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"...AAA can't afford to play games with ICL...."
You got that right. Changing horses at the middle of the race is kinda-sorta dicey.
I hang my hope of the SOP project as a source of equity as a spin-off or preferred shares of Farhad's type.
Market does not seems to buy the story though....
In reviewing my haphazard notes:
Farhad mentioned that the lenders require contingency funds for cost overruns and working capital for the first year of operation.
He mentioned 35M for the working capital and undisclosed amount for the cost overruns. I would dare to guess that the total capital budget for the project (including some cost creep) would be in 750M to 800M range.
Farhad mentioned that the cost creep is not as large as feared and the FEED will quantify it further. He went on to mention that the significant portion of the components will be coming from South Asia and even from South Africa.
Farhad also mentioned that EXIM banks from the individual exporting countries would be involved and he mentioned that 100M of debt over the basic 65% mark is possible.
I am not sure how he can securitize it, but hey he might be able to pull it out with the take of pay off-take.
He answered the question how much money is in the bank right now saying something around 20M.
With the current cashburn I would guess that Allana has about a year before it has to go to the trough again.
It should be sufficient time for closing the deal, if everything goes well.
Farhad mentioned on the SOP side that there are 6 evaporation ponds in place and 1 of them will be used for PEA work. There is a production size cavern operational already.
I did not get to ask if there are any thoughts given to using this cavern for a small scale operation (100,000 t/y MOP)?
Quick back of the envelope calculations result in $15M to $20M free cash flow. This could go a great distance at this point of time.
some more notes later...
During the presentation, Farhad explained the delay in financing a bit.
He was saying that one of the lenders requested a long term recharge test on the aquifer.
Allana has done originally one month test and the lender requested 3 month pump test.
Allana is about to complete this extended pumping test in coming weeks.
I did not get to asking the type of SOP process being envisioned for Kainitite. I guess we can wait for the PEA for that.
Farhad dogged the question if Yara is involved in any shape in SOP project, but mentioned that Yara does not have enough Silvinite on their property and thus is interested in SOP instead of MOP.
He went on saying that Allana even provide some water for Yara testing (SOP) at present. He also mentioned that the PEA costs 200k of euros. He also mentioned that Yara makes their test results available to Allana
The powerpoint presentation (p.17) provided has SOP project Track earmarked as "potential Spin-off and equity financing Q1/15"
I will not elaborate on this, but I found it interesting.
Farhad, while answering a question about major shareholders (and the percentage of shares held by management = 4%) kind of slipped (or pretended slipping very well) uttering that they are in black out period right now (??).
He completely avoided answering question about possible alternatives and mitigating the risk if ICL walks...
Reiterating instead that ICL has trouble in Israel. Also mentioning that ICL apologized to Allana for this indiscretion..
He said that ICL, if in charge, would pursue 2m tpy mine right off the bat, but Allana will stick to 1m tpy. The back of the envelope calculations show increase of 30-40% CAPEX going from 1m tpy to 2m tpy
I will come up with more notes later. this is in conjunction with the notes of other participant's rendition of the meeting.
I sure as hell hope that Allana will not decide to list on ARCA in US as Farhad mentioned as a possibility. The reverse split required to meet the share price requirement will be brutal to the current shareholders.
I think it will be both....
or about SOP?
You can google it as well.
I will try to find out what
- is the squabble with ICL all about.
- Financing structure and timing
- Reason for the recent delays
- are there any alternatives for partners
- this "Special Purpose Company" for SOP business
- what happened to BNP Paribas
I do realize quite many things.
One of them is that a thinly capitalised exploration company should not squander money on R&D projects of questionable value.
(or for that matter spend money - US$ 1,000,000!!! on questionable investment to Rodinia, or on buying back their own shares)
On a different topic, I am going to the shareholders meeting on Thursday, any questions I should ask?
From IC Potash:
(it seems that it is not an easy process)
sop production.
Sulphate of Potash (“SOP”) is not a naturally occurring mineral and is produced by chemical methods. Only a few of these processes exist, and the Ochoa Process will be one of the lowest cost methods.
Process Method World Capacity Process Inputs Products
Mannheim 60% MOP SOP
Energy HCl
Sulfuric Acid
MOP & Kieserite 25%
MOP
Kieserite
Energy
SOP
Magnesium Chloride
Salt Lakes 15%
Lake Brines
Energy
SOP
Magnesium Chloride
NaCl
Ochoa -
Polyhalite
Water
Energy
SOP
Mannheim Process
The most common method of producing potassium sulphate is the Mannheim Process, which is the reaction of potassium chloride with sulphuric acid at high temperatures. The raw materials are poured into the center of a muffle furnace heated to above 600ºC. Potassium sulphate is produced along with hydrochloric acid in a two-step reaction via potassium bisulphate. This method for creating SOP accounts for 50% to 60% of global supply. The Mannheim Process is also the most expensive of the processing techniques due to the high input costs associated with purchasing MOP and sulphuric acid.
