still no growth in the fallow fertiliser secto

Still no growth in the fallow fertiliser sector


by:ROBIN BROMBY
From:The Australian
April 01, 201312:00AM

PHOSPHATE exploration has not been a happy place to be of late

In fact, not really since the heady days of 2008 when phosphate prices soared well past their historical trends and stocks such as the then recently listed Minemakers (MAK) delighted its shareholders by hitting $2.58 in April that year.

The stock now sits at 13.5c, the world-class Wonarah project in the Northern Territory remains undeveloped, its 842 million tonnes grading 18.1 per cent still awaiting the right economics.

Transport costs have been the killer, so now MAK is working on a plan to produce downstream products such as superphosphoric acid rather than load phosphate rock on trucks and trains and haul it to Darwin. At present prices of between $US180 and $US200 a tonne, that simply does not work. SPA commands over $US1000/tonne.

MAK is also partnering with Balamara Resources (BMB) if the latter beats the other two international consortia bidding for a huge deposit in Togo.

Meanwhile, Phosphate Australia (POZ) is contemplating selling its NT deposit as it now prefers gold.

And investors seem to have lost interest in the sector notwithstanding the fundamentals looking as good as ever. Brazilian explorer Aguia Resources (AGR) may recently have announced a new discovery, but that has not prevented its stock price eroding. It fell 16.7 per cent on Thursday, taking it to a 52-week low of 10c. Minbos Resources (MNB) has been making considerable progress in Angola and in Congo-Kinshasa but to little avail so far as investors are concerned, the stock languishing at 3.7c.

The one seeming winner so far is Krucible Metals (KRB) which, if all goes according to plan, will in a few weeks get its hands on $12 million after selling several of its Queensland phosphate tenements to fertiliser manufacturer Daton Group Australia (DTG).
But back to those fundamentals.

Australia is the fifth-largest user in the world (behind China, India, the US and Brazil). Fertiliser is going to become increasingly crucial to the world's ability to feed itself, with global per capita arable land expected to drop from 0.46ha now to 0.21ha by 2039.

In the shorter term, any political eruptions in the zone running from Morocco to Syria could disrupt a large percentage of the world's phosphate production.

Just as gold hovered about the $US40 an ounce mark for decades, so between the mid-1980s and 2006 phosphate rock was stuck at about $US50/tonne. In 2008, phosphate went over $US500/tonne before the GFC pricked that bubble.

But, as Aguia notes in a presentation delivered on Thursday, those high prices opened up the phosphate business to juniors. There were five phosphate juniors globally in 2006; now there are 25. But, as usual, the Canadians value their companies more highly: the 12 phosphate juniors listed in Toronto are worth a total of $759m, while the 10 on the ASX have a combined cap of $180m.

There is a case to be made that big investors and joint-venture partners won't look at any phosphate project with less than one billion tonnes.

Which is the rationale behind Rum Jungle Resources (RUM) last week issuing its bidder's statement in the hostile lunge at Central Australian Phosphate (CEN). The two companies have adjacent projects in the Northern Territory, located just 80km from the rail line running to Darwin.

RUM's case is that, together, the projects have the chance to prove up more than that one billion tonnes, and a merger would mean only one logistics outlay -- either a slurry pipeline, road or spur railway to get the phosphate to the Darwin line.

And it would mean access to capital. RUM's largest shareholder is the deep-pocketed Washington H. Soul Pattinson (SOL). Investor Lion Selection Group (LSX) is also on the register.

But, apparently, there's not much enthusiasm for the plan over at CEN -- which does not suggest an early resolution.
And, surely, some junior is soon going to break out of the ennui engulfing much of our phosphate sector.

(with thanks to oily man)

Raider