By Daniella D’Alimonte – Exclusive to Potash Investing News
The Potash Corporation of Saskatchewan (TSX: POT) has been fairly unpredictable for the past two weeks. It has ranged anywhere between US$164.80 to US$143.40 per share. Closing on the weekend, it seems to be on its way back up.
The company believes it is heading into a potash shortage that could last several years. This shortage would be due in part to the demands from growing agricultural markets such as China and India.
“We think there’s actually a chance that you’re going to see potash be short for the next five years,” said Chief Financial Officer Wayne Brownlee at a recent investor conference, as quoted by Canwest News Service. “We subscribe to the fact that you are going to see continued strong economic growth from these countries.”
While potash warehouses are indeed almost empty, it won’t have much of an effect of prices anytime soon, according to a recent Reuters report. Even Potash Corp. three striking mines, which account for about 6 per cent of global production, are not making a huge impact.
Agrium Inc. (TSX: AGU), which is currently sitting around US$74.90 per share, was also present at the conference. It maintained a similarly positive outlooks for investors.
“Our business is as strong as ever, farmers margins are as strong as ever — they are still two three times what they (farmers) have been used to — and we haven’t seen any cutbacks,” said Mike Wilson, CEO of Agrium, as quoted by Reuters. Positivity could be granted seeing as both companies showed increase net profits in their second quarter reports compared to last year’s. Potash Corp. rose US$619.4M to US$905.1M, while Agrium rose US$407M to US$636M.
The TSX peaks experienced by both companies earlier this year, as well as others, can be chalked up to record high grain prices. This drove farmers to use high amounts of fertilizers. The situation has since balanced out, lowering share prices. While both companies have expansion projects in the works, the future has a lot riding on the continuation of foreign demand. The potential slowdown in these economies is certainly a risk.
McChip Resources Inc. (TSX: MCS) recently signed a lease agreement with Potash Corp. regarding its lands in the Rocanville area. The agreement will allow Potash Corp. to mine potash from lands leased from McChirp. “The extensive capital required to develop and mine potash combined with the discontinuous leases held by McChip would make it highly unlikely that the company would or could develop the property on its own,” said President of McChirp, Richard McCloskey as quoted by Marketwatch.
The agreement will cost Potash Corp. US$250,000 including a non refundable option payment and fees for historical technical data provided McChirp. It will also have to pay an additional US$100,000 advance annually until production begins, as royalties on potash produced on the land when the time comes.
Rio Tinto is investing US$170M into the construction of a terminal at Argentina’s southern port of Bahia Blanca. The terminal will be used to export potash. A plant will also be built to make fertilizer, serving Rio Tinto’s Rio Colorado mine, which will be built this year. Once built, the Rio Colorado mine is predicted to produce 2.5 million tonnes of potash annually. This would make Argentina the world’s fifth largest producer. The terminal property has been signed off for 50 years of use with the option of signing on for another 50 years.
Bonaparte Diamond Mines NL, an Australian junior mining company, recently announced a revolutionary project. The company plans to mine phosphates off the sea bed of Namibia’s continental shelf. Leader of the project and South African, Mike Woodborne, believes the project can take off with a $100 million investment. He believes that with the current high price of phosphates and the ever growing world population, the project is very promising.
“While nobody is willing to say where the price will settle, all the drivers that have supported the increase over the last four years are going to leave it well above the former phosphate baseline price of $50 per tonne,” he said, at the recent Africa Downunder conference, as quoted by Mining Weekly.
The sediment areas the company is looking at were previously technologically impossible to mine. The company says that is no longer the case. Bonaparte currently has four exclusive prospecting licences which cover 4,000 square kilometres off the coast of Namibia. Five more are in the works for its Meob project area.
Both Potash One (TSX: KCL) and MagIndustries (TSX: MAA) have announced changes to their executive teams. Ted Warren has been made the new manager of operations at Potash One. He will focus on the company’s Legacy Project in Southern Saskatchewan.
At MagIndustries, Jeff Swinoga has been named senior Vice-president, Finance and Chief Financial Officer Kate Harcourt has been named Director of Health, Safety, Environment and Community, Patrick Kielty has joined as Director of Human Resources and Richard Pratt has been named as general counsel.
