Fertilizer Capacities

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Potash Fertilizers Snapshot

Potassium is an essential plant nutrient and an essential nutritional requirement for both humans and animals, for which there is no effective substitute. Potassium is used to make fertilizer, biofuels, gunpowder, and various industrial chemicals. About ninety percent of potash is used for fertilizer manufacture. Potassium Chloride (KCl) is the most common source of potassium. The mineral plays a vital role in crop growth and helps plants resist cold and drought. Due to its high chlorine content, MOP is widely used in chlorine resistant crops such as wheat, rice, soya, maize, and pastures.

Potassium intake is also important in animal nutrition and milk production.

Potassium sulphate and potassium nitrate are the main non-chloride K fertilizers.

 

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Potash reserves are concentrated in just a few areas: major producing regions include the FSU, North America, Germany, and the Dead Sea area.

 

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Compared with other fertilizer nutrients, the potash industry is much consolidated, with Canada, Russia, Belarus and Germany accounting for more than 3/4 of world production. There are about twelve large potash manufacturers, most of them non-governmental owned.

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         Source: Agrium Fact Book 2014-2015

 

Potash changes are driven mainly by the demand of the global fertilizer industry, in particular the Indian and the Chinese one, but also by the growth of the agrofuel production. The key crops influencing the potash price are first of all corn, and then soybeans and rice.

 

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Ethiopia: Allana SOP Project at Danakhil

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. Now Allana has announced the results from an independent preliminary economic assessment (PEA) of production of SOP (sulphate of potash), a premium potash product widely used on chloride sensitive crops such as tobacco, fruits and vegetables, as well as nuts. In 2014 world production was of some 2.7 million tonnes K2O. China is the largest consumer. SOP production would be a separate mining operation producing about 1 million metric tons per year over an estimated 77- year operating life through solution mining of brine followed by solar evaporation. 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. It has been reported that Ethiopia is the cheapest place to extract potash after Jordan, because the deposits are only 100 meters below the surface, compared with about 1,000 meters in Brazil and Canada where the grade is similar. Total operating costs, including production, transportation, port storage and loading, and sustaining capital expenditures, are estimated at $130/mt of SOP. The payback period from the start of production is estimated at four years.

POTASH FERTILIZER SNAPSHOT

Potassium is an essential plant nutrient and an essential nutritional requirement for both humans and animals, for which there is no effective substitute. Potassium is used to make fertilizer, biofuels, gun-powder, and various industrial chemicals. About ninety percent of potash is used for fertilizer manufacture. Potassium Chloride (KCl) is the most common source of potassium. The mineral plays a vital role in crop growth and helps plants resist cold and drought. Due to its high chlorine content, MOP is widely used in chlorine resistant crops such as wheat, rice, soya, maize, and pastures. Potassium intake is also important in animal nutrition and milk production.

Potassium sulphate and potassium nitrate are the main non-chloride K fertilizers.

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Compared with other fertilizer nutrients, the potash industry is much consolidated, with Canada, Russia, Belarus and Germany accounting for more than 3/4 of world production. There are about twelve large potash manufacturers, most of them non-governmental owned.

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Significant additions to the global potash capacity are planned in Argentina, Belarus, Brazil, Canada, China, Congo (Brazzaville), and the United Kingdom.

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Potash reserves are concentrated in just a few areas: major producing regions include the FSU, North America, Germany, and the Dead Sea area.

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Potash production is located only in about a dozen countries and some 80% of the world output is traded.

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Potash changes are driven mainly by the demand of the global fertilizer industry, in particular the Indian and the Chinese one, but also by the growth of the agrofuel production. The key crops influencing the potash price are first of all corn, and then soybeans and rice.

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India: RCF Could Purchase Into Canadian Potash Mines

Rashtriya Chemicals & Fertilizers Ltd. (RCF), India’s second-biggest state-run maker of soil nutrients, plans to buy into potash mines in countries including Canada to secure supplies. Rashtriya Chemicals joins companies including Sinofert Holdings Ltd., a unit of China’s largest chemicals trader, that are looking for acquisitions overseas. India and China, the two most populous countries in the world, need to boost supplies of potash to ensure food security. World potash demand is forecasted to rise 3 percent this year, leaving a shortage, because of delays in commissioning new capacity. India and China, the two most populous countries in the world, need to boost supplies of potash to ensure food security. India imported 3.9 million tonnes of potash in the year ended last March, down from 6.3 million tonnes a year earlier, but China’s potash imports climbed to 6.4 million tonnes in 2011, up 22 percent from 5.24 million tonnes in 2010. According to the World Bank, MOP prices were last July 462.5 dollar per tonne, standard grade, spot, f.o.b. Vancouver, compared to an annual average of USD 435.3 in 2011.

