“Betting on the potential of potash” is the headline in Wednesday’s Australian Financial Review. The newspaper says that BHP Billiton’s decision to triple the stakes at its Canadian potash play is a serious surprise — but one that reaffirms the view expressed by recently appointed CEO Andrew Mackenzie that the Jansen project in Saskatchewan has great potential to be BHP’s fifth pillar, the others being iron ore, oil, coal and base metals (including copper, nickel, manganese and aluminium). This came after the company revealed it would spend another $2.6 billion on Jansen, with Mackenzie making the point that over the next 10 to 15 years another 250 million Chinese will move from the countryside to the cities (with the obvious affect on food supply and consumption patterns). Mackenzie stared down some large shareholders and analysts, including Citigroup, who had argued for a slowdown on potash to conserve cash.
From London, analyst Roger Bade at Whitman Howard noted that the spend would be $800 million a year through to 2016, adding: “The company believes in the long term future of potash and believes the price will ultimately reflect the cost of new supply. In addition Jansen will make the move into expansion projects and be reported on quarterly. BHP is open to being partnered to bring Jansen on stream. It will be interesting to see if this has any impact on the recovering potash sector, as this news has been overhanging it for some time“.
As the AFR notes, Mackenzie takes the view that further investment in Jansen increases the options open to BHP in that it keeps alive a project into which money has already been poured. Mackenzie sees the importance of a potash project that could have a 100-year life. The company is also signalling it is open to taking on a partner who realises that China, and much of emerging Asia, is about to see an explosion of food demand.
BHP apparently is not overly concerned about present potash prices, nor about the collapse of the Russian-Belarus cartel. The company is determined that Jansen will be able to operate at costs lower than many existing producers — vital if BHP is to stay true to its intention of keeping well away from teaming up with Canpotex.
On the other potash story of the week — The Wall Street Journal report that Indian potash buyers are demanding a 12% price cut, which coincided with news that a recent sale to Sri Lanka had been struck at 22% lower than a potash shipment four months earlier — we turn again to Roger Bade in London. “A 12% discount doesn’t appear to be much and it is encouraging that the Indians are talking again. This gives the impression that the eventual outcome will be in the middle Uralkali-versus-Potash Corp, that is, a 10%-20% price cut, but higher volumes to just below 60 million tonne per annum in the short term”.
GRAPHITE: At the risk of certain readers of this site having a conniption, here is an interesting list compiled by an Australian explorer for graphite, Lincoln Minerals. The company, whose projects are on the Eyre Peninsula in the state of South Australia, plans to be in production by 2015, its first mine (Kookaburra Gully) billed as having premium flake graphite at grades of over 90% total graphitic content without the need for chemical leaching, has compiled a list of the globe’s top known graphite resources.
As I say, don’t shoot the messenger (me); I did not compile this list, I have not verified it, and it is reproduced here purely for the interest of those who follow the graphite scene to discuss or whatever. OK, that said, here are the top projects as classified by Lincoln:
1. Nunasvaara, Sweden — Talga Gold (ASX:TLG)
2. Lac Gueret East, Canada — Berkwood Resources (TSX.V:BKR)
3. Munglinup, Australia — Lithex Resources (ASX:LTX)
4. Balama West, Mozambique — Syrah Resources (ASX:SYR)
5. Lac Knife, Canada — Focus Graphite (TSX.V:FMS)
6. Kookaburra Gully, Australia — Lincoln Minerals (ASX:LML)
7. Koppio, Australia — Lincoln Minerals
8. Campoona Hills, Australia — Archer Exploration (ASX:AXE)
9. Raitajarvi, Sweden — Tagla Gold
10. Kringel, Sweden — Flinders Resources (TSX.V:FDR)
11. Asbury, Quebec — Uragold Bay Resources (TSX.V:UBR)
12. Uley, Australia — Strategic Energy Resources (ASX:SER)
13. Gropabo, Matts Myra & Mansberg, Sweden — Flinders Resources
14. Molo, Madagascar — Energizer Resources (TSX:EGZ)
15. Graphite Creek, Alaska — Graphite One Resources (TSX:GPH)
16. Loharano, Madagascar — StratMin Global Resources
17. Kearney, Canada — Ontario Graphite
18. Bissett Creek, Canada — Northern Graphite (TSX:NGC)