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Potash/Phosphate

Sask. potash royalty structure ‘alarmingly inefficient:’ report (Canadian Press/CTV News – January 7, 2015)

http://regina.ctvnews.ca/

A new report says Saskatchewan’s potash royalty structure needs to be overhauled because it is too complex and “alarmingly inefficient.”

Jack Mintz, a professor at the University of Calgary, says the royalty program is the most complicated in the world. “Hardly anyone understands the Saskatchewan system,” said Mintz, who is the director of the university’s School of Public Policy.

His report released Wednesday says that while Saskatchewan produces almost one-third of the world’s potash, its tax on the resource isn’t competitive on an international level. “What you really want is something that’s stable,” said Mintz, who added that there are wide fluctuations in the current approach.

The royalties collected by governments from resource companies help fill provincial coffers. Saskatchewan’s system includes a production-based levy, revenue-based levies, profit-based taxes and other taxes on capital investment.

“Saskatchewan is competitive as long as there is a lot of investment that is undertaken by firms,” Mintz said. “But it’s not very competitive — in fact it actually has the highest effective tax rate on investments compared to any other country that we look at — when companies aren’t investing as much as the 2002 period.”

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Uralkali Gains Most in 5 Years on Output Goal, Share-Deal Delay – by Yuliya Fedorinova (Bloomberg News – December 18, 2014)

http://www.businessweek.com/

OAO Uralkali jumped the most more than five years in Moscow as the largest potash company raised its output goal even after one mine was halted by flooding and it delayed a share deal that would have left it less room to pay dividends.

“With increased capacity utilization at other mines, we intend to produce 12 million tons of potash this year to meet strong demand from our customers,” Chief Executive Officer Dmitry Osipov said in a statement. In August, Uralkali estimated annual output of the fertilizer of 11.5 million metric tons.

The potash producer advanced 14 percent, the biggest gain since May 2009, to 141.50 rubles by the close in Moscow trading, paring its loss for the year to 18 percent.

Uralkali is monitoring the Solikamsk-2 mine in Russia’s Perm region after water poured into the site last month. A sinkhole that has widened to 54 meters (177 feet) by 83 meters opened near the mine, swallowing up summer homes. Uralkali sees a high risk the mine will be completely flooded, forcing it to abandon a site contributing almost 18 percent of its capacity.

“We expect the accident to have an insignificant impact on our 2014 full-year output target,” Osipov said today.

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BHP Turns to Fertilizers in Search for Growth – by Chuin-Wei Yap (Wall Street Journal – December 11, 2014)

http://online.wsj.com/home-page

BHP Executive: Potash Seen as Strategic Focus for China Growth

SHANGHAI—Global mining giant BHP Billiton Ltd. is likely to raise the profile of fertilizers among its suite of products as it hunts for resources to tap longer-term growth in China.

The Anglo-Australian miner said Thursday it is focusing on potash as an area of strategic growth in China, adding to four key markets— iron ore, oil and natural gas, copper and coal—that the company had identified earlier this year as a slimmed-down slate designed to help BHP concentrate on getting better returns for investors.

“Potash can be our fifth pillar,” said Mike Henry, president of BHP’s health, safety and environment marketing and technology.

BHP owns the giant Jansen potash development in western Canada that could increase global supply of the fertilizer by almost 15%. The company in 2010 had also made an abortive $39 billion bid for Potash Corp. of Saskatchewan, which the Canadian producer rejected. Potash is seen by farmers as a more attractive resource as it produces more nutrients in plants compared with other fertilizers.

“Diets will continue to shift, requiring more agricultural product. That will mean you will need more fertilizer,” Mr. Henry said at a BHP event. “China will continue to be a big part of that picture.”

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A billion tonnes of premium potash! – by Lawrence Williams (Mineweb.com – December 5, 2014)

http://www.mineweb.com/

A vast potash deposit in Eritrea offers suitability for producing a premium potash fertilizer, which commands high prices.

