IC Potash Corp. (
TSX: T.ICP,
Stock Forum) is among a handful of companies in the fertilizer sector that are aiming to develop new projects in a bid to take advantage of premium prices and an expected surge in demand for Sulphate of Potash (SOP), especially in emerging markets.
SOP is the second major form of potash, with a chemical formula of K2S04 and a reputation for being particularly effective in the cultivation of fruits, vegetables, potatoes, tobacco and tree nuts.
Accounting for between 5.5-6 million tonnes per year, or 10% of global potash production, SOP is also used for certain crops that do not like the chloride traditionally contained in Muriate of Potash (MOP), the product that makes up the majority of the potash market.
But while investment analysts are taking a cautious view about the outlook for the potash industry, SOP has been trading at a US$250 per tonne premium above the price of MOP.
That’s well above the historical premium of around US$100, according to William Irwin, a potash analyst with Integer Research, who says he remains bullish on the SOP market in the near term.
“We expect this industry to be very interesting to investors and producers for at least the next two to three years, and potentially beyond that,’’ the analyst said in remarks to a seminar in London, England, which were posted on the Mining Journal website.
IC Potash recently took a big step towards its goal of becoming a leading low cost producer of potassium sulphate by securing a US$10 million injection from Cartesian Capital Group, a $2 billion New York fund with investments in a variety of sectors.
The strategic investment allows IC Potash to complete vital engineering studies that will set the stage for the junior to begin the process of financing its flagship Ochoa project in New Mexico.
Ochoa is a greenfield project that is expected to produce 714,400 tons per year of SOP.
A NI 43-101-compliant technical report concluded that the Ochoa property contains significant polyhalite mineralization in quantities and grade that are expected to be attractive for mining and processing under current conditions.
ICP already has a committed off-take agreement with Yara International, a Norwegian conglomerate, which will buy 30% of the annual production from Ochoa. The term of the agreement is 15 years, with a provision for an automatic extension every five years thereafter.
However, as the estimated cap ex for the Ochoa Project is pegged at just over $1 billion, the company will soon be focusing heavily on securing the funds that are needed to put the project into production.
Other companies positioned to bring new projects online in the next few years include
South Boulder Mines Ltd. The Australian company is developing its Colluli SOP project in the Danakil region of Eritrea, East Africa. South Boulder is currently working on a feasibility study to support the development of the project.
Integer’s Irwin said Tessendro Group of Belgium, one of the world’s leading SOP producers, has had problems disposing of their hydrochloric acid.
Irwin said Tessendro recently signed a joint venture to help absorb this by-product, which could result in an increase in its production from around 600,000 tonnes annually.
The list of new projects also includes Sirius Minerals Plc’s York project in the United Kingdom and
Potash Ridge Corp’s (
TSX: T.PRK,
Stock Forum) 100%-owned Blawn Mountain project in Utah.
IC Potash was trading at 21.5 cents on Monday, leaving a market cap of $37.2 million, based on 172.9 million shares outstanding. The 52-week range is 36.5 cents and 20.5 cents.
FULL DISCLOSURE: IC Potash is a client of Stockhouse Publishing.