Ethiopia: Potash and the Country Infrastructure Building

Ethiopia, sub-Saharan Africa’s second-most populous nation, is in the middle of a five-year plan to modernize and upgrade its infrastructure and industries. The government last year signed two agreements with Chinese companies to build a 4,744 kilometer rail network to Djibouti.

Landlocked Ethiopia lost its access to the sea after Eritrea voted for independence in 1993. The new rail line will run between the cities of Mekele and Hara Gebaya.

Toronto-headquartered Allana Potash Corp., Sainik Potash Plc of India, Ethiopian Potash Corp. and Melbourne-based BHP Billiton Ltd. are all developing projects to extract potash in the Afar region. 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 Ethiopian Potash Corp. is a mineral resources company engaged in the acquisition, exploration and development of mineral properties in Eastern Africa and in 2011 they acquired an interest in the Danakil Potash Permits. The estimated capacity for the Dallol project is 1-1.5 million tons potash per year, with resources of more than 30 years mining. A feasibility study work on the project is in progress and scheduled for completion in the third quarter of 2012. The study includes hydrogeological studies to identify large water sources, dissolution testwork, rock mechanical testwork, a pilot solution mining operation, and solar evaporation pond tests.

Ethiopia signed a US$ 1.5 billion agreement with state-run China Communications Construction Co. to build a railway to carry potash from mines being developed in the nation’s northeast. The 360-kilometer line will transport passengers and freight along a route to neighboring Djibouti’s Tadjourah port, which is being built. It should be completed by July 2015. The Chinese government-owned transportation infrastructure company CCCC will be mobilizing substantial resources to guarantee completion of the project. They have a market capitalization of about 12.8 billion dollar, and over 90,000 employees.

Global demand for fertilizer is rising steadily as tight market conditions for oilseeds and corn are giving farmers an incentive to boost production. But the nutrients increase will be higher for potash. According to Paris-based IFA, in the next years average annual growth in potash demand is seen at 3.7 percent, compared with 2.3 percent for phosphates and 1.5 percent for nitrogen fertilizer.

Brazil: Lara Options its Sergipe Potash Project to Aguia Resources

Canada-based Lara Exploration Ltd. has signed an Option Agreement with Australia-based Aguia Resources Limited, whereby Aguia may pay US$100,000 and issue up to 15 million shares to Lara and carry out US$1.5 million of exploration within two years of the renewal of certain of the exploration licenses to acquire a 100% interest in Lara’s Sergipe Potash Project in northeast Brazil. Lara is engaged in identification, acquisition and exploration of precious and base metal deposits and other resource opportunities in South America; it holds a diverse portfolio of prospects and deposits in Brazil, Peru, Colombia and China, including also the Boyaca Phosphate Project.

Under the terms of the agreement, Aguia will issue 4 million shares (which will be subject to a 12 month hold period) to Lara upon publication of the extension of certain of the exploration licenses and carry out exploration of at least US$1.5 million in exploration expenditures by the first anniversary of the Extension Date. The exploration must include at least one drill hole to test the known potash horizons within the Property (to a depth that will result in the targeted Ibura Member of the Muribeca Formation being fully tested). Such exploration is a firm commitment and not optional unless Aguia pays $1.5 million to Lara, but Aguia may terminate the Agreement if the exploration licenses are not extended within 2 years.

Aguia may then issue a further 6 million shares to Lara on or before the first anniversary of the Extension Date to earn a 75% interest in the project. Aguia may issue and deliver a further 5 million shares (free of any restrictions on transfer through the ASX) to Lara on or before the second anniversary of the Extension Date to acquire 100% ownership and control of the project.

Lara’s Sergipe Potash Project comprises 21,483 hectares of exploration licenses located in Sergipe State, northeast Brazil. The licenses are adjacent to and cover the extensions of the potash-bearing sedimentary basins of the Vale owned Taquari-Vassouras mine, which produces about 650,000 tons of potash annually. These license areas have been explored extensively for oil and gas in the past and a database of seismic surveys and exploration drilling is available through the Brazilian National Petroleum Agency. This ANP data includes eight wells drilled within Lara’s license areas, several of which intercepted potash, with the best drilled intercept a cumulative 37.6 meters of potash mineralization in ten separate sedimentary units between 1,710 and 1,806 meters depth. Aguia has approximately 68,700 hectares of licenses including blocks that are adjacent and contiguous with those of Lara in the northern part of the basin and blocks covering southern extensions of the basin. It owns in Brazil the Mata da Corda Phosphate Project.