Potassium Chloride and Sulphate Salts
Potassium chloride can be reacted with various sulphate salts to form a double salt that can be decomposed to yield potassium sulphate. The most common raw material employed for this purpose is sodium sulphate. Sodium sulphate, either in the form of mirabilite (also known as Glauber's Salt) or sulphate brine, is treated with brine saturated with MOP to produce glaserite. The glaserite is separated and treated with fresh MOP brine, decomposing into potassium sulphate and sodium chloride. These methods of production are the second greatest source of global supply at 25% to 30%.
Naturally Occurring Brines
Some operations produce SOP from the salt mixtures harvested from natural brines. Three companies produce potassium sulphate in such a way on a large scale: GSL Minerals (Great Salt Lake, Utah), SQM (Salar de Atacama, northern Chile) and Luobupo Potash (Lop Nur, northwest China). This method requires brines with high sulphate levels such as those found within these salt lakes. The sulphate is typically present in the harvest salts in the form of the double salt kainite, which is converted to schoenite by leaching with sulphate brine. The leach process is hampered by high sodium chloride content in the harvest salts and the halite is first removed by flotation. After thickening, the schoenite is decomposed by simply adding hot water, whereupon the magnesium sulphate enters solution leaving SOP crystals. This process is currently the lowest cost method to make SOP. As lakes with sufficient brine mineral levels are rare, this method only accounts for 15% to 20% of global supply.
Ochoa Process
IC Potash’s Ochoa Process will convert polyhalite into SOP using unit operations common to the industrial minerals industry. Processing polyhalite to produce SOP involves the following steps: crushing and washing, calcination, leaching, crystallization, and granulation.
This is from South Boulder NR (emphasis by me):
The advantage of the Colluli resource is that the three potassium bearing salt forms in conjunction with the magnesium sulphate (kieserite) provides the resource the ability to make potassium chloride, potassium sulphate and magnesium sulphate. This gives Colluli a strategic advantage relative to many of the traditional potash production centres. It diversifies the product mix, gives a price premium on potassium sulphate and allows a higher potential product recovery per tonne of feed as a result of the kieserite. The proximity of Colluli to the key growth markets, in particularly India make this a very attractive resource. The challenge has been to determine the most suitable processing option for the salts, and work is about to commence in this area.
ICL's parent co. is selling 60 million shares of ICL to get about US$500m.
I just wander what they need this money for. Buy Allana and build a fertiliser plant in Ethiopia?
They sure as hell are not investing in Israel.
What happened to BNP Paribas?
BTW to my knowledge SOP production from Kainite is not proven technology, or is it?
This might be the reason why Allana is pushing SOP:
(sometimes I don't know what they are thinking....)
Potash miners face over-supply threat of their own making
Reuters | September 3, 2014 12:59 PM ET
More from Reuters
North American potash producers flexed their market muscle by idling production to boost prices when demand slumped
Andrey Rudakov/BloombergNorth American potash producers flexed their market muscle by idling production to boost prices when demand slumped
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A pickup in fertilizer demand has brightened the outlook for North American potash companies who suffered through plunging prices and profits after a European trading consortium collapsed in 2013. But any celebration among investors may be premature.
A surplus of potash mining capacity is set to grow even larger in coming years, weighing down the global industry while favoring low-cost eastern European producers over North American miners, who are sticking to a marketing strategy that risks falling behind the times.
And the times are changing. Belarusian Potash Company (BPC), the counterpart to North America’s potash trading consortium Canpotex Ltd, collapsed a year ago, with one partner looking to increase volumes rather than limit output and hope for higher prices.
The first new mines in Western Canada in four decades are also under construction and would be fierce rivals to Canpotex partners Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc.
Related
Potash Corp boosts outlook as profit tops expectations
Potash Corp. takes dramatic U-Turn with new CEO hire Jochen Tilk
This year, global capacity will hit 82 million tonnes, but demand will fall well short, even at a record-high level of 57 million tonnes, according to London-based commodity research firm CRU. That gap is set to widen slightly by 2020, when capacity looks to reach 99 million tonnes, far more than is needed to meet demand of only 73 million.
CRU’s demand forecast is based on an assumption that demand will grow faster than it has in the last seven years. If it does not, the supply-demand gulf will grow even wider.
“I’m more worried still about the industry,” said Philippe Capelle, vice-president of equities for Standard Life Investments, which holds shares in Potash Corp and Agrium and likes the companies.
“You’ve had a bounce-back in volumes this year in potash. Do you get a bounce-back next year? Maybe not and then what happens? You still have plenty of supply, so why would the pricing go up?”
Potash Corp shares have risen 28 percent since late July 2013 through Tuesday to trade back around their level before BPC’s collapse that month. But the Toronto-listed stock’s price around C$38 is less than half its record-high value reached during the 2008 commodities boom.
Canpotex is sold out of potash for the current third quarter. But much of that recovery is due to pent-up demand caused by North American railway problems that temporarily stifled the flow of potash.
“You can only restock the cupboard once,” cautioned Scotiabank analyst Ben Isaacson, in a July 24 note.
Potash was an investor darling six years ago on the logic that global population and income growth would drive up grain production.