LONDON (MINEWEB) – At an investment conference like this week’s Mines & Money in London one can be besieged by junior miners/explorers all with good stories to tell. The fallout in the junior sector has already tended to do the sorting of the wheat from the chaff. But even so some will have seemingly better stories to tell than others – the problem for the dispassionate observer tends to be to rate those which might appear to stand out.

As is the nature of things these days there does tend to be a concentration on gold explorers/developers as gold has an aura which transcends reality. As my former colleague Chris Hinde at SNL is always keen to point out, in terms of global value of production coal, iron ore and copper all rank far higher than gold.

But what of other metals and minerals? There are those who favour nickel, zinc, uranium etc. as the next big thing in terms of price potential, but the history of mining suggests that perhaps the real profits in the industry are made in bulk materials where high volumes trump high values – so what of potash?

Go back a couple of years and it was potash which was rated to be the next big thing.

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Flooded Mine Bolsters BHP’s Plan for Potash, CEO Says – by David Stringer (Bloomberg News – November 24, 2014)

http://www.bloomberg.com/

The flooding of a mine owned by the world’s biggest potash producer is confirmation for BHP Billiton Ltd. (BHP)’s Chief Executive Officer Andrew Mackenzie of the wisdom of his company’s planned move into the industry.

“These sorts of factors, combined with continued economic growth and demand for potash all conspire, if you like, to bring toward us the time when a new mine is required,” Mackenzie said in an interview in Sydney. “We have the lowest cost mine that would be useful to bring into the market at that stage.”

According to Mackenzie, no major new mines have begun production since the 1970s and the halt of operations at Uralkali’s Solikamsk-2 mine, which accounts for 3 percent of world supply, is a sign of the vulnerability of supply — just as the need to feed a booming global population spurs demand.

BHP is looking to build its Jansen project in Canada’s Saskatchewan province sometime in the next decade, though Mackenzie is cautious about giving an exact timeline. Spending of $3.8 billion has been approved so far on Jansen, including mine and service shafts, and Citigroup Inc. (C) forecasts the whole project may cost $16 billion.

“We do know we have to wait for the market to come towards us, but once those shafts are complete, we are only three to four years — at most — from first potash,” Mackenzie said yesterday in the interview.

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What Uralkali’s mine shutdown may mean for the potash market – by Jonathan Ratner (National Post – November 20, 2014)

The National Post is Canada’s second largest national paper.

A major supply outage at one of Uralkali’s potash mines in Russia raises the prospect of a much tighter global market for the commodity and could serve as a much-needed catalyst for Canadian fertilizer stocks.

The shutdown of the Solikamsk-2 potash mine after Uralkali detected an increased flow of brine, which can weaken a mine’s structure, bodes particularly well for producers such as Potash Corp. of Saskatchewan Inc. to increase their sales since the Russian mine has annual capacity of approximately 2.3 million tonnes.

Raymond James analyst Steve Hansen said early indications are that the shutdown will be an extended one or possibly worse, and it comes during a period of international contract negotiations, which could influence both Chinese and Indian contract pricing to the upside.

He raised his 2015 international pricing benchmarks by US$10 per tonne to reflect the additional bargaining leverage that potash marketer Canpotex, whose members include Agrium Inc., Mosaic Co. and Potash Corp., should get from this development.

“With both Uralkali and Belaruskali running close to flat out of late, we believe that much of the volume shortfall stemming from this supply outage will accrue disproportionately to the western-based producers (i.e., Canpotex) who possess ample slack capacity,” he told clients.

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K+S Raises Profit, Sales Goals as Potash Prices Improve – by Sheenagh Matthews (Bloomberg News – November 13, 2014)

http://www.bloomberg.com/

K+S AG (SDF), Europe’s largest potash supplier, unexpectedly raised its full-year profit forecast by 12 percent as prices for the crop nutrient recovered more quickly than previously thought. The shares rose the most in almost a year in Frankfurt trading.

