Phosphate latest craze for investors Font Size: Decrease...

Phosphate latest craze for investors Font Size: Decrease Increase Print Page: Print PURE SPECULATION: Robin Bromby | May 12, 2008
NO sooner does one mania finish, it seems, than another one is off to the races.

There was the uranium craziness, followed by mini-manias for various specialty metals and iron ore juniors. Millions of dollars was thrown at them all, but it appears that punters want to roll the dice one more time.

This time it's phosphate. Look what happened with Uramet Minerals (URM) and Krucible Metals (KRM) in the past few days. The former's stock shot up to an intraday gain of 250 per cent after it announced finding phosphate in grab samples at its Thorntonia project north of Mt Isa and -- more importantly -- next to the Lady Annie deposit controlled by Joseph Gutnick.

Krucible is also in the same neck of the woods and all it needed was for the mob to belatedly read the company's quarterly report and be reminded that it is sitting on land close to Phosphate Hill, the mine owned by Incitec Pivot (IPL). Krucible still has to get site clearances before it can drill, so it is very early days.

Yes, phosphate is going to be big. But, also yes, this has all the smell of the early uranium mania. Just as, 18 months ago, half the languishing juniors suddenly found potential for uranium on their gold (or base metals, or iron ore) tenements, now suddenly previously unsuspected phosphate indicators are being announced.

How many years is it going to take these greenfields projects to get into operation? Who knows, but investors buying for a long-term position should heed the words from New Zealand on Friday.

Peter Mourits of NZ's largest fertiliser supplier, Ballance Agri-Nutrients, made two points. One, there is no shortage of raw materials reserves and, two, new projects are well into the planning stages.

He didn't cite examples, but we can. Morocco and Western Sahara have enough known phosphate to meet the world's demand at present levels for 300 years. And big money is going into new production, including a new mine in Morocco (the so-called Saudi Arabia of phosphate). An Indian company is to spend $US1.5 billion ($1.6 billion) to build a fertiliser plant in Mozambique, a country with large known resources of phosphate. And another Indian company has teamed up with Singapore money to develop new mines.

It is true that phosphate is going to be in huge demand to meet world food needs. But it's a long way from grab samples to bagging the end product.

One final point: there may be pauses in demand growth as fertiliser use is hit by price resistance. In the past few days, there have been reports that farmers in The Philippines may no longer be able to afford it, and that NZ farmers may use less superphosphate due to cost blow-outs.

Speciality metals appeal

HOWEVER, if you want to back something a lot further down the development road, then specialty metals are still appealing.

German metals and chemicals giant H.C. Starck is notifying customers worldwide of a double-digit price increase for molybdenum, tungsten, tantalum and niobium metals. It adds that the demand for these metals, especially from the electronics sector, is expected to be secular not cyclical. They added -- in case we don't understand -- that "pricing pressures will be sustained and likely increase (further)". On the tungsten front, a real supply crunch seems to be in the making as projects around the world get hobbled by environmental problems -- one in Vietnam is now more than three years behind timetable -- and older mines start to near the end of their lives. One industry source calculates that world demand of 82,000 tonnes a year is expected to reach 110,000 tonnes by 2012 but there will not be the metal to fill that need.

Queensland Ores (QOL) is expecting to ship first concentrates from its Wolfram Camp tungsten and molybdenum mine within two months, while various other players are well advanced. Thor Mining (THR) with its Molyhil moly and tungsten project and King Island Scheelite (KIS) have resources and Chinese partners even though each has a few hurdles yet to go.

Further back in the queue is Vital Metals (VML), which is looking at tungsten production by the end of 2009. It plans to produce 4000 tonnes a year -- about 5 per cent of world production.

One interesting aspect, at a time when Australia seems to be enthusiastically embracing the role of China's first economic colony in the developed world, is that VML prefers to get a US or European partner and off-take deal. With China already controlling about 80 per cent of world tungsten, the junior is looking to keep its independence.

Tungsten may be becoming like tin -- small industry, declining grades (especially in China) and problems finding new resources (and by the way, tin hit a record of $US24,585 a tonne on Friday).

Seeking a clearer Image

SEEMS the traders -- and even a few analysts -- failed to get the message with the first resources statement from Image Resources (IMA).

Its shares were dumped when people interpreted the resource from its North Perth Basin mineral sands project as being small. No, it's not. There's 6.4 million tonnes of heavy minerals: 340,000 tonnes of leucoxene and rutile, 4.5 million tonnes of ilmenite, 545,000 tonnes of zircon and 390,000 tonnes of garnet. Here are two key factors: much of it can be dredge-mined, which is much cheaper than dry mining; and there's little overburden to be removed before mining.

This resource has an in-ground value of about $1.2 billion. Yet it is based on less than 10 per cent of IMA's ground in the area, and the group has another 250km of drill targets.

Image plans to put out a further statement today to try to get its message through. This resource is enough to sustain mining, and Image is looking at a pre-feasibility study.

Don't forget silver

WHILE gold gets the attention, its precious metal partner battles on largely under the radar, at least in this country. But as the World Silver Survey 2008 reminds us, the white metal had a greater percentage price growth in 2007 than gold, platinum or palladium. Industrial demand for the metal saw a sixth consecutive year of growth.

Announcements that caught the eye during the week included one from Azure Minerals (AZS), which has added to its Mexican ground position by buying the Promontorio copper-silver-gold project. Drill results include 16.8m with 121 grams/tonne silver, 7.9 per cent copper and 3.36g/t gold.

Malachite Resources (MAR) has received four more assays from its impressive Conrad project near Inverell, NSW. One intersection not only extended the known mineralisation to a depth of 360m but returned grades over 2.6m at 430 grams/tonne silver, 8.95 per cent lead, 4.35 per cent zinc and 0.1 per cent tin.

But the big news is that North Queensland Metals (NQM) will start developing its Baal Gammon deposit for commissioning late next year. In the historic Herberton mining region inland from Cairns, Baal Gammon has copper and tin, but also silver and indium.

In regard to the last mentioned, there was a report on Thursday that indium prices rose by $US200 a kilogram just in the past month to hit as high as $US730/kg. This was on the back of reports that China is further restricting exports and also building stockpiles of the metal used in every flat panel and television screen made in the world.

Moreover, a New Jersey company, SMG Indium Resources, is planning an IPO, after which it will spend some $US45 million to buy and stockpile indium against times when shortages send the prices even higher.

Last year, New Scientist reported a study showing that the world's known indium supplies would be exhausted within 10 years. Then what?

The Australian implies no recommendations regarding any of the stocks mentioned. The author does not own shares in any of the securities mentioned.

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