One by one, producers expanded, starting with Potash Corp more than a decade ago. But fertilizer prices collapsed during the financial crisis, along with other commodities.
Through the ups and downs, North American potash producers flexed their market muscle by idling production to boost prices when demand slumped. But some say changing times calls for a new approach.
“The potash industry needs to take a more pragmatic (approach) to price versus volume, otherwise demand will continue to stagnate and the capacity surplus will be unsustainable,” said CRU analyst Paul Burnside. “It needs to price potash to move, without getting into a price war.”
New Potash Corp Chief Executive Officer Jochen Tilk says he plans no “radical changes” in strategy.
By contrast, after quitting BPC, Russia’s Uralkali OAO focused on driving up volumes. It says it pushed its market share to 23 percent in 2013 from 17 percent in the first half of that year, mostly at the expense of Canpotex, which still holds a larger share of the market.
“Is price over volume the right strategy if you lose market share? I don’t have the answer,” said Standard Life’s Capelle. “You’re not in an oligopolistic environment anymore.”
But Mosaic CEO Jim Prokopanko said shareholders are best served by the traditional Canpotex model. Like Potash Corp, Mosaic has shut in capacity.
“We’re not going to try to sell more product than what the world requires,” he said.
If Germany’s K+S AG and Anglo-Australian miner BHP Billiton complete their Canadian mines, the new North American players will also have to weigh supply and demand, Prokopanko said.
“I think they’re going to be good business stewards, look after their investors’ capital and they’re not going to be crazy about this,” he said.
Yet low-cost Russian producers are less worried about adding supply to the market. One of the reasons Russia’s EuroChem is confident about building two mines by 2017 is that it expects Potash Corp to limit its production if prices dip too low.
“This is one of the considerations, yes – that big incumbent players including (Potash Corp) are likely to pursue price over volume,” said Andrey Ilyin, EuroChem’s finance director, in an email.
Some shareholders are confident in the existing strategy. Favoring price over volume helps preserve Potash Corp’s margins, said Mohsin Bashir, portfolio manager at Stone Asset Management.
But it may be hard for Potash Corp to drive a higher price without a clear competitive advantage, he added.
Ultimately, any marketing strategy must consider what farmers are willing to pay for potash, said Gene Gauss, vice-president of fertilizer and nutrition at Wilbur-Ellis, a U.S. retailer that buys potash from the miners.
He thinks Potash Corp may eventually be forced to pursue a closer balance between volume and price as competition increases.
“I think they’ll have to … It’s just, in this industry now, it’s hard to determine anything in the future based on the past.”
© Thomson Reuters 2014
Allana Potash Continues To Drift Amidst Ag Malaise
Sep. 12, 2014 10:46 AM ET | 4 comments | About: Allana Potash Corp (ALLRF), Includes: ISCHY
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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
•Allana shares continue to drift lower, despite a strong and engaged strategic partner in Israel Chemicals.
•If efforts to increase royalties and taxes on resources produced in Israel stick, Allana's Ethiopian Danakhil project may become even more valuable to ICL.
•Allana still needs to secure project financing, but these very risky shares look undervalued below $0.80/ADR.
The bloom is definitely off of the ag bull market, as lower crop prices have soured investors on seed, ag equipment, and fertilizer companies. None of that is positive for Allana Potash (OTCPK:OTCPK:ALLRF, (AAA.TO)), nor is the fact that potash pricing remains stuck around $350 per ton. These shares have continued to weaken since the company announced a major tie-up with Israel Chemicals (OTCPK:ISCHY) and since my last piece. While the Global X Fertilizers/Potash ETF (NYSEARCA:SOIL) is down about 2% since my mid-March update on Allana, the company's shares themselves are down another 20% or so.
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Granting that investors were disappointed in the terms of alliance with ICL, and granting that there is still more dilution likely on the way (as the company still needs to raise debt, and probably equity, to fund its Danakhil project), I continue to believe these shares are undervalued. By no means is Allana anything other than a high-risk investment, but ICL appears committed to the project, and I believe the current price doesn't give much credit to the value of the project.
While I generally recommend avoiding "F-type" ADRs and buying shares on local exchanges when possible, Allana's ADRs are more liquid than most unsponsored ADRs. Even so, I'd advise owning the Toronto-listed shares when/where that is an option.
Some Progress, But Not Headline-Grabbing Stuff
Allana isn't just sitting on its hands. There is a lot of work for the company to do as it moves toward building the mining capex needed to turn the Danakhil project in Ethiopia into a potash-producing asset.
The company has successfully relocated two villages, and received a water extraction permit from the Ethiopian government. With the permit covering 30M cubic meters/year, Allana has more than enough to cover the 18.5M or so cubic meters it will need to produce 1Mtpa of potash and some left over for production expansion. The ECPM contractor selection process is ongoing, and the company is presently working on optimizing the project (including hydrology work and in-fill drilling).
Elsewhere, important logistics projects are moving forward, including the construction of a road and port.
