Germans rub BHP's nose in it Robin Bromby From: The Australian November 23, 2010 10:35AM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these? GERMANY, once the world's dominant supplier of potash, has made a move on Canada's up and coming big hope.
Just weeks after BHP Billiton was thwarted by the Canadian Government in its bid for Potash Corp of Saskatchewan, now K + S Aktiengesellschaft has entered a friendly takeover with Toronto-listed Potash One. The deal is worth $C434 million - tiny by comparison to the BHP offer for the world?s leading producer, but it gives K + S a big hand in the Canadian potash scene.
It also signifies that the German manufacturer of fertilisers is wanting to ensure supplies of potash in a world market that is dominated by a duopoly - the North American marketing group which consists of Potash Corp and two other North American miners - Agrium and Mosaic - on the one hand, and the Belarus-Russia grouping on the other.
Start of sidebar. Skip to end of sidebar. End of sidebar. Return to start of sidebar. Potash One controls the Legacy project in Saskatchewan which is expected to produce 2.86 million tonnes a year of potash when developed.
The move by the German company has historical overtones. From the 1860s, when potash was first produced for fertilising, until the 1930s, the world market was dominated by a German syndicate. It set the prices and production levels. It was only the emergence of mining of potash in North America after World War I that broke the syndicate?s power.
Of course, while BHP has been stopped in its tracks with the Potash Corp bid - sending a signal about political risk in Canada - the big former-Australian has its own potash ground in Canada, and will eventually emerge as a big player in that industry.
The K + S/Potash One deal is far smaller - but the principle is the same, so it seems that there?s a varying set of playing rules in Canada, and it hinges around the political clout of the target company.
Meanwhile, the phosphate/potash race in Africa is really heating up.
Last week Celamin Holdings - the recently renamed Victorian Gold Mines - announced it had raised $5.76m toward its Tunisian phosphate project, while South Boulder Mines has been releasing more encouraging drill details from its Eritrean ground and what it calls the world?s shallowest potash deposit - no small matter given that the Canadian deposits are thousands of metres below surface and therefore a costly mining exercise.
And clearly a stock to keep an eye on is Minbos Resources, which listed only last month. The stock has its admirers, but turnover is subdued. It raised $8 million through an IPO and has a market cap of $13m.
This week MNB set out a presentation of its African phosphate strategy, which covers Angola and the Democratic Republic of Congo. The company believes that one of the strengths of the projects is the access to port infrastructure. The presentation takes a swipe at Australian phosphate projects, noting those ?currently being readied for development are high capex (capital cost) and opex (operating cost) due primarily to distance from the sea?. No doubt companies like Minemakers and Phosphate Australia, both developing projects in the Northern Territory, would have their own views on that comparison.
But here?s a comment from MNB that gets some agreement from Pure Speculation: ?Fertiliser (is) being likened to the next rare earth story where restrictions in China will see long term prices increase?. The only qualification we would add is to turn that statement around, that rare earths is the new potash/phosphate story (and not as big).
Drilling has begun at the Cabinda project in Angola owned by Minbos where it has an exploration target between 333 million tonnes and 538m tonnes.
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OUR plans for an African-wrap have once again been overtaken by breaking news. However, that wrap is still in the wings.
The writer implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment advice. The writer does not own shares in any company mentioned
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