Magna’s 30% rally lifts potash plays in Utah’s Paradox Basin
Potash and Phosphate Week in Review: InvestorIntel’s Potash & Phosphate members rose 5.8% for the week ending on July 19. The gains were spread throughout the sector; however, there was a clear rebound of potash companies operating in Utah’s Paradox Basin, including EPM Ventures (TSXV: EPK | OTCQX: EPKMF), Potash Minerals Ltd. (‘POK’, ASX: POK) and Magna Resources (‘Magna’, CNSX: MNA). Magna itself jumped 30% and, in fact, it was Magna, which accounted for the rise after a series of lackluster weeks. In fact, Magna announced that the US Bureau of Land Management (BLM) environmental assessment – examining all environmental issues associated with the exploration plan – for its Green River Potash Project in Utah has ended on July 8.
The BLM can now review concerns and advise magna of changes – if any – that need to be made before the exploration phase of the project can continue. However, what is more significant is that the BLM submission marks the end of Magna’s process for the application of all relevant prospecting permits ending in a decision of “Finding of No Significant Impact” (FONSI) for Magna’s plans such that the Company can expect to be granted the relevant BLM Federal prospecting permits promptly. POK, which showed a 6.67% increase, has already received the BLM permits last April while EPM (+13.33% in TSX trading) Ventures also announced that the BLM confirmed its finding of “No Significant Impact on the Sevier Playa Potash Exploratory Testing Proposal and Environmental Assessment”, which should also lead to the prompt granting of exploration permits.
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The potash market overall proved especially resilient last week. While prices for agricultural commodities fell close to their annual lows, the potash juniors did not suffer, despite ongoing fears of a potash overcapacity. Andrew Mackenzie, the chief executive of mining giant BHP Billiton, continued to fuel speculation over whether or not the massive Jansen mine would proceed. Last week, he noted that the project would have to meet “certain profitability criteria”, given that it is expected to cost around USD$ 10 billion. The CANPOTEX cartel, comprising of such major players as Potash Corp and Mosaic, has been adding pressure by maintaining prices at about USD 400/ton. This is enough to ensure profits for current producers while being too low to attract new major players.
Mosaic CEO Jim Prokopanko warned that prices would continue to decline because of weaker demand prospects in India – a major potash market – owing to the depreciation of the Indian rupee and the decline in government subsidies for the next year. If the price of potash should drop for India; China will also demand discounts and the CANPOTEX players will likely oblige as this price drop would probably send the death blow to BHP’s Jansen, which has to make its decision for Jansen in the next few months. Nevertheless, if in the short term will be characterized by ‘price games’, the fact that wheat has experienced a surprisingly high export demand is indicative of potash’s potential.
China has been importing large quantities of grain, since it expects its own harvest to be lower by ten million tons. Wheat production requires large quantities of potash and ultimately the demand prospects for this mineral are very favorable. As for phosphates, since the start of 2013, prices of phosphates are down;, average per ton process fell from USD $ 185 at the end of 2012 to USD$ 164 last June. The market fears the entry of a new high volume player, Saudi Arabia’s Ma’aden Resources. Few will be able to compete with Saudi Arabia’s low energy costs ; however, production has been postponed. Saudi production may prove competitive, given that its main target market is India, closer to it geographically than the major phosphate supplier of Morocco. The speculation has led to lower world prices for phosphates in the short term. In the long term, considerations of world population increases will help phosphate prices bounce back. Mineral fertilizers offer the best solution to the problem of growing population, higher food demand and more productive uses for agricultural land.