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Potash prices look to have stabilized over the first quarter, giving the sector a much needed boost of hope that potash is looking up.
Helping prices maintain their current level are the dwindling inventories held by producers, which as Agrimoney writes, have dropped the fastest in almost two years with hints of improving rail logistics. Inventories have dropped to 2.71 million tonnes, which is the lowest level of stocks seen since Russia’s Uralkali parted ways with the Belarusian Potash Company.
Potash prices at the bottom?
Earlier this year, the potash market heaved a collective sigh when the world’s two major buyers of potash, China and India, signed bulk purchase contracts with potash producers. While this has definitely aided in buoying the potash price, the market is still a long shot from the prices of yesteryear.
This week, German salt and potash miner, K+S AG (ETR:SDF) beat market expectations as it saw prices for its fertilizer materials begin to recover. Though the company saw a 21 percent drop in its first quarter adjusted earnings before interest and tax to 220 million euros ($301 million). However, the figure still surpassed the average estimate from a panel of Reuters analysts.
Given the better-than-expected performance from the German miner, Chief Executive Officer Norbert Steiner is optimistic about the future of the market. ” The demand for potash and magnesium products is robust and we see indications that the price level has bottomed out,” he said.
While the company is still expecting to see a “significant” profit drop this year as a result of the lower pricing environment, having beat analysts expectations was one of the first signals to K+S that the market could be recovering.
At the end of April, North American potash giant, Potash Corp of Saskatchewan (TSX:POT, NYSE:POT) was optimistic about the future of potash sales. Despite also having seen a decline in the first quarter of 2014, the results beat the company’s guidance and gave the sales out look an added boost.
“After an especially challenging environment in the second half of 2013, greater demand and stability emerged early in the year,” CEO Bill Doyle said in a statement. “We saw strong customer engagement ahead of the spring planting season, particularly in potash.”
Doyle concluded that while prices are still rather low, they are also enticing to consumers.
Company news
Even with the depressed potash prices of late, it is still imperative to move forward with potash exploration and development to ensure the continued supply of fertilizer as demand continues to grow.
Potash Ridge (TSX:PRK) received approval this week for the required water rights for the company’s Blawn Mountain sulphate of potash project in Utah. The water rights, approved the Utah State Engineer, are approved for an initial term of 20 years, and are subject to certain conditions.
“We are extremely pleased to have secured these water rights which represents a significant milestone in the development of the Project. I would like to thank SITLA for their support throughout this important regulatory process. We are continuing to move the project forward in our efforts to develop the project into an anticipated future source of SOP production,” commented CEO Guy Bentinck.
Earlier this week the company also released its first quarter financials, announced that it is in discussions with several engineering firms relating to the feasibility study for Blawn Mountain. The company ended Q1 with cash and cash equivalent of $5.5 million.
On Thursday, DuSolo Fertilizers (TSXV:DSF) reported results from a recent pit opening campaign on a recently discovered target – Tataco – at the Bomfim project. The company intersected 4 meters at 10.43% P2O5 including 2 meters at 14.92% P2O5. The target remains open at depth. Another drill hole intersected from surface, 6 meters at 15.08% P2O5 including 4 meters at 20.05% P2O5, also still open at depth.
According to Paulo Amorim, DuSolo’s VP of Exploration, all data the company has obtained thus far is indicative that “MbAC Fertilizer “Canabrava” deposit and our Santiago and Tataco Targets are connected geologically. “Given the company’s new discovery, “the potential in and around Santiago has increased dramatically.”
Amorim explained that “The superior grades and location of these two targets along the same strike are very encouraging as they support our assertion that we are in possession of a very important part of the phosphate belt. It is for this reason that we are now very keen to investigate the area further by way of drilling.”
While not a potash company, Arianne Phosphate (TSXV:DAN) is developing a large fertilizer resource that is valuable to the market. The company recently announced an additional 78 million tonnes at 5.34% P2O5 inferred at a 3.5% P2O5 cut-off grade to its already existent mineral estimates. The company also identified new potential targets that could return between 260 and 390 million tonnes with grades ranging from 5.34% to 7.13% P2O5.
EPM Mining Ventures (TSXV:EPK) reached another milestone on May 8, when the company was granted its water rights application by the Utah State Engineer for the company’s Sevier Lake Playa Suphate potash project. With the water rights application approved, the company will now have sufficient brine as well as fresh water to operate. Sevier Lake is expected to produce 300,000 metric tons of sulphate of potash per year.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.