Congo wants to become Africa’s largest producer of mineral fertilizers by 2018
The Republic of Congo has vast resources of ores used to make fertilizers, but for now, the extraction on an industrial scale has not begun. At the start of the decade the government decided to make turn the country into Africa’s main potash producer by 2013. That target date proved overly ambitious, but the race is still on and Congo is expected to soon become one of the world’s top 10 producers of phosphate and potash over the next five years. Phosphate mines in the department of Hinda Kouilou province located 37 km northeast of Pointe-Noire combines two adjacent permits (Hinda and Kolatchikanou), covering an area of 2 300 square km. A paved road and a dirt road link the site to the port of Pointe-Noire. The total resources amounted to 531 million tons. Congo also has tremendous potential as a potash producer, offering the advantage of very low cost mining in the Pointe Noire area, where a potash export terminal is being built able to support 150,000 tons.
Toronto listed MagIndustries Corp. (TSX:MAA) has announced that it has signed a general construction contract with East China Engineering Science and Technology Co (ECEC) to offer support in planning and construction of the their Mengo Potash Project. Meanwhile, South African based African Potash has been hovering around one of the most promising potash projects in Congo, the Sintoukola project, run by Elemental Minerals (ASX: ELM | TSX: ELM) close to the Atlantic Ocean and port infrastructure. African Potash (AIM: AFPO) is an investing company focused on investing in sub-Saharan potash assets. It has already acquired a controlling interest in La Societe des Potasses et des Mines S.A. (‘SPM’), which is developing the Lake Dinga Project (the ‘Project’) in the Republic of Congo.
The appetite for Congolese potash resources is only slated to increase: Elemental has received an AUD$ 190 million bid from Hong Kong based Dingyi Group Investment Limited for the Sintoukola Potash Project (‘Sintoukola’) which is contiguous to Lake Dinga. For the time being African Potash and Elemental have signed a “data sharing agreement” to help define the potash resources in both properties; however, it is clear that there is a high potential for additional cooperation if not outright speculation for takeovers from either group. The higher value of the US dollar will drive the price of commodities such as fuel higher, making potash exports from North America, priced in US dollars by the CANPOTEX cartel more expensive for importers in developing countries where potash demand is growing fastest. The African agricultural sector should be of great interest to any investor now as the population and the economy continue to rise steadily, leading to inevitable demand for food.
Elemental Minerals is one of a growing number of potash exploration projects in Sub-Saharan Africa. The Republic of Congo (ROC) is one of the areas of greatest production potential. Indeed, the government of ROC is very keen on mining to diversify economic resources away from oil, which has a lion’s share of the GDP. The government has promoted mining in the country with help from the World Bank. The government has also encouraged the sector by establishing more stringent controls on the transparency of the allocation of permits, the publication of technical or legal aspects, even promoting sustainable investment practices that consider environmental and social concerns. The Sintoukola project has already shown high-grade sylvinite intersections and has the potential to produce close to one billion tons at an average grade of 15.11% K2O (23.93% KCl).
Elemental will proceed with the project with production and sales expected to begin in 2015 and reach an annual production amount of about 2 million tons. The project’s development costs are estimated at USD$ 1.67 billion. While mineral fertilizers are expected to draw increased demand within Africa in response to efforts to improve agricultural production, Elemental is targeting the Brazilian market in particular, also looking to secure offtake agreements. Brazil is one of the largest potash consumers in the world, the biggest buyer by volume, and while it has indigenous sources of the mineral, they are not expected to be sufficient to meet demand. The Brazilian ethanol industry is one of the largest in the world and as demand for biofuel increases so does demand for biofuel producing crops. Elemental expects Brazil to double imports of potash from the current 6 million tons to 12 million tons in the next decade. Targeting the Brazilian market also offers logistical advantages, as ROC’s Atlantic coast offers much shorter shipping distances to Brazilian ports than North American production or Russian and European centers.
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