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Brazil is climbing its way up the potash consumption ladder, and its undeveloped lands are attracting exploration.
Commenting on the growth rate of Brazil’s agriculture market, Mike Blady, Pacific Potash’s (TSXV:PP) VP of communication, told Accesswire that Brazil’s “agro-business is the fastest-growing industry and one of the government’s largest cash generators. It’s expected that Brazil will have the largest sustained growth in potash consumption over the next 50 to 100 years as it still has 20% of the world’s remaining arable land. Brazil is the number one growth market for fertilizer and potash. It’s growing even faster than China for potash consumption.”
One of the factors that has attracted exploration to Brazil is its proximity to the market, which reduces transportation costs significantly and helps make the country attractive to agrobusinesses. With underdeveloped reserves, the Latin American nation is rapidly becoming a favorable region for potash projects, with several companies looking at developing their resources.
The companies
Vale (NYSE:VALE) is currently operating the only active potash mine in Brazil. The Taquari mine produces roughly 10 percent of Brazil’s potash demand and is scheduled to close in 2016, setting the stage for newcomers.
A relative newcomer on the Brazilian potash scene is Pacific Potash, which is moving forward with its Amazonas Basin potash project. The company has a 100-percent interest in Amazonas basin, an early stage project targeting the prolific the Prairie Evaporite formation. The company has an aggregate total of 795,824 hectares of land in the northern region.
The Amazonas basin can be compared to Saskatchewan’s potash basin; however, unlike its Canadian counterpart, the Brazilian basin is vastly underexplored and underdeveloped.
Verde Potash (TSXV:NKP) is working on developing the Cerrado Verde project in the country’s cerrado agriculture region in Minas Gerais state. The region is the hub for sugarcane and soybeans. Cerrado Verde hosts a NI 43-101 compliant total resource estimate of 253 million tonnes of potash. In February 2012, Verde released a preliminary economic assessment( PEA) for the project; it shows a $3.3-billion NPV with a 27-percent IRR and $598 million in capital expenditures.
Verde was recently dealt a setback that could impact the company’s financing plans. In mid-May, the company announced that contrary to guarantees made in its 2012 PEA, engineering firm FLSmidth cannot offer the company a performance guarantee that a rotary kiln for the potassium silicate to KCl process will operate at 12,000 tonnes per day. FLSmidth can only guarantee 3,000 tonnes, a significant drop, according to the Financial Post. The company is now exploring other options in order to bring the performance guarantee higher. As a result, the company has delayed its bankable feasibility, which had been expected in Q1 2014.
Despite the setback, President and CEO Cristiano Veloso is committed to bringing the project to term. “Verde remains focused on advancing the Cerrado Verde project and delivering a large-scale KCl operation. Management believes that the operation of a demonstration plant can act as a significant value creator for the Company, as lenders and potential strategic partners will have an opportunity to observe the conversion of potassium silicate ore to KCl calcine at a semi-industrial scale here in Brazil.” Veloso said in a statement.
As of a March update, Verde Potash was working on setting up an offtake agreement.
Among these publicly traded firms there are several other private companies looking to start their potash operation in Brazil. Included in this list is Potash Brazil, also located in the Amazonas Basin.
The company is almost ready to go, and expects to list on the BOVESPA in Q1 2014, according toDigital Journal.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.