More news:Spur kicks Yichang expansion plans into high gear
2005-07-06 09:26 ET - News Release
Mr. D. Robert Rennie reports
SPUR VENTURES ACCELERATES ITS GROWTH STRATEGY IN CHINA
Spur Ventures Inc.'s board of directors has approved its plans to fast-track expansion of its Yichang Spur Chemicals (YSC) compound NPK fertilizer plant in Yichang City, Hubei province, PRC, in order to take advantage of the strong demand for NPKs in China combined with strong pricing for phosphate rock.
Spur acquired Xinyan Chemical's underperforming NPK facility in April of 2004 renaming it YSC. Since that time Spur has doubled the plant's annual output and in 2005 successfully commissioned a 60,000-tonne-per-year phosphoric acid plant, set a 5,310-metric-tonne production record in May and recorded the first profitable quarter in the plant's history.
Spur's strategy is to differentiate itself from its competitors by integrating its rich phosphate mines with manufacturing of phosphate-based fertilizers and marketing.
Spur's strategy of integration is both upstream into raw materials and downstream into fertilizer products. Since 2004 the prices of raw materials (phosphoric acid, sulphuric acid, nitrogen and potash) required to manufacture NPK's have increased by 20 to 60 per cent.
The first upstream integration was implemented in the first quarter of 2005 with the completion of a 60,000-tonne-per-year phosphoric acid plant which eliminated the need to purchase phosphoric acid, the price of which had increased 60 per cent in the last year, and purchasing rock phosphate instead, which has increased only 30 per cent. Spur now purchases rock on the open market but with the opening of its own mines in the near future, will have a captive rock phosphate source.
Spur will now implement the second stage of its upstream integration by building a 300,000-tonne-per-year sulphuric acid plant in 2006, eliminating its dependence on purchasing sulphuric acid which has tended to show great fluctuation in supply and price which has increased by 50 per cent. Sulphuric acid will be substituted with elemental sulphur the price of which has increased by 20 per cent and for which supply is reliable because it is largely imported from Canada. YSC expects to produce its own sulphuric acid at substantially lower costs than purchasing it, and in addition will have security of supply. Burning of elemental sulphur will also permit YSC to eliminate coal and electricity purchases due to byproduct steam and cogeneration.
Spur's ultimate objective is to process its raw materials into fertilizers. The next stage of downstream integration, also in 2006, will be the construction of a 100,000-tonne-per-year mono-ammonium phosphate plant (MAP) in Yichang. MAP is an essential phosphate source for the manufacture of Spur's NPKs. By producing MAP, Spur introduces greater flexibility into its production since either several NPK formulations can be produced to meet a broader market demand or MAP can be sold as a phosphate fertilizer in its own right to industrial users.
The final stage of downstream integration will be the construction of a 200,000-tonne-per-year NPK facility at Yichang in early 2007 bringing total production at this facility to 300,000 tonnes per year. Spur has just acquired an additional 200,000 metric tonnes of NPK capacity through its merger with Tianren giving a total of 500,000 metric tonnes of NPKs by the end of this expansion.
The construction of the sulphuric acid and MAP plants is planned for 2006 at a capital cost of approximately $20-million (U.S.). The 200,000 tonne-per-year NPK plant is scheduled to be constructed in 2007 at a capital cost of approximately $6-million (U.S.).
Simultaneously, Spur's mining subsidiary, Yichang Maple Leaf Chemicals (YMC), plans to begin the first two stages of mining the Diaziping deposit to supply rock phosphate to YSC. Development of the first 150,000-tonne-per-year phosphate mine is expected to start in the fourth quarter of 2005 and the second 150,000-tonne-per-year phosphate mine by the end of 2005. The total capital cost is expected to approximate $10-million (U.S.).
Spur is currently analyzing its options for financing of these capital expenditures over the next two years, including bank debt in China, in order to complete this strategy.
Spur has commenced final engineering and environmental studies, and is also in the process of obtaining construction and other permits for these projects.