphate. Company sources said they are willing to invest something between US$150 million to US$1 billion in order to acquire phosphate capacity production in North Africa, in order to tap their access to secure and not expensive raw material.

Gubretas aims to boost sales 6 percent this year, after 8 percent growth in 2011 to US$1.2 billion. Of the total, 52 percent is from Turkey. Iranian unit Razi had a profit of US$250 million in 2011. It is estimated that the fertilizer market in Turkey will grow some 3 percent this year after it shrank 2 percent in 2011.

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India: GSFC Plans to Produce NPK by 2014-2015

State PSU Gujarat State Fertiliser and Chemical (GSFC), one of India’s largest fertilizer producers, located in the West Coast, reported that they will expand the capacity of their DAP facility at Sikka by 400,000 tonnes to produce complex fertilizers by 2014-15. The Sikka facility is located in the Jamnagar district of the state currently has production capacity of 1.1 MT per annum. The company presently imports ammonia and phosphoric acid for manufacturing DAP, and they plan also to set up new phosphoric acid capacity. In the next months they will commission a 160,000 tpa methanol plant at Vadodara.

In 2010-11 the company produced 1.5 million tonnes fertilizers, compared to 1.8 million in 2009-10. The registered net profit for the third quarter ended December 31, 2011, fell down some 25% as against the corresponding period in the previous year. The Government’s involvement in GSFC equity structure has come down to 38.4%, compared to a past 49%.

Vietnam: Giant Leap Forward in Urea Production

The FAV (Fertilizer Association of Vietnam) has announced that from 2012, Vietnam will become self-sufficient in urea, when the 800,000 tpa Ca Mau Fertilizer Plant of the Vietnam National Oil and Gas Group (PetroVietnam, the country’s biggest fertilizer producer) and the 560,000 tpa Ninh Binh Fertilizer Plant of the Vietnam Chemical Group become operational, raising the total capacity to 2.36 million tons, double that of 2011.

It is estimated that the demand for urea would be 1.8 million tonnes only in 2012. As such, Vietnam now can not only satisfy its demand, but also has products in excess for export. With the current production capacity, the supply may be higher by 560,000 tonnes per annum than the demand.

In a longer term, the Ha Bac Fertilizer Plant is expanding the production to increase the capacity from 200,000 tpa to 500,000 tonnes by 2015, and the Cong Thanh group is also considering making nitrate from coal dust with its 560,000 ton per annum plant located in Tinh Gia district of Thanh Hoa province.

Israel: Another Gas Discovery for Delek and Noble Energy

Noble Energy and the Delek Group announced on early February another significant discovery of a natural gas field off the coast of Haifa.The field, located in the Mediterranean waters 120 kilometers northwest of Israel’s northern port city, reportedly totals about 1.2 to 1.3 trillion cubic feet.

Gas-bearing strata some 40 meters thick was discovered at a depth of 5,500 meters in the offshore Tanin 1 (Crocodile) well. That strata, part of the Tamar sands structure, is divided into two prospects, Sand A and Sand B. Tests are currently being conducted by Noble Energy as the firm stabilizes the borehole that was created during drilling.

The company will conduct wireline, electrical, seismic and magnetic testing as well as logging tests to check the composition of the rocks, liquids and the natural gas at the site. The share of the Tanin license owned by Delek is through Avner Oil and Gas LP and Delek Drilling LP. The Tanin field is reportedly slightly larger than the Yam Tethys reservoir, which is rapidly depleting and which has been an expensive alternative to Israel’s Egyptian gas supply that has been repeatedly disrupted over the past year.

In a separate development, according to Globes, Delek, Isramco Ltd. and Ratio Oil Exploration have decided not to develop the Or natural gas prospect located in the Med Yavne offshore license.

Currently Israel is getting 43 percent of its natural gas from imports from Egypt, but recurrent terrorist sabotage has made this supply highly unreliable.

Brazil: The Itafos Phosphate Project Advances

Technical reports significantly increased resources at Itafόs, a phosphate project located in central Brazil, near the border of Goiás and Tocantins states. It belongs to MBAC Fertilizer Corp. and currently operates this small-scale mine and processing facility which has a production capacity of approximately 100,000 tpa. The present operation processes rock phosphate which is sold to local farmers for direct application.

MBAC focuses now on the development of a higher volume and much larger mining operation, which is expected to be in place by mid-2012. The Itafós Arraias SSP Project will include a new mine and mill facility, a sulphuric acid plant, a SSP plant and a granulation plant. At full capacity, the proposed beneficiation plant is expected to generate 330,000 tpa of phosphate rock concentrate at 28% P2O5. This phosphate concentrate will be used to produce 500,000 tpa of SSP. Beyond this proposed first phase of development, the Company is also actively investigating the potential for a second phase of development which could double production and potentially be in place as early as 2015. The project plans to produce 220,000 tpa of sulphuric acid for secondary attack in the SSP manufacturing. It will also produce 10 MW of electricity. The mine life is expected to last 14.5 years. Its strip ratio is expected to be 1.85 for the first 10 years.

MBAC Fertilizer Corp. has three other phosphate projects, namely the Santana Project, the Carmo Project, and the Araxá Phosphate/REE/Nb Project.

The Santana Project is located in the South-eastern most portion of the Para State, in Northern Brazil. The property has good prospects for phosphate and is ideally located to serve important Brazilian markets in Mato Grosso state.

The Carmo Project is located in the central Minas Gerais State of Brazil. Good infra-structure and close proximity to extensive farm land and to several bulk fertilizer blenders imply in lower minimum size requirements for standalone operations when compared to other exploration projects elsewhere in Brazil.

