By James Wellstead- Exclusive to Potash Investing News
Despite boasting a relatively modest share of global mineralization, North America has long been a leading phosphate rock and fertilizer producing jurisdiction. While sliding phosphate prices have raised cautionary flags within fertilizer markets, rising food prices, declining arable land and persistent emerging market demand keep the prospect of continued phosphate production rosy.
While China and Morocco continue to be the largest producers of phosphate worldwide, that has not stopped North American producers from contributing to world supplies. With more than 32 million tonnes of phosphate produced annually, as of 2008, North America continues to be an important player in phosphate and fertilizer markets.
US phosphate production
Led by the world’s largest phosphate producer, Minnesota-based Mosaic Company (NYSE:MOS), the US has a strong history of phosphate production and refinement. With the third highest level of phosphor fertilizer consumption in the world, American projects have been able to supply most of US based demand from locally-sourced, sedimentary-type phosphate which are principally converted into diammonium and monommonium phosphates (DAP and MAP).
The largest US reserves and production occur in Florida, North Carolina, Idaho and, to a lesser extent, Tennessee. Florida, in particular, is a favoured supplier of the fine-grained concentrated apatite product known as “phosrock”. In 2005, Florida phosphate supplied American farmers with 75 percent of their fertilizer demand, and contributing to 25 percent of the world’s supply.
Mosaic’s operations are by far the largest in the state, the so-called ‘Bone Valley’ region, but have come into regulatory troubles in recent years after attempts by Mosaic to expand its South Fort Meade project lead to a local environmental griup suing the Army Corps of Engineers for approving the project without further assessments.
Potash Corp (TSX:POT) is the next largest producer in the country with majority of its operations based in North Carolina. Directed by Aurora Phosphate and operated out of Lee Creek, North Carolina, PotashCorp has the capacity to produce 6.6 million tonnes per year of phosphate ore, with 1.3 Mt/y of phosphoric acid and 0.2mt/y of phosphate feed.
While phosphate producers are facing depressed fertilizer consumption in the first part of 2012 has had a slow start, the US continues to hold its strong position with phosphate production currently, and likely into the long term.
Canadian phosphate production
With relatively limited economic phosphate resources, Canada plays a much more limited role in North American, and global phosphate extraction and production. That being said, notable exemptions do exist.
In 1999, fertilizer producer Agrium (TSX:AGU,NYSE:AGU) began operations of Canada’s first phosphate mine in the northern Ontario town of Kapuskasing. Despite the quality and significant resource provided within the Kapuskasing geology, the mine’s economic phosphate rock reserve are set to be depleted by the second half of 2013.
A testament to the lack of available phosphate resources in Canada, Agrium recently turned abroad to execute a long-term rock agreement out to 2020 with Office Cherifien des Phosphate (OFC), S.A., the national Moroccan phosphate company and world’s biggest phosphate exporter, to make up the shortfall of ore for its manufacturing facilities at its Redwater plant near Edmonton, Alberta. Currently, Redwater produces about 660,000 tonnes of MAP annualy, a figure likely to grow in the coming years.
However, other players are keen to prove Canada as a bankable phosphate mining destination. Located 140km northwest of the Kapuskasing project, Hearst, Ontario-based PhosCan Chemical Corp (TSX:FOS) is currently developing its Martison Lake phosphate project, 20,600 acres, 70 km northeast of Hearst, with measured and indicated resource of 62,200,000 tonnes grading 23.55 percent phosphate and 0.34 percent niobium.
Further east, Quebec-based producer Arianne Resources Inc. (TSXV:DAN), located 200 km north of the St. Lawrence River-connected port town Saguenay, is currently in the prefeasibility study (PFS) stage of its primary resources, the Lac à Paul phosphate and titanium property.
Arianne’s recently released PFS also increased the estimated resource of the site, bumping the figure up, at a cut-off grade of 2.43% P2O5, to a measured and indicated resources of 348 million tonnes of 6.50 percent P2O5 and 8.43 pertent TiO2, with 114.3Mt of 5.46% P2O5 and 6.19% TiO2 of inferred resources. As a result, the estimates should provide for a 25 year mine life at 33,000 tonnes/day with average mill recovery of 89 percent.
Weak first half of 2012
Mosaic, in response to the slower demand expectations across the market reduced its first-quarter production by 250,000 tonnes due to sharp price reductions. Russian producer OAO Phosagro also plans on reducing its output in Q1 of 2012 by 18 percent, with cuts coming in the production of both diammonium and monommonium phosphates (DAP and MAP).
Diammonium phosphate prices have fell by about 15 percent over the last 6 months out of Tampa, Florida, down to around US $572.50/tonne by December’s end. However, in commenting on the slumping phosphate prices, Mosaic Chief Executive Officer Jim Prokopanko told Bloomberg earlier this month that “prices have bottomed and we have a big North American spring season ahead of us.”
Disclosure: I, James Wellstead, hold no direct investment interest in any company mentioned in this article.