That's all well and good (and necessary), but it is not the sort of activity that is going to lead to the market reconsidering the shares. What could prompt such a move is the company's ongoing efforts to obtain financing for the project. Management expects to secure debt financing in the late fall or early winter. Investors shouldn't expect great terms (this is a risky project in a risky jurisdiction), and there is a risk of delay in securing the financing, but less onerous terms or a creative structure could be a positive.
Developments At ICL Should Be Generating More Interest
While things at Allana have been fairly quiet, the same cannot be said of the company's partner, ICL. The company is exploring the sale of its German cleaning/disinfectants business, a move that would make the fertilizer business even more prominent, and is pursuing a dual listing in the U.S.
More specific to Allana, ICL has relocated a managing director from its Cleveland Potash operation to Danakhil to help oversee the project. ICL has also been active in lobbying the Ethiopian government for support on the Danakhil project and sponsoring educational programs via Ethiopia's Agriculture Transformation Agency on fertilizer application - part of a wider effort to start developing the African fertilizer market.
All of that may pale next to what happened in May, though. ICL lost on arbitration ruling regarding royalties, and saw Israel's Sheshinski Committee recommend higher taxes and royalties on natural resources produced in Israel - a 5% royalty and a 42% natural resources tax to be applied after an 11% operating return calculated on depreciated assets. In response, ICL froze $1 billion in planned investments in its Dead Sea operations, and indicated that further investments in Israel are likely not viable under that sort of structure.
I would think that this should make the Allana Danakhil asset even more valuable to ICL. True, ICL has other projects in countries like Brazil and Vietnam, but this project should be able to produce a meaningful amount of potash in a relatively short time. I'd also note that Allana just recently announced that it had engaged a company to conduct a preliminary economic assessment of its kainitite resources at the Danakhil site. Kainitite can be processed into sulphate of potash (or SOP), a more valuable form of potash than murate of potash (or MOP) that is the initial focus of the project.
All told, it seems to me that Israel Chemicals is looking at the prospect of reduced expected economic returns from its Dead Sea potash assets, while it looks to increase its presence in the potash market and sell more into emerging markets like India, the Mid East, and Africa. I should think that would make Allana's Danakhil project even more valuable to the company and perhaps motivate an outright acquisition of the remaining shares of the company, given the current slump.
No Change To My Outlook
While it is true that low crop prices have led investors to flee the ag sector, I don't believe that the current price of corn or potash should have too much bearing on a project/company that won't be producing for a few years. What's more, fertilizer is still under-applied in many parts of the world, and I believe that demand for fertilizers like potash will continue to grow.
In valuing Allana, I use a lower assumed price than management's feasibility report ($375/t versus $430/t), higher opex cost assumptions ($80/t-plus), and a higher discount rate. I also assume that the project will be expanded in 2024, though, so my life-of-project production forecast is higher. Including expected dilution and financing, I believe Allana shares should still trade at almost C$0.90/share, or just a bit under $0.80/ADR.
The Bottom Line
If Allana shares continue to drift lower, I believe ICL has to at least consider stepping up and buying up the remaining shares. At a minimum, I would think that such a transaction would lead to lower project financing costs. Taking the bearish side, what's the rush? The off-take agreement lets ICL control the project's expected production, and that would likely discourage a rival bidder, so other than an unexpected spike in potash prices, ICL might be thinking that there's little risk of the share price of Allana running away from them.
Allana is the sort of stock/investment where it's tempting to run the numbers over and over again, because it seems strange that the shares trade where they do. Even though the ICL deal was more dilutive than investors may have wanted, ICL's commitment to the project is a positive, and the NAV looks attractive even with more conservative pricing and cost assumptions. Again, this is a high-risk opportunity, but one that I'm finding increasingly appealing as the shares drift lower on no apparent negative news, and in the face of what I believe ought to be positive news regarding the importance of Allana/Danakhil to ICL.
Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
Let's hope that you will be LMAO (or should I rather say LYAO ?) in a week time....
Spending more money....
I wander what they are thinking.
At least they claim no delay in the main work.
I hate the idea of the "special purpose company".
Allana shareholders are paying for the development of a new company (maybe privately held?)
Smells like Rodinia deal all over.
Allana Potash starts Danakhil sulphate of potash PEA
2014-09-08 08:15 AT - News Release
Mr. Farhad Abasov reports
ALLANA POTASH INITIATES PRELIMINARY ECONOMIC ASSESSMENT ON PRODUCTION OF SULPHATE OF POTASH (SOP)
Allana Potash Corp. has engaged Ercosplan Ingenieurgesellschaft Geotechnik und Bergbau to complete a preliminary economic assessment on Kainitite resources that may be amenable to sulphate of potash production on its Danakhil project in Ethiopia. SOP is commonly used on chloride sensitive crops such as tobacco, fruits and vegetables and vineyards and typically commands a premium price to Muriate of Potash (MOP). The price differential between MOP and SOP is substantial, and has averaged approximately US$ 125-150/tonne above the MOP price over the past several years. However, recently the differential has increased to over US$350/tonne.