The Araxá Phosphate/REE/Nb Project consists of four tenements covering 214 hectares of a carbonatite in close proximity to the Municipality of Araxá in Minas Gerais State, and contains also Rare Earth Elements (REE) and Niobium mineralization. The inferred mineral resource estimate comprises of 2.7M tonnes with an average TREO content of 8.39% (using a 6% TREO cut-off) and an average of 1.41% Nb2O5 and 9.91% P2O5. But there has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the determination of a mineral resource.

Last year, MBAC Fertilizer Corp. has entered into an agreement with IFC, a member of the World Bank Group, pursuant to which IFC has agreed to provide funds by which IFC will hold an interest representing approximately 11.1% on a non-diluted basis and 10.3% on a fully-diluted basis of the common shares outstanding. The proceeds from the IFC investment will be used by MBAC for the development of the Itafós-Arraias SSP project.

Forecasts indicate Brazil will outpace the USA production of many key commodities by 2020/21 including cotton, soybean, corn and wheat because of burgeoning yield gains.

Ethiopia: the Dallol Potash Project Feasibility Study is due for completion this year

Toronto-headquartered Allana Potash Corp. is a junior mining company with a focus on the acquisition and development of potash assets internationally with its flagship in the Danakhil Potash property (also referred to as the Dallol Potash Project), which is a previously explored potash property in northeastern Ethiopia. The indicated resources are of about 673 million tonnes containing 126 million tonnes of potassium chloride (KCl) and additional inferred mineral resources totaling 596 million tonnes containing 119 million tons of KCl. A Feasibility Study is due for completion in the last quarter of the current year and it includes hydrogeological studies to identify large water sources, dissolution testwork, rock mechanical testwork, a pilot solution mining operation, and solar evaporation pond tests. The company plans to produce one million tonnes of standard MoP per year. There is an initial estimation of the operating life of the mine of thirty years.

The Danakhil Project area is the one of hottest places on earth, which allows for the use of solar evaporation after solution mining and should bring significant cost savings. Salts harvested from the ponds will be processed by standard flotation to create muriate of potash product. There are reports that Ethiopia is the cheapest place to extract potash after Jordan, because the deposits are only 100 meters (328 feet) below the surface, compared with 1,000 meters in Brazil and Canada where the grade is similar. At least part of the output is expected to be shipped to the giant consumers India and China.

The start of production is estimated at the end of 2014-early 2015. The total capital expenditure to develop the project is estimated in US$796 million, which includes costs associated with cavern development, solar evaporation ponds, brine processing and infrastructure, including power.

On April 8, 2011, the Company incorporated a wholly owned subsidiary, Allana Potash Afar PLC (Allana Ethiopia). The major shareholders of Allana Potash are Liberty Metals and Mining (16%) and International Finance Corp. (3%). Besides their Dallol Potash Project, they also have a property in Argentina, which is located near Vale’s Rio Colorado potash solution mining project.

Brazil: Chronic Domestic Potash Deficit

Brazil overtook India as the top global importer of potash in 2011, with imports of about 7.5 million tonnes  KCl, which is a 21%  increase on a year to year base.

U.Kingdom: Sirius Advances the York Potash Project

Sirius Minerals Plc, formerly Sirius Exploration Plc is a diversified holding company with interests in mineral properties in Australia and North America. In January 2011 they acquired the York Potash Project and drilled two boreholes (SM1 and SM2) and confirmed the presence of the three seams of potash mineralization. The drill was successful and now the company is seeking funding for what they call a “Definitive Feasibility Study”.

The company performed a serious expansion a couple of years ago. On October 2009, it acquired a 90.1% interest in Adavale Holdings Pty Limited, a 100% interest in Derby Salt Pty Limited, and a 100% interest in CO2 Energy Storage Pty Limited and Bicarb Sequestration Pty Limited. During the fiscal year ended March 31, 2010, the Company acquired 63.8% and 30.71% interest in Auspotash Corporation, which is engaged in the acquisition, exploration and development of mineral properties.

Tunisia: Changes in the Phosphate Industry

Given the loss of more than three quarters of its capital, Al Kimia announces that the Extraordinary General Meeting of the Algerian subsidiary, KIMIAL SpA held on 15 and 26 September 2011, decided to dissolve the Company. The company said that given the extended shutdown produced several times by the discontinuation of phosphoric acid supply, the production of 2011 was only 82,675 tons of STPP against a nominal 140,000 tonnes per year.

The Company returns to obtain a concession for the extraction and production of 100,000 tons of sodium sulphate Sebkhat Oum El Khialate Tataouine, an operation of the concession will be made by the new subsidiary “of the Salinas Tataouine “incorporated in August 2011.

One last fact concerns the size of the Company which has grown from 301 agents in 2010 to 525 agents to 31.12.2011 following the recruitment of subcontracting.

European Union: Regulation Limiting Phosphate Use in Detergents

On 10 February 2012, the EU Council adopted formally a regulation that restricts the use of phosphates and other phosphorus compounds in consumer laundry and automatic dishwasher detergents. The regulation is the result of a compromise worked out by the European Parliament and Council, on 9 November 2011, and endorsed by the EP, on 14 December. For consumer laundry detergents, the new limit value is set at 0.5 grams of phosphorus per washing process. It will be applicable from 30 June 2013. The scope of the regulation also includes detergents used in public laundrettes. The regulation also covers detergents for automatic dishwashers, for which the limit value of 0.3 grams of phosphorus in a standard dosage will apply from 1 January 2017. The regulation is limited to domestic washing machines and dishwashers. Industrial detergents and equipment are not included because technically and economically feasible alternatives to the use of phosphates do not currently exist.

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