It might take longer then I thought:
"HALIFAX, NS -
A technology with the potential to shake-up the potash fertilizer industry took a step closer to reality on Wednesday as Verde Potash (TSX-V: NPK) reported it had produced potassium chloride (KCl), a typical potash fertilizer, at a pilot plant from non-traditional but potassium-rich source rock, of which it controls some billion tonnes in Brazil.
Potash fertilizers usually come from salts, a mining industry that is dominated by Canpotex, a producer-owned potash cartel in Canada, and the Belorussian Potash Company (BPC). Toronto head-quartered Verde, however, using a proprietary method it calls the Cambridge process looks to wrench the dependence of Brazilian farmers away from such entrenched producers. Verde says its resources could support production as high as six million tonnes KCl a year - just about how much of the stuff Brazil imports. This KCl production plan is part of Verde's two prong strategy which also involves making thermopotash - a novel kind of fertilizer that it also hopes Brazilian farmers may adopt.
But it is a new source of KCl that may strike the greatest fear into the hearts of potash Goliaths now supplying farmers in Brazil.
"We are still early in this process, but if and when Verde is able to demonstrate the economic viability of its Cambridge process, it could have a significant impact on incumbent potash producers (i.e., PotashCorp, Uralkali, Mosaic, etc.) and the potash market overall," Mackie Research analyst Jaret Anderson told Mineweb in an email Thursday morning. "Verde has referenced the potential for a six million tonne per year KCl operation at its Cerrado Verde site in Brazil. If this ultimately comes to pass...Brazil would no longer be importing from the likes of Canpotex, BPC, etc."
And so Anderson warns: "In my view, developments at Verde Potash bear watching by current shareholders of PotashCorp, Mosaic, Agrium, Uralkali and the like."
The key is cost. Analysts contacted by Mineweb agreed that Verde's masterplan for a full scale and victorious assault on the Brazilian potash market rides on the cost of production and how easily it can scale-up the Cambridge process to lofty production counted in the millions of tonnes per year. As it stands, the answer to the question of cost is unknown. But it will soon be fleshed out in a scoping study Verde hopes to release in early 2012.
"We need to see the results of a preliminary economic assessment (scoping study) first to assess the economic potential of making KCI from Verde's potash rock," Octagon Capital analyst Max Vichniakov said in an email. Verde "did not provide much information on the production flow or technological mapping at this stage. We speculate the process involved some sort of combined material (Verde's potash rock, limestone, and sodium chloride) treated at about +1,000 degrees C in a rotary kiln. Clearly input costs of the materials used, reagents, energy and technological complexity will be one of the key components we will be looking at."
For Anderson, in terms of operating costs, $300 per tonne is the magic number. That stands as his estimate on how much it costs to get KCl from the likes of Canpotex to Minas Gerais state in Brazil where many fertilizer processing plants are located. "We don't know where the cost figures will come out, but I would view anything less than US$300 per tonne as being a positive outcome for Verde and its shareholders."
Scalability will also be critical to Verde's success. As Vichniakov put it, the question of whether the pilot process can "be turned into a commercial production facility in Minas Gerais, that would exhibit the same economics, remains to be seen."
Cristiano Veloso, Verde's president and CEO, could not be reached for comment on costs and scalability as of presstime.
But, if Verde shows that it can do just that - produce millions of tonnes of KCl from an atypical source - then traditional potash giants may have cause to quake at the sight of this Brazilian David holding his slingshot bearing potassium-rich stone. And it may not just be Brazil that they have to worry about. What if the technology can be applied elsewhere?
Both Vichniakov and Anderson note there may be potential to develop deposits similar to Verde's in other countries, some of which, it is worth noting, that are outside traditional potash-producing arenas. "US, Egypt, Australia, China also have significant glauconite resources (a closely related mineral to Verde's rock) besides Brazil, so if Verde's process proves to be economical there might be potential interest from those countries," Vichniakov said. "If the process is fairly simplistic and does not involve any technological know-how, we believe it can be easily replicated elsewhere."
Anderson, who also pointed to glauconite deposits in Australia, said, "I believe there will be a number of groups globally that would be interested in both the Cerrado Verde deposit Verde controls (the glauconite material at Cerrado is particularly rich in K2O content) and the patented process they have developed to convert this rock to potassium chloride...While it is too early to put a value on this option, Verde could choose to license its process to others, who could then develop their own glauconite to KCl operations."