Farhad Abasov, President and CEO of Allana, commented, "We are pleased to have engaged ERCOSPLAN to complete a PEA evaluating the potential of the vast Kainitite resources on the Danakhil Project. As we move to completion on the development of our MOP operations, it makes sense to start to plan for the development of SOP as an Allana product line, particularly given the extent of our estimated SOP-based resource. The SOP PEA will proceed independently but in parallel with our development and optimization work on our MOP production facility as outlined in the MOP project's Feasibility Study completed in 2013. The Kainitite is ubiquitous on our project license and management believes a positive PEA may allow Allana to add significant value for our shareholders. If the results of the SOP PEA are positive Allana may consider establishing a special purpose company dedicated to developing the SOP resources for sale in the global market."
The Kainitite mineral resources on Allana's Danakhil Project are extensive (see table below) and dominated by the mineral kainite (4KMg(SO4)Cl x 11H2O). For details on the Kainitite mineral resources see Technical Report entitled "Resource Update for the Danakhil Potash Deposit, Danakhil Depression, Afar State, Ethiopia" dated effective April 17, 2013 filed under the Company's SEDAR profile at www.sedar.com on August 7, 2013.
RESOURCE ESTIMATE TONNAGE (MT) GRADE (% KCL) MEASURED 552.3 19.2 INDICATED 598.2 19.5 INFERRED 481.8 19.8
Notes
1. MT=Million Tonnes, tonnage is for in-situ resource with no discount for recovery as mining method is to be determined.
2. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimates of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
3. The quantity and grade of reported inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.
The PEA will outline the potential to produce SOP (K2SO4) from kainite derived from the Kainitite Horizon in the project area. The Kainitite Horizon is interpreted as a primary evaporite unit in the basin and has been intersected in diamond drilling in most of the mining license area. The PEA will examine the use of solution mining to mine the Kainitite Horizon and produce 1,000,000 tonnes per year of SOP product from the brine as a separate operation from the current development program which will produce 1,000,000 tonnes per year of MOP.
(another pie in the sky)
The PEA will focus on six main areas covering the following: 1. Preliminary Brine Field Design 2. Preliminary Evaporation Ponds Design 3. Preliminary Process Development 4. Preliminary Definition of Additional Infrastructure 5. Preliminary Cost Estimates (CAPEX and OPEX) 6. Preliminary Market Study and Financial Model
ERCOSPLAN has extensive experience with potassium sulphate minerals and processing through its work in the potash industry in Germany where SOP is and has been produced from different combinations of potassium chloride and/or magnesium sulfate bearing minerals. The PEA is expected to be completed by Q1, 2015
The mineral resource estimates disclosed herein were completed by ERCOSPLAN under the supervision of Dr. Henry Rauche, Ph.D., EurGeol, Managing Director, CEO ERCOSPLAN, Dr. Sebastiaan van der Klauw, Ph.D., EurGeol., Consulting Geologist, ERCOSPLAN and Euro Ingenieur Ralf Linsenbarth of ERCOSPLAN Ingenieurburo Anlagentechnik GmbH who are each independent Qualified Persons for the purposes of National Instrument 43-101.
Read more at http://www.stockhouse.com/companies/bullboard/t.aaa/allana-potash-corp#Tgk2dpa6vgZ1jckT.99
This one is scary even for me:
(from February 13, 2014)
We shall se on Sept 18 if Allana management has anything to say to negate this overall bearish sentiment.
Event Details for: Continuation Diamond (Bearish)
Rate this Event:
Tells Me: The price has broken downward out of a consolidation period, suggesting a continuation of the prior downtrend. The Continuation Diamond (Bearish) begins during a downtrend as prices create higher highs and lower lows in a broadening pattern. Then the trading range gradually narrows after the highs peak and the lows start trending upward. When the price breaks downward out of the diamonds boundary lines, it marks the resumption of the prior downtrend. More...
Event Date: Feb 13, 2014
Opportunity Type: Long-Term Bearish
Close Price: $0.45
Target Price Range: $0.04 - $0.12
Price Period: Daily
Volume: 2,563,251
Pattern Duration: 314 days
Inbound Trend Duration: 247 days
I think that ICL has a plan to time the beginning of the production to the infrastructure completion and development of the African potash market.
They have no interest in building the mine right now.
All other activities are dependent on that.
Why to sign a load when you will need the money in a year?
It seems that ICL will take its time here and we will suffer all along...
JMHO
20's here we come.
A week old news, but still interesting.
Uralkali sees 2014 global demand at 56-58 mln T
* Says no major difficulties due to sanctions (Adds details, quotes, context)
Aug 28 (Reuters) - Russia's Uralkali, the world's largest potash producer, said on Thursday its first-half net profit fell 7 percent year-on-year due to lower prices for the crop nutrient.
Uralkali quit a powerful trading alliance with Belarus in July last year to focus on maximising sales volumes, triggering a slump in global potash prices.
"In the first half of 2014, the potash market demonstrated signs of recovery both in terms of volumes and price," Dmitry Osipov, Uralkali chief executive, said in a statement. "Customers sought to replenish depleted stocks."
Uralkali said its first-half net profit fell to $370 million, beating analysts' average estimate of $330 million. Revenue rose 7 percent to $1.7 billion.
