Monday, November 17, 2008

Potash Price Close to all time highs – Future Outlook



As a result of questions fielded at the recent Mining 2008 conference in Brisbane and the recognition that Australian investors have limited experience with Potash, ActivEX thought it important to provide some fundamental information regarding potash and the important differences between potash and other fertilizer products such as phosphate.
ActivEX has recently negotiated an option to purchase the Lake Chandler Potash deposit. The project is located 50km north of the central wheat-belt town of Merredin some 300km east of Perth, Western Australia. Over the next 6 to 12 months ActivEX will be investigating the potential of the project, in particular the most favourable extraction methods. Likely products from the project will be fertiliser products Potash and Ammonium Sulphate with a by-product of high grade alumina.
Potash is vital for agriculture because it improves water retention, yield, nutrient value, taste, colour, texture and disease resistance of food crops. It has wide application, to fruit and vegetables, rice, wheat and other grains, sugar, corn, soybeans, palm oil and cotton, all of which benefit from the nutrient’s quality enhancing properties. Phosphate, however, contributes to photosynthesis, cell division and energy transfer, therefore is critical to crop development. The two products are not substitutes for each other.
Australia currently has virtually no Potash production and imports all of its requirements. World wide, Potash production is tightly held by a handful of companies, principally in Canada, Russian and Belarus. The largest producer of Potash is Potash Corporation of Saskatchewan which is capitalized at US$23bn.
Recent retraction in commodity prices has not affected the spot Potash price which remains close to an all time high in September/October 2008 at US$865 per tonne or A$1300 per tonne. The resilience of the Potash market appears to be due to three factors :-
• very low inventories in USA and China
• the small number of producers (worldwide) struggling to meet demand, and in the shorter term,
• the effect of strikes in Saskatchewan at mines of the worlds largest potash producer, Potash Corp.
In comparison, Phosphate prices have come down significantly, following the recent trend of mineral indices – the supply/demand fundamentals for phosphate are far different to Potash.
Given the fundamentals of the Potash market, ActivEX believes it is an appropriate time to fully investigate potential production at the Lake Chandler deposit which was once a Potash producer back in the 1940’s when imports from Germany were curtailed.
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ActivEX Managing Director Mr Doug Young said today “The long term outlook for Potash is positive with sustained high prices predicted over the 2009 to 2020s period due to increasing demand for foodstuffs and the competing demands on agricultural products for fuel stocks”. Mr Young also pointed out that “Production of potash from Lake Chandler would be essentially replace imports, but with the lower Australian dollar, locally produced potash could be very competitively priced”.

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