Miners turn to the growing fertiliser marketBHP and Anglo have...

Miners turn to the growing fertiliser market

BHP and Anglo have major plans while two Aim stocks arefinancing smaller projects

February 22, 2023

Bare fruit and vegetable shelves in supermarkets this monthhave brought the global food supply chain into sharp focus, as droughts inNorth Africa and tougher growing conditions in Europe have cut what isavailable to UK consumers.

At the same time, Anglo American (AAL) will reportedlyannounce its updated plan for the former Sirius Minerals mine in NorthYorkshire this week. Fertiliser mine developers pitch investors with the ideathat their products will boost crops and see continued demand growth purely throughthe world's population rising.

The fertiliser market is still being reconfigured a year onfrom Russia’s invasion of Ukraine. There are two reasons for this: Russia andBelarus are significant exporters of fertilisers, while soaring gas prices werepassed through into urea and ammonium nitrate prices, which are key fertiliserinputs.

The price for potash, a potassium-rich salt that is the mostcommonly-mined fertiliser, soared in 2022 from around $250 (£207) a tonne atthe start of the year, to nearly $1,200 a tonne by the end of the year. This isdistinct from ammonium nitrate fertiliser, which is produced by combiningnitrogen from the air and natural gas. Anglo will mine a product calledpolyhalite, which is crushed and applied directly to crops, at Woodsmith nearWhitby.

The potash price has since come back to earth due to seasonalmovements and importers using inventories rather than paying record prices. Butindustry leaders such as Nutrien (CA:NTR) have already seen earnings hit recordlevels in the past year. The Canadian giant reported adjusted cash profits thattrebled pre-pandemic levels, at $12bn, also a 70 per cent year-on-yearincrease. ICL (IS:ICL), which runs the UK’s only major mine in Yorkshire,Boulby, doubled Ebitda for 2022 to $448mn off the back of its polyhaliteproduction.

And Anglo is not the only major miner with a project in theworks. BHP (BHP) has the Jansen development project in Canada, which is closerto construction and production.

It was championed by former chief executive Sir AndrewMackenzie, and new boss Mike Henry has kept on with the Saskatchewan-basedproject. It was initially scheduled to reach production in 2015, and then againin 2023, but BHP has pushed this out to 2026.

Henry said this week that spending for the mine would be$120mn ahead of its previous forecast this year, at $860mn, because of the“accelerated production schedule” for stage 1. A feasibility study for stage 2,which would expand production, is expected in the financial year ending 30 June2024.

The excitement from the majors is easy to explain: peopleneed to eat, and the world just keeps making more people. This isn’t a newpush, either, but as the big miners have talked about simplification and slimmed-downpriorities, fertiliser projects have remained in the portfolios. BHP startedwork on Jansen 12 years ago, and the head frame has been a feature of the locallandscape for a decade.

Hungry for action

“The irony is Anglo was originally involved with [ICL mine]Boulby in the late 1960s,” said Graham Clarke, chief executive of fertilisermine developer Emmerson (EML). “They sold it because it didn’t fit the corebusiness, but now fertiliser and agriculture [are] becoming a lot more people’score business because of the importance [to the world] and fundamentals thatsupport it.”