Global potash demand in 2014 may exceed the 2011 level, which would set a new record, Uralkali added.
In its presentation of results, it said that global demand was expected at 56-58 million tonnes in 2014 compared with 54 million tonnes in 2013. In 2015 it expects the demand to rise further - to 58-60 million tonnes.
During the first half of 2014, Uralkali signed a five-year unsecured club facility for $450 million with international banks, a rare event for Russia, which has been hit with sanctions by the West following its annexation of the Crimea region and its support of pro-Russia rebels in Ukraine.
"The political and economic turmoil witnessed in the region, including the developments in Ukraine, have had, and may continue to have, a negative impact on the Russian economy, including weakening of the Russian Rouble and making it harder to raise international finance," Uralkali said.
Uralkali is not currently experiencing any significant difficulties because of the sanctions, but economic instability, the threat of further sanctions and uncertainty in financial markets may affect suppliers and customers, it added.
The European Union and United States have imposed sanctions on some Russian individuals, companies and banks, but Uralkali has escaped unscathed.
Its net debt was $3.9 billion at the end of June, with earnings before interest, tax, depreciation and amortisation (EBITDA) at $767 million.
Shares in Uralkali were down 2 percent in afternoon trade, in line with a decline in other Russian stocks, on fears of escalating tensions in Ukraine. (Reporting by Polina Devitt and Natalia Shurmina; Editing by Katya Golubkova and Mark Potter)
According to Scotia Bank commodity analyst Patricia Mohr, potash sales prices are increasing and potash sales volumes are growing. Some of the highlights from her latest report are as follows:
Spot potash prices (FOB Vancouver) edged up from $302.50 in June to $310 per MT in July.
Global shipments have rebounded significantly in 2014 and are likely to reach 58 MMT.
Canpotex previously announced that they are sold out for this quarter; inventory remains significantly below its 5 year average. Granular prices in Brazil are looking to increase from the current $355-$360 MT to $380 given strong seasonal demand in Q3.
China is now expected to exercise a large amount of optional tonnage from Canada before year end. A new contract price with China for early 2015 is expected to reflect a 10% price hike which would take it to ~$335 per MT.
Uralkali believes global potash shipments will reach 60 MMT in 2015.
There are definitely some indications that this might happen when Allana goes into production (in 2016 - 2017)
MOP market is slowly firming up.
(In the meanwhile, we will see 20's...)
IMHO
Cheers
Hmmmm, interesting:
Uralkali sees North American potash demand matching 2010 record • 11:35 AM
Carl Surran, SA News Editor
• Uralkali (OTC:URALL) sees North American demand for potash rising to ~10M metric tons in 2014, matching the record level of 2010, as farmers boost production of crops.
• Consumption will be sustained at least through this fall as farmers replenish declining nutrient levels in the soil after crop production that reached an all-time high this year, Uralkali says; the region’s H1 demand was ~6M tons, up 30% Y/Y.
• Uralkali, competing with Potash Corp. (NYSE:POT), Agrium (NYSE:AGU) and Mosaic (NYSE:MOS), sells ~5% of its output in the U.S
I don't think we will need further delay to get to low 20's...
:):):)
Cheers
Well, it was yesterday...
:):)
Allrf is at 29 cents (US) isn't it?
It looks like Jansen will not be built any time soon:
BHP Billiton (ASX, NYSE: BHP) (LON: BLT), the mining giant in the midst of a major demerger, said Tuesday that current potash market conditions may be scaring potential partners for its $12 billion Canadian Jansen project away.
The company has hinted it would likely need a fellow miner to develop its proposed mine in south-central Saskatchewan, which has the potential to become one of the world’s largest mines for the fertilizer ingredient. However, Chief Executive Officer Andrew Mackenzie restated today the firm is not in a rush.
“We are not in a hurry and we have to take account of how current market conditions have perhaps made some of the potential partners less interested than they might have been,” he told reporters in London according to Bloomberg.
Potash prices, oversupply scaring potential Jansen partners: BHP
Jansen potash project.
Jansen is not the miner's only potash bet in the area. Four years ago, BHP bought nearby Athabasca Potash for $320 million and Diamet Minerals for $426 million.
The world’s No.1 mining company, which has already committed $3.8 billion to the project, plans to spin off its nickel, manganese and aluminum operations to form a new company that would have an estimated value of $8 billion.
Analysts agree it is too early to tell how the Canadian operations will be affected, but the company's appears to be leaning towards continuing to invest in its potash operations, a potential “fifth pillar” or major business line.
Slowly, but surely
Potash prices, oversupply scaring potential Jansen partners: BHPBHP recently committed to spending an additional $2.6 billion on Jansen over the next few years, just to gain access to the deposit, but it hasn’t made a decision on when to start building the mine, which has 5.3bn tonnes of measured resources and 1.3bn tonnes of inferred potash.
The reason, say experts, is that potash producers need prices as close as $500 per tonne as possible, so they can cover construction costs.
