3 Things to KnowImportant to know now your market, know your costs and know your neighbours…
In recent weeks, we have heard of several of the largest potash companies planning on expanding production over the next 2 – 10 years. Companies within the two cartels and companies not in the cartels…What I take from this tells me that we are on the verge of witnessing a glut of potash production for years to come. It tells me that the ultimate winners will be China and India and the lower prices they will pay…and Brazil through the domestic development of the Verde Deposit and its desire to be a self reliant fertilizer country.
It always comes down to supply and demand. We know all about the coming population growth, lack of arable land and fresh water, current lack of appropriate fertilizer applications, and the increased demand for better diets from Asia…but, until there is a plan to constructively address these issues…we can not assume that the world can absorb all this planned new potash production…
If you are going to “survive” the potash boom…you better have the lowest operating costs and the lowest capital costs to get to production…you better have a plan on securing off-takes and your better have secured partners that will be there to assist with financial support.
The last thing you want is to spend over $3 billion and end up having a mine in one of “the ghost towns” created with the glut of production and much lower prices for the product…and still have the long term debt to service on the $3 billion dollar investment…so, if all this increased production is destine to come to the market in the next few years…what is more logical is that BHP is sat down by “those in the know” and shown the “real numbers” and what the best options are going forward…BHP has expressed a desire to be mining in two of the global potash basins…
Basin 1: they are in Sask. with 5 large properties and have postured that they will be producing millions of tonnes in years to come.
Basin 2: they are in Ethiopia with a huge land lease south of Allana. They have been drilling on their land for months now. We heard from the AGM that BHP will not likely take a run at the basin players until at least 5 million tons of potash production is proven up…so, Allana appears to be safe for now. Farhad said no more dilution for 1.5 – 2.0 years…enough money to take us through our current Bankable Feasibility Study. In the first quarter of 2012 we know we are going to have news coming on our pending revised resource estimate, some element of “financing” for our mine capex. Farhad has been to Asia 3 times during 2011…and we have had no official news from any of those visits..?
I sincerely hope we continue to achieve the milestones required on our way to production…I hope we stay under the radar until we have completed the BFS..
Because... at that time we will have all the ducks in a row….and all the financing in place…off takes in place…and a share price at a much different place…time will tell.
Important to never forget that the largest miner in the world BHP…understands the rules of the game when it comes to… “ a return to good old-fashioned cut throat competition.” just ask anyone involved in iron ore…
Potash Companies Appear Intent on Pushing the Capacity Envelope
Potashblog, Editor: Brian Truscott December 27, 2011 If one adds that to the hectic production and expansion schedules being seen by numerous companies in Canada’s potash-rich province of Saskatchewan, there should be some concern that this historically cyclical sector could be on its way to creating a number of ghost townsacross Russian, Belarusian and Canadian plains in coming years.
Capacity concerns will no doubt continue to weigh on the potash sector, given the number of greenfield projects and brownfield expansion plans in the pipeline. Market watchers can now add Belaruskali to the list of global companies keen on ramping up capacity, apparently with little regard for the economics of supply and demand. Optimists say potash companies are adept at regulating themselves, by keeping supply off the market during economic downturns and then ramping up production when prices and demand rise. But there are the number of new sector players who aren’t part of the historic cartels, leading some to forecast a return to good old-fashioned cut throat competition. Translation: cartels such as Canpotex and the Belarusian Potash Company will lose influence and control of what will be a larger, dynamic and international market. Now, having said that, the Belarusian Telegraph Agency reported this week that:
“The second priority complex will allow raising the mine’s capacity from 1 million tonnes in 2011 to 3 million tonnes in 2012. In December 2012 the company plans to commission a third priority complex that will allow reaching the designed capacity of the mine – 6 million tonnes of ore for 35 years. The startup complex at the Krasnoslobodsky mine was commissioned in May 2009.
“The commissioning of the second priority complex is part of the measures meant to raise Belaruskali’s potash fertilizers output by 17% in 2012 or up to 10.3 million tonnes. In July 2012 the company will open up the Berezovsky mine, which designed capacity will reach 6 million tonnes per annum by 2015, with the life cycle of at least 40 years.
“At present Belaruskali can make 8.8 million tonnes of potash fertilizers per annum. In 2010 the figure stood at 8.6 million tonnes. In 2011 the company is expected to export over 7.5 million tonnes (6.8 million tonnes in 2010). The company plans to earn over $3 billion in hard currency, 50% more than the previous year.”
So what does this mean? Well, in 2015 Belaruskali will have output capacity of 11 million metric tons per year. But that’s just the beginning, really. The company wants to raise the figure to 15 million tonnes.
The Petrikovskoye field and its future ore mining and processing enterprise will increase the capacity by 3 million tonnes. What’s more, exploration of the Nezhinsky section of the Starobinskoye field and the construction of yet another potash factory will ensure the production of over 15 million tonnes by the end of the decade.