Article from The Australian...KING Mohammed VI of Morocco, it...

Article from The Australian...


KING Mohammed VI of Morocco, it was reported recently, is the fifth wealthiest royal in the world with his personal $US1.5 billion fortune based largely on selling phosphate, of which his country is the world's largest producer.

He -- and Morocco -- plan to remain the Saudi Arabia of phosphate. The North African state is apparently refusing to budge from its asking price of $US400 a tonne of phosphate rock.

Rock has gone from $US200/t this time last year to $US400 in March; $US500 in June. There have been reports that Jordan has been selling at $US350/t but, if the Moroccans stick to their guns, the market will be tight.

In the short term this might not matter, as the world in recent months has been under-fertilising. The cost of fertilisers, along with the inability of farmers (in the US particularly) to get loans to buy this product, has resulted in big cuts to applications on farm land.

This will, inevitably, affect crop yields and already bodies such as the Food & Agricultural Organisation are warning of increased famine around the world. It was a sign of the times that earlier this month New York-listed The Mosaic Co, the world's largest producer of phosphates, reported a 38 per cent drop in sales volumes for the preceding three months.

As for local investors, they have -- after initially leaping head-first into anything related to phosphate and potash -- gone quite lukewarm on the whole idea of soft commodities (another "stronger for longer" busted flush).

The news out of Warrnambool Cheese & Butter Factory (WCB) after Friday's close won't help. Business there has "softened considerably" due to the unexpected and substantial reduction in world dairy prices over the past few weeks.

There will also be write-downs of inventory and adjustments of foreign exchange contracts to take into account the dollar depreciation.

The stock, which went above $5 on the news that WCB was going to own half of Dairy Farmers' cheese business, closed at $3.78.

BUT Andrew Drummond, who runs Minemakers (MAK), is not worried by this. The world has got to eat, and the imperatives of food production will, he argues, mean that phosphate prices will be off again within 12 months. Incidentally, the world's largest potash producer, Potash Corp of Saskatchewan, is predicting shortages in the next few years as fertiliser demand recovers.

Drummond believes he can get phosphate rock from the Wonarah project across the wharves at Darwin for around $US100/t. The company claims to have Australia's largest phosphate resource at 461 million tonnes and he is now looking to raise around $100 million to allow the first phosphate to be loaded on a train to Darwin in just over 12 months.

While most exploration sectors have gone quiet, the phosphate and potash crowd is clearly working on the same assumptions as Drummond and Potash Corp.

In Queensland, GBM Resources (GBZ) has begun drilling its Burke River phosphate deposit while NuPower Resources (NUP) has got itself very excited about the Lucy Creek project, saying its review of the former CRA's drilling records from 1993 leads it to believe this may be a world-class deposit.

Worth watching will be Transit Holdings (TRH), run by Richard Monti (an Andrew Forrest mate from the days of Anaconda Nickel), which is running the ruler over a potash project in Utah. But if political risk is more your game, there's Oklo Uranium (OKU), which has just acquired a permit in Mali that contains what appears to be a very large phosphate occurrence.

And for those with nerves of steel, there's always Russia. Red Emperor Resources (RMP) is to acquire a 70 per cent interest in a Siberian potash project. Interestingly, the announcement contains the qualification that the deal is conditional "on the vendor demonstrating that it has clear title to the project". Plucky is the only word we can think of to apply here.

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I reckon BON should be worthy of a mention!