Potash prices fell last year about 30%, to near $300 a ton by December 2013 – hitting a six-year low. Prices have since rebounded to about $350 a ton. But building Jansen, which could cost as much $15 billion to construct, is probably a no-go for BHP even with the slightly higher current prices.
Called by Mackenzie “the world’s best undeveloped potash resource,” the mine is expected to produce ten million tonnes of potash a year during a 70-year mine life.
But BHP spent less than expected on Jansen during the 2014 financial year, and also allowed an associated port lease to lapse.
Global demand for potash was expected to rise this year. Key importers in China and India have for the past couple of years demonstrated an ability to drive deeper discounts on contracted volumes due to plentiful supplies.
Image: BHP's CEO Andrew Mackenzie speaks at the annual IHS CERAWeek conference in
So, the twenties are here, but not on any decisive volume...
Conclusion: wait and see.
I think that we will see 25 cents here.
This is interesting.
(courtesy of BOB-TEN1 from Agoracom)
It seems that AMEC was working on Dallol project in May already....
Senior Process Potash Specialist at AMEC Americas Ltd.
Past
Senior Process Engineer at Mosaic Potash Company
Environmental Engineer at State of New Mexico , Environmental Improvement Division
Senior Process Engineer at Mississippi Chemical Corporation
see all
Education
New Mexico State University
Iowa State University
Dailey M. Jones, II's Experience
Senior Process Potash Specialist
AMEC Americas Ltd.
Public Company; 10,001+ employees; AMEC; Oil & Energy industry
November 2007 – Present (6 years 10 months) Saskatoon, Saskatchewan
Served as the process lead on the PCS Cory Expansion project to take the Cory facility to 2.8 million tons per year capacity. Assisted in PFDs, P&IDs, instrumentation, equipment selection, construction, commissioning and start up activities completing assignment in November, 2011. In January, 2012 named as the process lead on the Mosaic Potash Belle Plaine expansion to increase capacity by 1.1 million tpy of white KCl. May 13th Mosaic announced that this project is to be deferred for up to 2 years. The PCS Cory Potash Plant completed the CANPOTEX run on June 26th, 2013 establishing the plant capacity at 3,022,356 tons on an annualized basis exceeding the original 2.8 million ton per year design basis. May, 2014 assigned as the process lead on the Allana Potash Project for new solution mine in Ethiopia.
Farhad spent 1M of Allana's money on this:
(if he pulled it once he might be able to do it twice...)
(after all, it is his patent...)
Rodinia Lithium unveils $3 mln non-dilutive potash stream financing
3rd Apr 2012, 9:35 am by Joyanta Acharjee Rodinia Lithium unveils $3 mln non-dilutive potash stream financing
Rodinia Lithium (CVE:RM)(OTCQX:RDNAF) said late Monday it will raise $3 million in a non-brokered private placement financing linked to potash prices and future potash by-product sales.
The lithium explorer said it plans to issue 3 million subscription receipts to an investor at $1.00 each.
Rodinia's innovative deal will avoid share dilution with the company monetizing the by-product potash that is being extracted from its lithium assets.
The capital raised will go towards building a pilot plant and completing a feasibility study for the company's flagship Salar de Diablillos project located in Salta Province, Argentina.
"The unique structure of this offering recognizes the value inherent in our potash by-product, while at the same time providing us an opportunity to raise capital in a manner that is non-dilutive to the common shareholders of the company," Rodinia's president and CEO Will Randall said.
"While this financing places a current value on the potash by-product of C$20 million, Rodinia’s primary source of income in the event of production remains the sale of high purity lithium carbonate from Diablillos."
Speaking to Proactive Investors, Rodinia's vice president of corporate development Aaron Wolfe said: "We are raising capital today by monetizing our potash by-product, which prior to today was not being recognized in the company’s valuation – our potash now has a value of $20 million, while our market capitalization prior to the deal was approximately $23 million.
"This structure is non-dilutive to the common shareholders from the perspective that we are not issuing a significant amount of new common equity. The only common equity issued will be if and when the half warrant is exercised and that will occur at $0.45, well above the recent trading prices.
"This financing does not encumber the balance sheet, it leaves room for the company to contemplate debt financing for the construction phase, and it provides another arrow in our capital raising quiver going forward."
The Potash Stream Preferred Share structure places an implied value on the project's potash revenue today of $20 million, while Rodinia's market capitalization prior to the deal was approximately $23 million.
Each of the subscription receipts will be exchangeable into a unit consisting of one non-voting potash stream preferred share and one-half of a common share purchase warrant.
Farhad speaks:
(I think he should have kept his mouth shut. 20's here we come...)
http://ethiopia.newsscale.com:8080/video/allana-potashs-president-and-ceo-talks-about-their-future-ethiopia
Yes you are right. it says that right here:
"...While the mine has been shut down, that hasn’t stopped smaller sinkholes from appearing, and each street in Berezniki is under constant camera surveillance for signs of collapse. The latest sinkhole in the city appeared in 2011...."
(but it would still be a boost for potash price if there was some production disruption there)
Price hike to US330/t?
