re: phosphate plays

This was taken from the ARU site, posted by Lenni2001. Supprised it doesn't mention MAK. Interesting

The Australian

PURE SPECULATION: Robin Bromby | May 19, 2008


Phosphate plays

THIS in from reader Geoff Griffiths via Optusnet: "Do some better research before you go shooting your gob off." Nice one, Geoff. This angry reader was appalled by Pure Speculation suggesting investors should be a little discerning about which phosphate plays they back.

Another -- more moderate but no less welcome -- response came from "John B" who argues that the food demand in China and India will put pressure on world fertiliser supplies. Moreover, he continues, phosphate resembles iron ore as the process and economics of mining are similar.

This column was not suggesting otherwise; rather, the point being made is that, yes, phosphate (and potash) are going to become more pricey but, also yes, a bubble was forming in the sector with investors buying stock with the most greenfield of greenfield prospects. A parallel would be the choice 18 months ago between investing in an advanced uranium explorer such as Summit Resources (SMM) or the latest $3 million float based on some moose pasture in the west.

We saw the bounce last week when Korab Resources (KOR) reported it had been approached about developing phosphate at its uranium project in the Northern Territory. Traders went in boots and all, pushing up Korab's price -- but, by Friday, the shares were on the way down again.

There was a more subdued response on Friday to the announcement by Aurox Resources (AXO) that it is working on developing the phosphate component at its Balla Balla magnetite project. But Arafura Resources (ARU) provided the most specific news of the week: it has been running tests on phosphate from its Nolans project in the Northern Territory and reported that initial results indicated phosphoric acid recoveries above 80 per cent and has specifications that qualify it as a premium quality fertiliser product.

Middle East scene

NOW a word about the bigger picture.

Saudi Arabia's Maadan Phosphate Co will bring its new fertiliser plant into production in just over two years' time. It will use local phosphate and cheap natural gas.

This first phase will add 2.9 million tonnes a year to the supply of diammonium phosphate (DAP) and will, by itself, tip the DAP global market into surplus, according to Barrie Bain, of the British-based fertiliser consultancy Fertecon.

The second phase will bring production up to 6million tonnes a year, equivalent to half the DAP produced around the world in 2006, according to Middle East Business Intelligence.

Morocco will remain the world's largest exporter of phosphate overall and another fertiliser, monoammonium phosphate. And last week the Moroccans signed a deal with PetroVietnam Fertiliser to build a new DAP plant in the North African country to supply Vietnam and surrounding countries with fertiliser from 2011.

One of Europe's largest producers of phosphate-based chemicals, Nilefos Minerals, is reported to be investing $US535 million to develop a 230 million tonne phosphate deposit in Uganda.

Again, all this doesn't mean that phosphate prices will fail to rise further, that phosphate won't be in deficit at times, and companies producing phosphate won't make good profits. But nor does it mean that every junior who tries to join the phosphate bandwagon is a sure-fire investment