Earnings before interest, tax and some hedging transactions, called EBIT I, may be as much as 640 million euros ($797 million), the Kassel, Germany-based company said today in a statement. Previously K+S predicted as much as 570 million euros and a Bloomberg survey shows analysts had estimated 567 million euros.

Chief Executive Officer Norbert Steiner started a 500 million-euro cost-cutting program to help counter a drop in potash prices, triggered by Russian rival OAO Uralkali bringing extra capacity into the market last year. A “slight upwards trend” in prices is now evident, the company said today.

“All in all 2014 is looking good so far,” Chief Financial Officer Burkhard Lohr said in a video posted on the company’s website. “The long-term perspective of our business is very optimistic. Our positive business trends are holding strong.”

The shares jumped as much as 6.1 percent, the biggest intraday gain since November last year, to 23.65 euros. The stock was trading 5 percent higher at 23.43 euros as of 9:06 a.m. local time. K+S has gained 3.7 percent this year for a market value of 4.5 billion euros.

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Investment giant Capital Group boosts Potash Corp. stake above 10% – by Peter Koven (National Post – November 12, 2014)

The National Post is Canada’s second largest national paper.

The global investment giant Capital Group Cos. appears to be a fan of Jochen Tilk.

The Los Angeles-based firm disclosed in a filing this week that it has boosted its stake in Potash Corp. of Saskatchewan Inc. to 83.1 million shares, or just above 10% of the total. It owns nearly double the shares of any other single investor.

In late 2013 and early 2014, Capital Group’s stake in Saskatoon-based Potash Corp. was around 40 million shares. It has skyrocketed since then, a period that roughly coincides with Mr. Tilk joining the company. He was named chief executive in April and took over for the retiring Bill Doyle in July.

Capital Group has a history with Mr. Tilk, dating to his days as CEO of Inmet Mining Corp. Capital Group was Inmet’s third-biggest shareholder when it was acquired early last year by First Quantum Minerals Ltd. for $4.8-billion. That takeover made Mr. Tilk a free agent until Potash Corp. came calling.

Mr. Tilk spent more than two decades at Inmet in various roles and played a key role in the company’s success. He is known for his strong operational skills, though he is far less of a promoter than Mr. Doyle.

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Canada’s Potash to spend over $53 million in US Clean Air Act case – by Jonathan Stempel and Rod Nickel (Reuters U.S. – November 6, 2014)

http://www.reuters.com/

(Reuters) – Potash Corp of Saskatchewan Inc agreed to spend more than $52 million on plant improvements and pay a $1.3 million civil penalty to resolve U.S. charges that it violated the Clean Air Act over the emission of harmful pollutants such as sulfur dioxide, U.S. authorities said.

Thursday’s accord with the world’s largest fertilizer producer includes a consent decree, and is the largest in the U.S. Department of Justice’s effort to address Clean Air Act violations by sulfuric acid producers.

It resolves claims by the Justice Department and the U.S. Environmental Protection Agency that three Potash units built or modified several sulfuric acid plants in ways that allowed the emission of excess sulfur dioxide into nearby communities.

Potash spokesman Tom Pasztor said that while the company disagrees with the EPA’s interpretation of the Clean Air Act, “we opted, rather than litigate, to work with them and other regulators to resolve this dispute.”

Sulfur dioxide has been linked to respiratory and cardiovascular problems, including premature death, and contributes to acid rain, haze and smog.

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Saskatchewan mining has quiet future – by Paul Sinkewicz (Regina Leader-Post – October 25, 2014)

http://www.leaderpost.com/index.html

Gouging potash from deep beneath Saskatchewan’s surface has been the work of nasty, snarling, belching beasts of machines for more than 60 years.

The application of brute force courtesy of workhorse diesel engines did the job just fine, but with each burly r.p.m. came the inevitable byproducts of internal combustion – fumes and diesel particles and the need to bring more sweet, clean air down the shaft and deep into the subterranean tendrils of the mines.

