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Could Michigan become a potash producer to compete with the likes of Canadian behemoth PotashCorp (NYSE:POT) and U.S. fertilizer giant Agrium Inc.(NYSE:AGU)?
While that seems a stretch, considering the high barriers to entry into a market dominated by a few large conglomerates, a media report surfaced this week indicating that Denver-based Michigan Potash Co. LLC, is proposing a $700 million potash extraction and processing operation to tap into a deep underground potash deposit near Hersey.
“Our company is actually endeavoring to try to reintroduce the potash industry into Western Michigan and ultimately providing our farmers with a second and local choice, which they currently don’t have;”: Michigan Potash President Ted Pagano
Hersey is the location of the only potash mine in the state, which produced a small amount of potash since 1989, but in 2013 it stopped production and its dozen workers were laid off. The closure killed the excitement about developing a $65-billion potash industry in Michigan, which is the value placed on the deposit by the U.S. Geological Survey.
In a report, the USGS states that the amount of potassium contained in potash samples revealed a richer grade of potash than deposits mined in Canada and Russia. Because of its depth, at roughly 7,600 feet below ground, the potash would be mined using the solution method which injects steam into wells to dissolve the mineral, before it is pumped to the surface in a brine.
President Ted Pagano reportedly told MiBiz that reviving the mine would give local farmers access to a new potash source and reduce their reliance on imports mostly from Canada.
“Our company is actually endeavoring to try to reintroduce the potash industry into Western Michigan and ultimately providing our farmers with a second and local choice, which they currently don’t have,” Pagano told the publication. “Michigan is uniquely positioned because its location provides a sustainable advantage that cannot be displaced.”
Michigan Potash is currently leasing the mineral rights from 450 families across 23 square miles near Hersey, just north of Big Rapids.
While Pagano wouldn’t reveal a timeline for the project, the USGS report says unlisted Michigan Potash is working on breaking ground on a manufacturing facility this year.
Skeptics will of course point to the moribund potash market. A global oversupply of the fertilizer ingredient has caused prices to tumble in the last decade, leading to layoffs, mine closures and reduced capacity across the sector as the downward trend became more dramatic in the past two years. It has also forced a consolidation of the industry, with PotashCorp expected to complete its $12.8 billion merger with Agrium in mid-2017.
Prices have been sliced by over half in the last five years, with a tonne of potash going for US$214 in March compared to $475 in 2012. MiBiz reports the problem has been exacerbated by a corresponding fall in crop prices, also due to oversupply, thereby resulting in decreased demand for potash.
5 Comments
LAMB
This seems like a good opportunity for Michigan to get into the business, even while the price for Potash is low – it will rebound as the worlds population grows and needs food .
DMZ
‘Hersey’, not ‘Hershey’.
Chris Pritchard
Low cost mining method with proximity to a large customer base in the Midwest could easily make this profitable. Availability of fresh water is an advantage. I would bet the barriers to entrance in the market are lower as Canadian operations need a large investment in expensive mine shafts. An issue may be contamination of salt in the solution mining process as experienced by Salt Lake area and Moab, UT producers. That could be an environmental issue, and be a competitor to Midwest salt companies.
Tex Gilmore
Great news. Borehole mining using directional, or horizontally drilled wells used in mineral recovery is going to be a game changer. Those that embrace the technology will be big winners, those that don’t will be out of business. Just ask the folks in the O&G business.
Fannybeenhad
Drilling and mining and injecting waste water into the earth. You nor any company looking to get rich can not convince me that it will not endanger the ground and drinking water. I have a tiny piece of wetland (man made) that I can not break a twig in ( 30 x 40 feet) and this out of state business is getting the ok to destroy our environment. and destroy more wetland than anyone anywhere in the state. I am not interested in selling our environment to business. We have enough things that need to be removed such as the oil pipe line under the Mackinaw Bridge that can and one day will destroy our economy by unleashing oil all thru the water shed. Great news my ass. Bring more overseas ships ballast water to destroy our fishing. Oh, That’s right, you already did. Makes me sick to my stomach.