the australian newspaper article today

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Fertiliser stocks to shine as food runs short
Robin Bromby From: The Australian February 07, 2011 12:00AM
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THERE'S a great commodities story which is going to make some people a lot of money -- but not many Australian investors, alas.

If you look at commodity price moves since early 2009, the big performer has been the precious metals complex -- gold, of course, but with a big push in 2010 from palladium. Industrial metals come a distant third, notwithstanding their present strength, with energy last in the race.

The second place went to agriculture. And there's the frustration. The growing crises of inadequate food supplies and rising prices are now dominating commodities news, but how to get onboard?

Investors here have plenty of choices for riding gold, base metals, iron ore, uranium, oil and gas, rare earths -- you name it. But when it comes to agriculture, there's a smattering of companies only. PrimeAg (PAG) saw what it called a silver lining in the recent Queensland and NSW floods. While it has experienced some crop damage, the company is expecting a bumper fiscal 2012 now that its soil moisture and water storage levels are very high, helped by the soaring prices for cotton.



There are a few others but, for agriculture, the main proxy here have been the fertiliser (potash and phosphate) stocks.

Now we have the issue of Morocco, and it seems this was one of the reasons behind the sudden 62.5 per cent gain on Friday by Phosphate Australia (POZ). We believe no announcement is imminent, and that includes the search for a financing partner, so there's a bit of head-scratching here.

The only other apparent explanation is Morocco and the worry that it will eventually become entangled in the North African unrest. The country is the world's dominant producer of seaborne phosphate rock so any disruption to output would be disastrous for world agriculture.

It has to be said opinions vary on Morocco. While it has factors similar to Tunisia and Egypt -- 40 per cent unemployment and half the population under 25 -- some experts argue the monarchy is far more widely accepted and less resented than the governments in Tunisia and Egypt.

But the stories that circulated during the week talked of international food security being compromised by even a temporary disruption of Moroccan phosphate, and these seemed to stir local investors. Minemakers (MAK) also saw a small gain in its share price.

Phosphate Australia's plan is to develop its Highland Plains deposit in the Northern Territory and move the phosphate by slurry pipeline to the Gulf of Carpentaria for export. It is coming up to a year since the company embarked on its search for a partner to bring capital to the table. Apparently the attitude at POZ is that Highland Plains won't be given away cheaply. Until a deal is done, we don't have a production date. By then, presumably, any disruption in Morocco will be long over.

And, really, the POZ performance has been lacklustre. From 26c a year ago, the stock slumped to 9.5c and, even with Friday's frenzy, it still has not managed to get back to 20c.

And the rest of the world is not standing still. Syria, which increased its phosphate output by 46 per cent last year, is now seeking investors to built fertiliser plants. Yes, phosphate is going to be a continuing story. The latest commodity report from the World Bank shows an increase in the rock phosphate price from $US140 a tonne to $US155/tonne in the past month.

Yes, it and potash will be in ever-growing demand, which is why we saw BHP Billiton (BHP) decide this week to do a feasibility study on its potash project in Canada.

But you have to be in production for the high prices to mean anything.

By the way, in a Melbourne-based publication, Diggers and Drillers, Alex Cowie says that most investors have never even heard of potash. He's clearly not a Pure Speculation reader; we've been banging on about it for years.

Copper booming

JUST over three months ago we reported copper price forecasts out of BNP Paribas in London. They then envisioned the metal hitting a new all-time high by 2012, but allowed that the red metal could possibly make it past the $US10,000 a tonne mark sometime in 2011.

In recent weeks, too, there was a feeling about that copper had pretty well reached as far as it would go for the moment, and that the expected 500,000-tonne (or so) deficit in 2011 had already been priced in.

We now know different.

The metal briefly touch the $10,000/tonne mark on Thursday at the London Metal Exchange but ended the session back in the four figures. Not so on Friday, when copper hit $US10,100/tonne and closed at $US10,050. (We must also note tin's strong performance on Friday, its latest achievement being a surge through the $US31,000 a tonne level, to close at $US31,200. Long-time Pure Speculation readers would not have been taken by surprise.)

But back to copper. We noted an upward tick of almost 14 per cent in Redstone Resources (RDS) on Friday. Investors are no doubt getting themselves excited about the first assays from the Tollu copper project in Western Australia due out this month.

But it was surprising that the market recently yawned at the news from Red Metal (RDM) that its one drill hole at its Corkwood copper-gold project near Cloncurry intersected 32m of copper, gold and silver. Also near Cloncurry, Queensland Mining Corp (QMN) produced a maiden resource for its Young Australian deposit.

A reader rightly asks how come QMN's price languishes -- it closed at 13.5c on Friday -- when the copper market is so hot. The company is now at the stage of negotiating development and production at its White Range and Selwyn and Selwyn North areas. It's expecting to get joint-venture and toll-treating deals bedded down within the next few months.

During the week we saw Altona Mining (AOH) raise $42.6 million for its copper operations, with Finland first in the queue. Over the border in Sweden, Golden Rim Resources (GMR) reported targets have been identified along strike from the historic, and very large, Falun copper-zinc-gold mine. The target areas have seen little or no previous drilling. And Avalon Minerals (AVI) has begun its bankable feasibility study on the Viscaria copper-iron ore in northern Sweden.

For those who subscribe to the theory that the Kimberley region has yet to reveal all its secrets, and who are chasing the copper star, there is Speewah Metals (SPM), which recently reported a surface sample assaying at 27.2 per cent copper and 222 grams/tonne of silver. And for readers who prefer a punt at the cheap entry point level, there's always Zambezi Resources (ZRL) -- last priced at 2.3c -- which is now working up its mining licence application for the Kangaluwi deposit, which has 193,000 tonnes of contained copper. It's in Zambia, mind.

Incidentally, the weekly Wealth section in The Australian this Wednesday has, as its cover story, the outlook for metal commodities (written by your not-so-humble correspondent). At 2pm on that day there'll be a Boardroom Radio panel discussion. Is there a question you want answered by the experts? If so, email it to the address below and we'll try to get some answers.

The link to the broadcast will be given in Wealth.

Hopes nuked

ANNA Bligh may be the media's sweetheart at present, but she won't be too popular at Summit Resources (SMM). Its quarterly reminded us of its high-grade uranium deposits in Queensland -- and the state ban on its being mined.

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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.