That will all change if Patric Byrns has his way. The president and CEO of PapaBravo Innovations has been rapidly creating a new way of doing business in the province’s potash mines with a line of electric trucks. They are clean, quiet and powerful, and they are attracting attention.

“You can only exhaust so much diesel particulate into a confined space without expanding the ventilation system,” said Byrns. “So, in that environment, if you can replace diesel engines with electrics, it expands their production capabilities for what they have for ventilation, and ventilation costs a lot of money.”

Byrns said converting to electric vehicles provides operators with almost a blank cheque for how many vehicles they can put underground.

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Resources, Empire & Labour: Crisis, Lessons & Alternatives – Edited by David Leadbeater

To order a copy of Resources, Empire & Labour: Crisis, Lessons & Alternatives, click here: http://fernwoodpublishing.ca/book/resources-empire-and-labour

The interconnections of natural resources, empire and labour run through the most central and conflict-ridden crises of our times: war, environmental degradation, impoverishment and plutocracy. Crucial to understand and to change the conditions that give rise to these crises is the critical study of resource development and, more broadly, the resources question, which is the subject of this volume. Intended for researchers, students and activists, the chapters in Resources, Empire and Labour illuminate key aspects of the resources question from a variety of angles through concrete analyses and histories focused on the extractive industries of mining, oil and gas.

Saskatchewan: Social Democracy in a Resource Hinterland – by John W. Warnock

Saskatchewan has always been seen as a hinterland area and economy within the Canadian territorial state. Geographically, it is part of the interior plains of the North American continent. Prior to the European colonial invasion it was the home to Indigenous Peoples who had adapted to the local ecology and survived mainly as hunter-gatherer communities. The colonial settlement of the region expanded in the late nineteenth century under the National Policy of John A. Macdonald’s Conservative government. Across the prairie grain belt, land taken from the Indigenous Peoples was declared state land and then distributed to white settlers through the Homestead Acts.

The National Policy was a capital accumulation project: the creation of a national market, the population of the west by white settlers from Europe and the United States, the development of the wheat economy for export and the protection of industrial capitalism in central Canada.Behind a tariff wall, an economic surplus could be extracted from independent commodity producers via banking and finance and the monopoly power of the farm supply industry and the downstream processing and distribution industries. As I have argued and referenced elsewhere (Warnock 2004), this system of political economy became a major Canadian example ofmetropolitan domination of hinterland areas.

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BHP Billiton Dispatches Top Manager to Much-Watched Potash Project – by ALISTAIR MACDONALD, RHIANNON HOYLE and ELENA CHERNEY (Wall Street Journal – September 29, 2014)

http://online.wsj.com/home-page

Industry Will Watch Closely for Clues to Company’s Next Move for Massive Mine

BHP Billiton BLT.LN -0.32% PLC. has sent its top project manager to run the giant Jansen potash development in western Canada, a move the potash market will scrutinize for clues to BHP’s plans for its Canadian mine. BHP Billiton’s Phil Montgomery, its head of group project management, last month arrived in Saskatchewan from Australia, a spokeswoman said.

At stake is a mine that—if producing today—would increase global supply of the key fertilizer ingredient by almost 15% according to Scotiabank. That would worsen an oversupply problem for potash. The price of potash, which is fixed through long-term contracts, has rallied by as much as 17% this year on better-than-expected demand, according to analysts. Analysts, though, and some BHP executives, believe that this rally will fade as the increase in demand fizzles.

BHP has already committed some $3.8 billion to a project that it says has no fixed completion date. Last December, work was halted for several months amid technical trouble.

“Jansen has become almost mythological in the industry,” said Matthew Korn, an analyst at Barclays, BARC.LN +0.64% said of the project and the prospects of it being finished. “We know it is there, we know it represents a load of volume, but in terms of timing I don’t think anyone believes this will happen before 2020, if at all,” Mr. Korn added.

