Rules Are Changing
No surprise to those connecting the dots…its just good business and Agrium is expanding 50% production or an additional 1.5 million tons of Sask. potash…It is just not getting better for most juniors….even if they have a great resource…In time it is going to be those that can secure “financing” and ideally from non-traditional sources….ie. those that are not impacted with global financial market squeezes…
We have now heard from BHP (9 m tons of new potash planned), K+S Germany (2.8 m tons of new potash planned), Potash Corp ( 8 m tons of new potash planned from existing mine), and now Agrium with (1.5 m tons of new potash from existing mine)……You have to wonder after reading the article below…where this planned new potash is going to be sold ?...
The bottom line..is that it is NOT going to be sold…because it is slowly losing its markets…one country at a time…there is no need to expand..or build new Greenfield mines “if” your proposed market is changing the rules of the game…the risks of Ehiopia are really quite simply….less risky than the traditional stomping grounds of the cartels and the expensive operating and capital intensive basins…enter Ethiopia…and rethink BHP…time will tell…profits have a way of changing minds…always has…and always will..
If I was not invested in Allana…I would be paying attention to what is unfolding in South America…The real fear of Brazil taking “any steps” The government has to buy Verde or lose a big opportunity to control its agribusiness-related future….if not…, Brazil will be forking out $4.3 billion a year to bring in the nutrient needed to feed its arable land and keep harvest yields attractive. This is a big deal.
The other kicker is…that Verde holds patented processes to mine the thermopotash…(the Cambridge Process)…if the Brazilian Govt does not act…then one of the majors WILL take out Verde and control “that” proprietary process that could disrupt the shipment of 7 m tons of Sask. potash to Brazil year upon year…
Agrium's Board Approves Substantial Potash Expansion
December 14, 2011 Agrium Inc. (TSX:AGU) (NYSE:AGU) announced today that its Board of Directors has approved a one million tonne brownfield potash capacity expansion at its Vanscoy potash facility in Saskatchewan, Canada.
The expansion is expected to increase annual production capacity by approximately 50 percent, bringing total annual nameplate capacity to three million tonnes. Capital expenditure for the project is expected to be approximately $1,500 per tonne (capex). The majority of the project construction is expected to take place in 2012 and 2013, with completion projected by the second half of 2014.
Brazil should simply take out Verde Potash to secure future potash supply
by Brian Truscott The Potashblog
The question has to be asked: How long will the Brazilian government wait before buying out Verde Potash and making it a cornerstone of its agricultural development plans?
Everything in this question revolves around security of supply. Yes, the government has various agreements and tax-related and finance-related clauses in place, but that might not be enough when talking about a publicly-traded company.
Brazil is almost completely dependent on potash imports; the country reckons it will be going out with cap in hand, asking for 7.2 million tonnes a year by 2020, much to the delight of, say, Canpotex, the distribution arm for Potash Corp, Mosaic and Agrium.
Here's a fair guesstimate. Let’s say potash sells for $600/tonne. Then, in 2020, Brazil will be forking out $4.3 billion a year to bring in the nutrient needed to feed its arable land and keep harvest yields attractive. This is a big deal.
Enter Verde Potash, a company founded by Brazilians and now working closely with the University of Cambridge to perfect something called Thermo Potash. Definition: ThermoPotash is a slow-release, non-chloride multi-nutrientfertilizer made from silicate-based potash – ideal for Brazil’s nutrient deficient acidic soil. A preliminary economic assessment is expected in the first quarter of 2012.
Here’s the kicker: Unlike most potash projects, like the ones you see in Saskatchewan, the 1000 square kilometer Cerrado Verde project is ideal for low-cost strip mining (read: a heck of a lot cheaper than building and operating a conventional potash mine). The resource right now stands at a billion-plus tonnes, but analysts expect this to double with additional drilling.
Verde wants to start production in 2015. Where will the potash go? Not far. The project is in Minas Gerais, a state with a $70 billion agribusiness-related GDP – this is where 60% of Brazil’s potash consumption takes place. Think about that.
The potash is produced right there versus this scenario: A south Saskatchewan mine digs it up, there’s a railroad trip to Canada’s west coast, a ship waits, one that needs to be loaded. Then a long cruise south until dropping anchor in the Port of Santos where a long wait to unload ensues. Eventually, a long truck ride happens, one that goes through a seriously congested port and along less-than-perfect roads. Verde’s expected cost? $41.80 per tonne of potash. Hmmm.
If you don’t think a Potash Corp, Mosaic or a Uralkali, for that matter, isn’t looking at the potential of Verde and the size of the market,then you should probably sell vacuum cleaners – the ones that don’t lose suction. All of this comes back to security of supply. Reliability and price. And control.The government has to buy Verde or lose a big opportunity to control its agribusiness-related future..
But, if the government is smart, it would take a gamble and buy it out or take a huge piece of the company now or just before the PEA is announced to the market – and then promise the world to the founders. Basically, take it private, make everything nice and spiffy and then IPO 40% back into the market to raise the funds to recoup what you paid for the company in the first place.
But that would be unlikely, wouldn’t it…?
Watch this space.