Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Globes reports Israel Chemicals, a unit, ICL Fertilizers, will sell potash to its Chinese customers at $470 a ton, $70 a ton higher than prices to China during the first half of 2011. Under the terms of the current contract, 500,000 tons will be delivered in the second half of 2011 for $235 million.
ICL reported that since 2010, it has broadened its customer base in China, and sells potash directly to Chinese fertilizer producers and distributors. ICL, which is controlled by Israel Corp, is the world’s sixth-largest producer of potash.
The current selling price per ton is similar to recent prices recorded by other potash suppliers who supply potash to the Chinese market. At the end of June, the Belarus Potash Company (BPC) signed a potash deal with Chinese customers at $470 per ton, for a similar amount of 500,000 tons of potash.
At the end of June MINING.com reported the world’s number two potash producer said prices may reach $600/tonne by end of year and Germany’s top producers saying prices are rising almost on a constant basis:
Reuters quotes the chief executive of Russian potash producer Uralkali telling an investment conference in Moscow on Tuesday that spot potash prices could reach $600 per tonne by the end of the year. Uralkali also said it was considering entering into a transaction with Belaruskali, contradicting a Belarus deputy prime minister who earlier said the $20bn state-owned company was not for sale. A Belaruskali-Uralkali merger would create a group with annual production of 21m tonnes, dwarfing current number one Canada’s Potash Corp.
Back in January 2010, German potash producer K+S was charging 285 euros – roughly $407 – per ton of potash. As of now, bulk clients are buying potash at 363 euros or $520 per ton, a 27% net increase over the last 18 months.
Soaring prices for potash have underpinned the valuations of the large listed producers but in mid-June MINING.com reported how fertilizer stocks were punished after the US Senate voted overwhelmingly to eliminate some $6bn in annual subsidies for the country’s ethanol industry:
Shares of Potash Corp. of Saskatchewan, the world’s largest fertilizer producer, are down just shy of 8% for the week after losing almost 2% in late trade on Friday despite being upgraded to a buy by analysts at TD Newcrest. Others in the sector fared even worse with newcomer Karnalyte Resources shedding 4.3% while heavyweights Mosaic and Agrium lost over 4.4% and 2.3% respectively.
