Your source for unbiased, independent news
and information on the potash market

Delays in Chinese, Indian Potash Contracts Muddy Pricing WatersDelays in potash contract negotiations with China and India have left markets guessing where potash prices will land.

U.S. Awasthi, managing director of the Indian Farmers Fertiliser Cooperative, one of India’s biggest fertilizer makers, told Reuters that Indian farmers are unlikely to settle contract negotiations until after the Indian growing season has wrapped up. That will happen in late November to early December, and at that time farmers will be able to assess soil requirements.

An inflated rupee and a cut in fertilizer subsidies by the Indian government have left many Indian farmers unwilling to pay high prices for potash. India’s most recent contract with Canadian potash export body Canpotex settled at $490/tonne, a price Indian farmers are unlikely to pay again.

China is also looking for a better price in its upcoming contract negotiations, which now may not happen until the first quarter of 2013.

China buys potash from Canpotex and Belarusian Potash Company in contracts and is holding out for a better price, according to Jim Prokopanko, CEO of Mosaic (NYSE:MOS).

Prokopanko told Bloomberg in an interview that China is “very determined” to pay less than the $470/ton of potash that it agreed to for the first six months of 2012. Competition from increased rail-delivered potash from Belarusian Potash is one component of its desire for lower prices, but weakening demand has also played a part.

PotashCorp (TSX:POT) has interpreted this weaker demand as a reason to cut its projected earnings as sales volumes fall to lower-than-expected levels, Reuters reported.

The result of deferred contract settlements with China and India will likely be growth in North American potash stocks as the countries evaluate future purchases. North American potash stockpiles eased in September by 3 percent, about 73,000 tonnes, but remain 39 percent higher than the five-year average of around 2.332 million tonnes, Reuters reported.

Overall, potash shipments are expected to fall to 53 million tonnes this year from 55 million in 2011, while prices are forecast to remain between $420 and $450 a tonne this year. But according to both Mosaic and PotashCorp, 2013 will see a rise in potash purchasing from Indian and Chinese buyers, The Globe and Mail reported.

“The current dip in demand, we believe, is essentially a timing issue, and we are beginning to see improving dealer sentiment in North America and elsewhere,” Mosaic boss Prokopanko said.

Company News

Allana Potash (TSX:AAA) provided investors with an update on its feasibility study, which the company anticipates will be completed by late Q4 2012.

Allana also provided results from the remaining exploration holes drilled at its Dallol potash project in Ethiopia. The project’s northernmost hole shows an intersection of 5.7 meters of Sylvinite Zone, which returned 16.9 percent potassium chloride as well as 6 meters of Kainitite Zone, which yielded 20 percent potassium chloride.

Passport Potash (TSXV:PPI,OTCQX:PPRTF) and the Hopi tribe signed a letter of intent (LOI) that lays the groundwork to combine the Hopi and Passport land sections in Passport’s upcoming preliminary economic assessment. The LOI will also help formalize the relationship between the two parties for potential joint exploration and development of Passport’s potash resources in the Holbrook Basin, Arizona.

Joshua Bleak, Passport’s president and CEO, said of the announcement, “[o]ur goal is, and has always been, to see a potash mine built in the Holbrook Basin, and we see this as another positive step towards realizing this goal.”

In late September, Passport updated its NI 43-101 mineral resource estimate for the Holbrook Basin property in Northern Arizona. The updated estimate includes measured and indicated resources and totals 278.3 million tonnes of mineralized material. Average grading for the estimate is 14.89 percent, equivalent to a resource of 41.48 million tonnes of potassium chloride. Inferred resource estimates consist of 673.84 million tonnes, at an average grade of 12.96 percent potassium chloride.

EPM Mining Ventures (TSXV:EPK) reported the results of its NI 43-101 preliminary economic assessment for its sulfate of potash (SOP) from its Sevier Dry Lake potash project in Southwestern Utah.

“The PEA forecasts SOP Production of 300,000 metric tonnes (“MT”) with an estimated Net Present Value of $956.5 million (pre-tax, inflated, 8% discount rate) and an estimated Net Present Value of $629.7 million (after tax, inflated, 8% discount rate); and with an estimated Internal Rate of Return of 30% (pre-tax, inflated) and an estimated Internal Rate of Return of 24% (after tax, inflated).”

On September 19, Elemental Minerals (TSX:ELM) announced the results of the prefeasibility study for its Sintoukola potash project in the Republic of Congo.

Changes noted in the study include an 11 percent increase in construction capital expenditures up to US$1.85 billion, below Elemental’s prior $2 billion forecast. But despite this increase, the report also noted a 35 percent drop in operational expenditures, cutting costs down to $80/tonne compared to the original $105/tonne forecast. The reduced costs were attributed largely to scale advantages, improved metallurgical test results and reduced loading and mining costs.

Proven and probable reserves are 151.7 million tonnes graded at 20.02 percent K20 based on the mineral resource model cited in the study.


Securities Disclosure: I, James Wellstead, hold no direct investment interest in any company mentioned in this article.

Comments are closed.

The Potash Investing Newsletter:

Get our independent commentary on potash trends and companies delivered to your inbox.

The long-term outlook for Potash is positive and the worlds largest Potash producers are confident that the next few years will see a return to robust demand growth. The main growth markets for the metal are the BRIC countries, but demand from Western economies is expected to rise as well. The automotive and aerospace industries are seen as the main catalysts for new growth as manufacturers seek to reduce fuel consumption by creating lighter weight vehicles.

Potash Investing News is one of the leading providers of news and education on the Potash market. We pride ourselves on delivering quality, independent news to our investor audience. Our newsletters feature the latest Potash market commentary for investors interested in Potash stocks so you can stay up to date on the markets and leading companies.

Please sign up now to receive exclusive Potash articles delivered to your email account every week.

With your subscription, Potash Investing News will also send you a Stock Catalysts report at the beginning of the month that addresses sponsor company upcoming milestones which could positively impact a companys stock price.