Canada: Yara bets on potash

Giant fertilizer maker Yara has agreed to make a strategic investment of approximately CAD 40 million in IC Potash Corp (ICP) and has entered into an off-take arrangement for 30% of all products produced by ICP’s Ochoa project in New Mexico for a period of 15 years. ICP and Yara have also agreed to discuss the possibility of establishing a jointly held entity for the purpose of marketing products produced by the Ochoa project. The New Mexico mine contains proven and probable reserves of more than 400 million tonnes of ore. Potash is used by farmers to strengthen plant roots and defend against drought.

ICP’s objective is to start commercial production in the fourth quarter 2015, with an estimated annual production of some 0.7 million tonnes of SOP and SOPM (Potash Magnesium Sulphate). SOP is a non-chloride based potash fertilizer used in the cash crop and horticultural industries, and for agriculture in saline and dry soils. It is considered a premium product, carrying a substantial premium over the price of MOP.

In another development, Ethiopotash is developing a potash resource in Dallol in the Danakil Depression of Ethiopia, based on the mining and exploration permits held by the company. Yara entered in 2009  into an agreement with two partners to participate with 16.67% ownership in Ethiopotash. The partners were XLR with 57.33% ownership and management of the company, and Seftec with 26% ownership. Yara has now agreed to increase its ownership to 51% and take over management of the company, while XLR will retain a 49% ownership.

Estimated capacity for the Dallol project is 1-1.5 million tonnes potash per year, with resources of more than thirty years mining. Drilling activity started at site in 2010, and most drilling and drilling related activities have now been completed. The project development phase will be finalized with a Definitive Bankable Feasibility study which is expected to be completed in mid 2013. This study will be the basis for a decision on whether to proceed with project execution and realization, with production start-up 2-3 years thereafter.

United Kingdom: Emergence of the York Potash Project

Israel Chemicals monopoly on potash mining in the United Kingdom will be challenged by a proposed US$2.7 billion potash mine that’s set to become the largest in the U.K., and is in talks with lenders on helping to finance the development. London-based potash mineral company Sirius Minerals Plc explores for and mines potash on properties in North America, the United Kingdom, and Australia, and they have done a preliminary study on a mine on the Yorkshire coast in northeast England. The project, called York, may host the world’s largest estimated resource of polyhalite, used to make SOP (sulfate of potash), the rarer and more valuable of the two main forms of the fertilizer nutrient. Sirius plans to produce an annual 1.4 million tonnes of potash as from 2017 and is studying an expansion to 4.1 million tonnes a year by 2024 at an additional cost of about US$3.3 billion. The project could include also gypsum and epsomite (a hydrous magnesium sulfate mineral) production.

Besides the North Yorkshire mine, Sirius Minerals (formerly Sirius Exploration Plc) holds tenements in the Williston Basin in North Dakota in the United States, the Canning Basin in Western Australia, and the Adavale Basin in Queensland, Australia. The company acquired York Potash Ltd. in January 2011.

Belgium: EuroChem acquired BASF fertilizer capacities in Antwerp

The world leading chemical company BASF has completed the sale of its fertilizers activities in Antwerp, Belgium, to Russia’s largest mineral fertilizer maker, EuroChem, as of March 31, 2012, as planned. The appropriate antitrust authorities have given their approval for the transaction. The total purchase price amounts to around €830 million, including a deferred part of circa €130 million payable over the period 2013 to 2016. This transaction will lead to an expected pre-tax disposal gain of approximately €600 million for BASF in the first quarter of 2012. EuroChem is one of the top twelve global agrochemical companies by nutrient capacity, producing primarily nitrogen and phosphate fertilizers, as well as certain organic synthesis products and iron ore. They rank #6 in the global capacities of tradeable ammonia and #7 by capacity of tradeable phosphoric acid. In 2011 they accounted for a fourth of Russia’s nitrogen market and a fifth of its phosphate market. They have over 900 million tonnes of proven and probable potash reserves.

The scope of the transaction includes plants for CAN/AN fertilizers (calcium ammonium nitrate/ammonium nitrate), NPK fertilizers (nitrogen-phosphate-potassium) and nitrophosphoric acid as well as three related nitric acid plants. The activities were carved out into a separate company, now named EuroChem Antwerpen NV. About 330 employees have been transferred to the new company.

The EuroChem Antwerpen facilities include 2.3 million tonnes of NPK and CAN/AN; they are surrounded by the Scheldt and Scheldt-Rhine Canal and have access to jetties providing infrastructure for fertilizer distribution and for raw material acquisition via the North Sea and the Rhine River. EuroChem Antwerpen is now one of the largest fertilizer complexes in Europe and it will expand EuroChem share in that market in 3%.

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