Demand for both phosphate and potash fertilizers is expected to continue to grow as the world’s population increases and the amount of arable land decreases. Indeed, the US Geological Survey (USGS) has predicted that world consumption of P2O5 (phosphorus pentoxide) fertilizers will increase from 42.2 million tonnes (Mt) in 2014 up to 45.9 Mt in 2018, with the largest growth coming from Asia and South America.
Thankfully, phosphate rock production around the globe is also expected to increase, rising from 225 Mt in 2014 up to 258 Mt in 2018. Most of the increase will likely come from the expansion of existing mines in Morocco and development of a new mine in Saudi Arabia. The rest of the uptick is expected to come from the expansion of existing mines in Jordan, Kazakhstan, Peru, Russia and Tunisia.
With those numbers in mind, the Investing News Network decided to take a look at the phosphate mining companies that are either already producing the material or developing projects that investors should keep an eye on.
Aguia Resources (ASX:AGR) continues to advance its Três Estradas phosphate project. Last month, the company released a preliminary economic assessment for the project; it points to a NPV of $273 million, an IRR of 25 percent and a payback period of 3.2 years based on a long-term single superphosphate price of US$280 per tonne.
The company has already managed to secure some funding for the project, and announced the completion of a private placement for AU$9.5 million through the placement of 55.88 million new fully paid ordinary shares in August.
Arianne Phosphate (TSXV:DAN) is focused on advancing its Lac à Paul phosphate project in Quebec and has received support from the province through the Plan Nord program. Last fall, the government of Quebec announced plans to invest $2 million into the $1.2-billion project, with the expectation that it will create some 2,200 construction jobs and 1,000 direct and indirect jobs.
Since then, the company has been working through the permitting process, and has increased Lac à Paul’s measured and indicated resource to 702.7 Mt at 7.16 percent P2O5 with a 4 percent P2O5 cut-off grade. Arianne has also signed cooperative agreements with First Nations in the area.
This past June, Arianne Phosphate also reduced its production costs after launching numerous initiatives to improve project economics.
DuSolo Fertilizers (TSXV:DSF) continues to make progress towards establishing itself as the main domestic fertilizer supplier and producer in the Cerrado area of Brazil. It has locked in major supply deals for its direct-application natural fertilizer, and while its Q3 sales were softer than expected due to weak crop prices, DuSolo plans to implement new sales and production strategies to manage costs and increase its revenues.
The company is also expanding its reach in Brazil, and announced last week that it has entered an agreement with Mineração Batalha e Participações to acquire the São Roque phosphate project in Brazil. “São Roque is an excellent addition to the Company’s portfolio of projects. With this acquisition, DuSolo has phosphate assets throughout the Cerrado, one of the world’s fastest growing agricultural regions,” DuSolo CEO Darren Bowden said in a statement.
Potash West (ASX:PWN,OTCMKTS:PWNNY) has been working to advance its Dinner Hill phosphate and potash project in Australia, and recently decided to shift its focus there and sell its non-core interest in the South Harz project in Germany. The project is being sold to Davenport, a wholly owned subsidiary of Arunta Resources (ASX:AJR); Potash West will own 28 percent of Davenport afterwards, meaning it will maintain exposure to the project.
“Whilst maintaining significant exposure to South Hartz, the company can continue to progress its other projects: The Dinner Hill phosphate and potash project in the Dandaragan Trough and its ground-breaking extraction technologies,the 100 percent owned K-Max technology and the 25 percent owned Li-Max technology,” Potash West’s managing director, Patrick McManus, said in a press release.
Focus Ventures (TSXV:FCV), which has three phosphate projects in Peru, has had quite a busy first half of the year, with most of its focus falling on its Bayovar 12 project. The company began Phase 2 drilling there in April, and it has since returned some very promising assay results. “On the back of that drill hole we have begun to define what we believe is a world-class phosphate resource,” Vice President of Corporate Development Ralph Rushton said in a video interview.
What’s particularly interesting about the Bayovar 12 project is that the Focus is mining there for highly reactive phosphate rock. “Highly reactive phosphate rock is phosphate rock that you can use directly as a fertilizer on the soil. You don’t have to do much in the way of processing — you generally just dig it up, perhaps do a little bit of sieving or washing, and the farmers can use it as a phosphate fertilizer as is. You don’t have to react it with acid, you don’t have to add anything to it,” Rushton explained.
Australia-based Fertoz (ASX:FTZ) has projects in both Canada and the US, but has mainly been focused on its flagship Wapiti phosphate project in British Columbia. In May, the company upgraded the project’s JORC resource and also released scoping study results. Wapiti’s combined inferred and indicated resource now sits at 1.54 Mt at 21.6 percent P2O5; it was calculated to a depth of 30 meters along a strike length of 12.5 kilometers and at a 7 percent cut off.
What’s more, the scoping study reveals a post-tax, unlevered IRR of 82.4 percent and a post-tax, unlevered NPV of C$20.1 million. Pre-tax cash flows are set at $69.8 million over the life of the project, which should be greater than 20 years based on the indicated and inferred resources. The Wapiti project is expected to begin production in 2016.
Minemakers’ (TSX:MAK,ASX:MAK) 100-percent-owned Wonarah phosphate project is the largest-known phosphate deposit in Australia, with a measured resource of 78 Mt at 20.8 percent phosphate and an indicated resource of 222 Mt at 17.5 percent phosphate with a cut-off grade of 10 percent.
The company has also acquired Baobab Mining and Chemical, and along with it the Baobab rock phosphate project in Senegal. Minemakers delivered the maiden resource estimate for the project in May, and it shows an inferred mineral resource of 68 Mt at 22 percent phosphate and an 18-percent cut off for the Gadde Bissik prospect, part of the wider Baobab project. The inferred resource within the small mine permit application area of 5 square kilometers at Gadde Bissik East is 25 Mt at 23 percent phosphate.
The company said in June that it hopes to begin bulk sampling at Baobab project before the end of 2015.
Mosaic (NYSE:MOS) is one of the world’s largest producers and marketers of concentrated phosphate and potash crop nutrients, and has various phosphate operations in Florida and Louisiana. In its second-quarter report the company notes that it has achieved higher margin rates through lower phosphate rock costs and improvements in finished phosphate conversion costs per tonne.
According to Mosaic’s President and CEO Jim Prokopanko, “[o]ur Phosphates business is driving earnings growth for Mosaic. In fact, during the second quarter and year-to-date the business accounted for half of Mosaic’s operating earnings. As we look ahead, strong global demand and relatively stable raw material costs bode well for our Phosphates business.”
Mosaic’s earnings for Q2 2015 were $391 million, a 57-percent increase compared to $248 million in Q2 2014.
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: DuSolo Fertilizers and Potash West are clients of the Investing News Network. This article is not paid-for content.