Uralkali Considers Price Hike on New China Supply Deal
ReutersJul. 29 2014 13:56 Last edited 13:56
Uralkali
Russia's potash producer Uralkali could increase the price for a new 2015 supply contract with China.
Russia's Uralkali, the world's largest potash producer, said it could increase the price for a new 2015 supply contract with China by 10 percent, as it steps up efforts to restore prices to levels seen before last year's slump.
Global potash prices fell sharply after Uralkali quit a powerful trading alliance with Belarus in July 2013, sparking competition among producers who had previously maintained price discipline.
"Traditionally, China's market, which is set to consume 12 million tons of potash this year, is a growth driver," Oleg Petrov, Uralkali's head of sales, told Reuters. "The estimated price may exceed the current contract price by 10 percent."
China is the world's largest potash consumer whose contracts are seen as a benchmark by the bulk of market participants. Currently, Uralkali has a contract to supply China with 700,000 tons of the soil nutrient at $305 per ton on a cost-and-freight basis.
Negotiations over the new contract are expected to start this autumn and to end by January 2015, Petrov said. He declined to comment on the volume of future supplies.
A 10 percent increase in the 2015 contract price would still leave prices far behind the $400-per-ton level, at which Uralkali had been supplying potash to China in the first half of 2013, before the collapse of its trading alliance.
However, a new Chinese contract should stimulate growth in consumption and global potash deliveries are expected to reach 60 million tons in 2015, up 2 million tons from 2014, Uralkali said.
Its withdrawal from the Belarus trading venture, which controlled 40 percent of the $20 billion global market for the fertilizer, left a group called Canpotex — owned by Potash Corp of Saskatchewan, Mosaic Co and Agrium — as the world's top export group.
Potash Corp said last week it had a strong potash order book from U.S. buyers for the second half, and Canpotex was fully committed through the third quarter with China driving some of the renewed potash demand.
See also:
World's Biggest Potash Producer Uralkali Bullish Despite Sanctions
inShare
Interruption in production at Berezniki mine would cause the potash price to spike:
Berezniki, the Russian city where a giant sinkhole formed above an OAO Uralkali potash mine in 2006, is moving a small number of people to new homes after detecting signs of increasing subsidence.
The residents of as many as 11 houses will be relocated by tomorrow after weekly measurements showed an increase in the speed of surface subsidence near their homes in July, the city administration said on its website. There is a risk of a sinkhole forming next year should the pace of soil movements continue at current levels of almost 13 centimeters (5.1 inches) a month, the city said, citing scientists.
A 500-meter wide sinkhole opened above Uralkali’s Mine 1 eight years ago after water poured into the production site, about 1,600 kilometers east of Moscow. It swallowed part of a railway line and forced Uralkali, the world’s largest potash producer, to write off about 5 percent of its mineral reserves.
While the mine has been shut down, that hasn’t stopped smaller sinkholes from appearing, and each street in Berezniki is under constant camera surveillance for signs of collapse. The latest sinkhole in the city appeared in 2011.
Authorities are moving residents after the latest evaluation by the Mining Institute within the Russian Academy of Sciences’ Urals branch and scientists at the Galurgiya Institute.
New Suburb
It is possible that the situation will improve and remove the risk of a sinkhole, Alexander Baryakh, the Mining Institute’s director, said yesterday in interview with the city’s Bereznikovskiy Rabochiy newspaper.
No other dangerous areas at risk of new sinkholes have been identified in the city, he said. Baryakh couldn’t be reached today at his office in Perm. Uralkali’s press service declined to comment.
Berezniki began as a labor camp, built directly above the mine Uralkali established in the 1930s. That quirk of Soviet-era urban planning is now prompting a 7.5 billion ruble ($208 million) response from the company and the government of the Perm region as it prepares to move 12,000 people to specially built homes in a new suburb by 2017. Uralkali has agreed to invest 2.5 billion rubles in the program.
Uralkali rose 0.2 percent to 140.6 rubles by 5:16 p.m. in Moscow.
(An earlier version of this story corrected the level of reserves written off in the third paragraph.)
To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net
To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net Tony Barrett, Ana Monteiro
"....The FEED work is expected to take six months to complete and is preparatory work in anticipation of the completion of project financing and expected start of construction....."
Another 6 month of nothing
What really fascinates me is the utter lack of positive response on the SP.
I'd expect at least 40 cents right now.
Oh well, 20's here we come...
we might reach 20's even this week, judging by the volume.
Twenties are in the cards. EOM
Another capacity reduction.
Potash price must be starting moving up soon.
Agrium Inc. (AGU) announced that operations at its Vanscoy potash mine were suspended after its main hoist system suffered a mechanical failure.
Production had to be shut down at the mine due to the failure. As a result of the outage, Agrium will bring forward the planned turnaround to tie-in the current capacity expansion project.
Production will remain on hold until the tie-in is complete. No injuries were caused during the incident and the company does not expect any considerable impact on the workforce due to this.
Agrium’s shares are down roughly 1.5% since the announcement (based on last Friday’s close).
Nice...
Ertwo. Do you ever post any highlights. ? Lol just sayin.
You mean positives?