Mining vs AI: What’s wrong with this picture?
As the saying from mid-19th century California goes, during a gold rush the easiest way to get rich is selling shovels and picks.
Demand for potash is much higher than the available supply and as emerging economies grow, that demand is expected to increase as well. One of the largest consumers of potash is Brazil, which hosts one of the world’s fastest growing potash market. In 2012, Brazil consumed 9.3 percent more potash than in previous years for a record of 8.1 million tonnes of potash for the year. Furthermore, the country also imports 90 percent of its potash requirements, calling into question the security of its agriculture business.
Commenting on the growth rate of Brazil’s agriculture market was Pacific Potash’s VP of communication, Mike Blady who told Accesswire that Brazil’s “agro-business is the fastest-growing industry and one of the government’s largest cash generators. It’s expected that Brazil will have the largest sustained growth in potash consumption over the next 50 to 100 years as it still has 20% of the world’s remaining arable land. Brazil is the number one growth market for fertilizer and potash. It’s growing even faster than China for potash consumption.”
With the markets facing rising potash prices, many companies are struggling to remain cost-effective in their projects. One of the factors that has attracted exploration to Brazil, is the proximity to the market, which reduces transportation costs significantly and helps in making Brazil attractive to agro-businesses. With underdeveloped reserves, Latin American nation is rapidly becoming a favorable region for potash projects, with several companies are looking at developing their resources.
The companies
Vale (NYSE:VALE) is currently operating the only active potash mine in Brazil. The Taquari mine produces roughly 10 percent of Brazil’s potash demand and is scheduled to close in 2016, setting the stage for newcomers.
A relatively newcomer on the Brazilian potash scene is Pacific Potash (TSXV:PP) who is moving forward with its Amazonas Basin potash project. The company has a 100 percent interest in Amazonas basin, an early-stage targeting prolific the Prairie Evaporite formation. The company has an aggregate total of 795,824 hectares of land in the northern region.
The Amazonas basin can be compared to Saskatchewan’s potash basin, however, unlike its Canadian counterpart, the Brazilian basin is vastly underexplored and underdeveloped.
Verde Potash (TSXV:NKP) is working on developing the Cerrado Verde project in the country’s cerrado agriculture region in the Minas Gerais state. The region is the hub for sugarcane and soybeans. Cerrado Verde hosts a NI 43-101 compliant total resource estimate of 253 million tonnes of potash. In February 2012, Verde released the a PEA for the project which returned a $3.3 billion NPV with a 27 percent IRR and $598 million in capital expenditures.
Verde was recently dealt a setback which could impact the company’s financing plans. In mid-May, the company announced that contrary to guarantees made in the 2012 PEA, engineering firm FLSmidth could not offer the company a performance guarantee for the a rotary kiln for the potassium silicate to KCl process at 12,000 tonnes per day. According to the Financial Post, FLSmidth can only guarantee 3,000 tonnes, a significant drop. The company is now exploring other options in order to bring the performance guarantee higher. As a result, the company has delayed its bankable feasibility, which was expected in Q1 2014.
Despite the setback, President and CEO, Cristiano Veloso is commited to bringing the project to term. “Verde remains focused on advancing the Cerrado Verde project and delivering a large-scale KCl operation. Management believes that the operation of a demonstration plant can act as a significant value creator for the Company, as lenders and potential strategic partners will have an opportunity to observe the conversion of potassium silicate ore to KCl calcine at a semi-industrial scale here in Brazil.” Veloso said in a statement.
As of a March update, Verde Potash was working on setting up an off-take agreement.
Among these publicly traded firms there are several other private companies looking to start their potash operation in Brazil. Included in this list is Potash Brazil, also located in the Amazonas basin.
According to the Digital Journal, the company is almost ready to go, and expects to list on the BOVESPA in Q1 2014.
Brazil: The Next Potash Heavy Weight?
originally posted on
potashinvestingnews.com
