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.
The roller coaster ride continued for Karnalyte stock on Wednesday as prices spiked almost 50%, recouping some of Tuesday’s losses. The Calgary based company has announced that financing talks with Gujarat State Fertilizers and Chemicals have broken down.
The Indian manufacturer began discussions with Karnalyte back in March to draft the first phase of construction for a new potash mine at Wynyard. But the proposed US$700 million of financing fell through after the two parties failed to reach a mutually beneficial agreement.
The companies sighted conflicts over the proposed terms of governance and the development of secondary mineral projects. Following the breakdown of the potential deal, Karnalyte announced that its VP of capital markets, Julius Brinkman, would no longer be engaged by the company. The framework agreement with Gujarat State Fertilizers and Chemicals will now be allowed to expire on September 30.
Potash prices have been steadily declining due to increased competition, a fall in crop prices and lack of demand from China. But new annual trade settlements with Chinese buyers gave some much needed relief to potash stocks. Yet prices for the crop nutrient have sunk 30% percent since last year, dropping to almost 10 year lows. The glut in the market has caused the world’s largest fertilizer company, Canada based Potash Corp, to slash its dividend for the second time this year. However, the manufacturing giant still maintains that demand for the commodity will pick up again in the latter half of 2016.
Derived from coal and phosphates, potash is a key nutrient for plants, helping to increase water absorption and strengthen roots. China is currently the world’s largest consumer of potash, setting the tone for global market prices. Analysts are currently predicting that potash prices will remain in the $200 to $300 range for the next few years.
