fertiliser fever

http://www.miningnewspremium.net/storyview.asp?storyid=267880§ionsource=s0

Thursday, 14 August 2008
The Pilbara 2008:

Fertiliser fever Thursday, 14 August 2008

SURGING fertiliser prices have triggered renewed interest in potash and phosphate deposits. Now there is a scramble to cash in on the boom. By Paul Dicker

Mineral explorers have been aware of promising phosphate and potash deposits in Western Australia and the Northern Territory for some time.

They have remained largely untouched because the sums never added up. Exploration costs and the long and often expensive path to production could never be justified.

But that was when phosphate rock was languishing below $50 a tonne, potash prices were low and fertiliser was relatively cheap. Phosphate prices have increased eight-fold in the past couple of years and potash prices have trebled.

Suddenly, deposits that had been dismissed as marginal or uneconomic are today potentially highly profitable, long-term operations.

Perth’s Reward Minerals is one of a number of junior explorers hoping to hitch its wagon to the soft commodities boom.

It has numerous potash tenements in WA and the NT and is looking to add more. The most advanced is Lake Disappointment, about 400km from Newman.

Reward is poised to begin a drilling program at the vast salt lake in the Little Sandy Desert. Drilling should have started but was delayed while the company completed an agreement with the region’s traditional landowners, the Martu people.

Earlier this year, Reward struck a deal with the Martu, giving them equity in the listed company in return for mining rights to the land.

The Martu will receive 7 million Reward options with a strike price of 50c. Fully exercised, the Martu shareholding would account for just over 10% of Reward’s issued capital.

The company plans to extract potassium sulphate, used extensively in potash fertiliser, from the Lake Disappointment brine via an evaporation process.

South Boulder Mines is another listed WA company preparing to develop tenements at Lake Disappointment.

The company also has a foot in the phosphate camp through its holdings at Cardabia, about 200km northeast of Carnarvon and more recently acquired exploration acreage in the Georgina Basin, NT.

Convinced that higher fertiliser prices are here to stay, South Boulder is seeking to accumulate more potassium and phosphate-rich ground.

Managing director Lorry Hughes said the company had negotiated an exploration-access agreement with the traditional owners of the Lake Disappointment area that would set the framework for any exploration work on the ground.

The next step would be to organise site heritage surveys based around exploration plans before the grant of the tenement.

Hughes estimates his company is about 18 months behind Reward Minerals but he is hopeful the work Reward has done will reduce lead times.

“Because they have been there before us, we will not be breaking new ground,” he said.

South Boulder Mines rates Lake Disappointment as one of its lead projects but Hughes said the company would continue to scour the globe for opportunities in potash or phosphate.

He said the company continued to compile data on its Cardabia project. “I think we have enough land … it covers a large aerial extent and we plan to be looking at beneficiation options and investigating possible mining scenarios before too long,” he said.

“We have recently picked up some granted tenure in the Southern Georgina Basin and this will allow us to get on the ground exploring.

“We’re doing as much as we can on our projects that are not granted and we are hopeful that the first one of these could be granted by September.”

South Boulder’s Northern Georgina Basin project is close to tenements held by Phosphate Australia, which recently sought to raise $10 million via a public float.

“It’s still early days,” Hughes said. “We are trying to work out the way to extract the best value from these fertiliser assets for the company.

“There are obviously a number of options a company with our exploration assets can go.

“We could do a new IPO, we could retain it within South Boulder and spin out our nickel and gold or we could do a combination of both, to name a few examples.”

Hughes believes that most farmers cannot farm on a large scale without fertiliser. He said strong global demand indicated there would be upward pressure on prices.

Record oil prices would only add to that pressure due to the economic attraction of the biofuels sector.

The soaring cost of energy also was likely to put the spotlight back on uranium stocks, which were due for a comeback.

Minemakers, yet another WA-based explorer looking to cash in on the surge in fertiliser prices, holds Australia’s biggest undeveloped phosphate deposit.

Discovered more than 40 years ago, the Wonarah deposit in the NT had attracted the attention of Rio Tinto.

Managing director Andrew Drummond said that despite a four-week delay in a drilling program, a prefeasibility study was expected to be completed by the end of September.

Minemakers recently came under the spotlight when the Australian Securities Exchange instructed the company to retract a referred resource estimate for the project because it was found to be non-JORC compliant.

The company had reported the northern sector of the project contained a resource estimate of almost 2 billion tonnes at 14.4% phosphate.

However, analysts have retained their buy recommendation on the stock, predicting plenty of upside in the share price in the months ahead.

Drummond said the company was looking to streamline the approvals process to meet its 2010 start-up target.

“We are definitely aiming for a 2010 start and at this stage we are quite confident that it is attainable,” he said.

Minemakers still has to gain approval from the traditional landowners but, after cordial discussions with representatives from the Northern and Central Land Councils, Drummond does not foresee any problems.

Annual production is forecast to reach 3 million tonnes. The phosphate will be railed to Darwin for shipment.

* This report was first published in the July 2008 edition of Australia’s Mining Monthly.