Goldman on potash (remember that PGRX owns land that is located not too deep in the soil and in year-round good climate with access to railroads/ports):
BHP Billiton's proposed $US10 billion ($9.7bn)-plus diversification into the global bulk fertilisers market through the development of its Jansen potash project in Canada has received a seal of approval from Goldman Sachs.
In a report that looks at the 10 major themes likely to emerge in the minerals space, Goldman identifies potash as the commodity for the next decade as the pressure to feed the world by achieving greater yields from nutrient deficient soils in China, India and elsewhere grows.
Goldman said potash could be to the next decade what the boom commodity of iron ore was to the last.
BHP's pending exposure through the development of Jansen is a key factor in why BHP and two other companies -- Freeport (copper) and Uralkali (potash) -- are considered by Goldman as the likeliest to benefit from their "late-cycle commodity exposure".
"Growing population, an increasing middle class and decreasing arable land, all lend themselves to increasing demand for potash," Goldman said.
"While the market is oversupplied currently, with significant amounts of identifiable supply to come onstream, many of the structural positives that drove the iron ore price up five times in the past decade are in existence in the potash market, such as high barriers to entry, concentrated market and high capital intensity of projects.
"Mid this decade we will be approaching the $US10,000 GDP per capita in China. The growing view is that we have seen a peak in the Chinese steel intensity. The question is: will we see a significant pick-up in potash intensity? If we do, then there is considerable demand and price upside potential for potash."
Following the dropping of the Olympic Dam expansion in South Australia, and the inner harbour development at Port Hedland in the Pilbara, BHP's Jansen project is one of the few "mega" projects still in the development pipeline.
But Jansen remains in feasibility-study phase and subject to board sanction. BHP's new chief financial officer Graham Kerr said recently the project could go to the board in the next financial year but gave no further detail. "It (Jansen) could probably be the fifth commodity we may add longer-term if the Jansen project goes through our investment process."
BHP has already committed an additional $US488 million to provide access to the potash, deeply buried beneath Saskatchewan's prairie. It has committed or spent $US1.2bn on Jansen to date.