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Yara, CF in talks to create $27-billion global fertilizer giant to rival Canada’s Potash Corp – by Peter Koven (National Post – September 23, 2014)

The National Post is Canada’s second largest national paper.

A potential combination of the world’s two biggest nitrogen producers threatens to break up the established order in the fertilizer industry and create a new dominant player to match Potash Corp. of Saskatchewan Inc.

U.S. producer CF Industries Holdings Inc. and Norwegian firm Yara International ASA announced Tuesday they are in early negotiations to form a US$27-billion giant. It would be the untouchable leader of the nitrogen fertilizer sector, with more than four times as much ammonia production capacity as the next largest rival.

“We’ve had a slew of M&A on the nitrogen side in the last four or five years, but it would be the crowning achievement if these guys get together,” said Spencer Churchill, an analyst at Paradigm Capital. “Because they would be just a dominant force.”

The proposed “merger of equals” got an immediate thumbs-up from investors and analysts, as the two companies appear to be a sensible fit. CF is the dominant producer in the United States, while Yara is a big player in other countries and has a broad distribution network that CF can access. There are possible tax synergies for CF shareholders if the combined company is headquartered outside the U.S. And Yara would benefit from the low natural gas prices CF enjoys in North America.

Nitrogen prices have held up better than potash prices in recent years. As a result, there is speculation a combined CF-Yara could become the flagship investment in the sector, unseating Potash Corp.

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REUTERS SUMMIT-Russia’s Uralkali sees flat H1 potash supply to China – by Polina Devitt and Andrey Kuzmin (Reuters U.S. – September 23, 2014)

http://www.reuters.com/

(Reuters) – Russia’s Uralkali, the world’s largest potash producer, expects volumes to China to remain flat or rise slightly in the first half of 2015, the company’s head of sales told Reuters.

The company hopes to increase the price in the new contract by 10 percent from the $305 per tonne on a cost-and-freight (CFR) basis of the previous contracts, Oleg Petrov said in an interview at the Reuters Russia Investment Summit.

China is the world’s largest consumer of the crop nutrient, and its contracts are seen as a benchmark by most participants in the market. Potash prices are gradually recovering after Uralkali broke a powerful trading alliance with Belarus in 2013.

“The pace of market recovery has exceeded our expectations,” Petrov said. Negotiations over the new contract with China for the first half of 2015 are expected to start in October and to end by January.

“We expect a price rise on contract markets – in China and India; spot market reaction will depend on many factors,” Petrov said at the summit, held at the Reuters office in Moscow. Uralkali’s contract with India lasts until February.

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Uralkali CEO Says No Talks to Resume Potash Marketing Pact With Belarus – by Alexis Flynn (Wall Street Journal – September 16, 2014)

 http://online.wsj.com/home-page

Dmitry Osipov Says Potash Firm Has Regained Its Market Share After Splitting BPC

LONDON—Russian potash giant Uralkali URKA.MZ +4.26% JSC has no plans to restore a sales partnership with Belarus, dimming prospects for reviving a global pricing cartel for the fertilizer ingredient.

Share prices of major potash producers in North America, Germany and Israel have rallied this year, partly on hopes that two of the world’s leading producers of the crop nutrient could be reconciled. But Uralkali Chief Executive Dmitry Osipov said in an interview there have been no talks since April and none are planned.

“There are no negotiations going on at the moment with Belarus, with the BPC,” said Mr. Osipov, referring to the Belarusian Potash Co., its trading partnership with state-run Belaruskali OAO that collapsed last summer.

Uralkali’s decision to exit BPC ended an informal global-pricing cartel made up of BPC and North America’s Canpotex Ltd. that once controlled two-thirds of the world’s potash supply. The Russian miner’s move sent potash company stocks plunging last year, sparked a furious response by Belarus and landed the Russian company’s former boss in a Belarusian jail.

Prices that averaged $400 a ton before Uralkali broke away from the BPC fell in the wake of the move, but have since begun to recover.

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