Keeping Canada in the phosphate business — and helping meet the needs of U.S. farmers
In the Ontario town of Kapuskasing (population 8,196), a consortium of consultants is working to find a new purpose for the town’s mine, the only operating phosphate mine in Canada. Mayor Alan Spacek told the local newspaper, The Northern Times, that the site is valuable because it has access to a natural gas pipeline, a railway line, road and high-capacity power line.
This re-evaluation is needed because Agrium is closing the mine as its phosphate rock resources becomes exhausted and, in order to keep supplies up to its Redwater, Alberta, fertilizer plant, the company has signed a long-term rock supply agreement with Morocco’s Office Cherifien des Phosphates. According to North Ontario Business, Agrium developed the Kapuskasing mine in the late 1990s to replace supplies of phosphate rock which had been previously available from Togo, the West African state now trying to revive its phosphate industry.
With Kapuskasing closed, Canada will be, at least for a while, without any domestic supplies of phosphate. There is a small unlisted company, Black Diamond Resources, which is looking in the Crowsnest area of British Columbia where it has 4 million tonnes at 23% phosphate. However, as the company says on its website,“the Crowsnest Pass area has long been known to hold phosphate reserves in the billions of tonnes, but much of the rock is very deep and is very thin (1 to 2 meters thick). This makes much of the rock very hard to mine and many of the claims in the area uneconomical“. Black Diamond is now seeking potential buyers for its phosphate.
Then there’s Arianne Phosphate (TSX.V:DAN) It has the Lac a Paul rock phosphate project in Quebec where the company is working toward a 25 year mine life, with an initial capital cost of $1.2 billion.
Enter Fertoz (ASX:FTZ) which recently listed on the Australian Securities Exchange. It owns projects in British Columbia. It is aiming to work at its Wapiti, Barnes Lake and Crows Nest projects to define direct shipping ore grading between 24% and 28% P205 phosphate rock which is capable of generating early cash flow with relatively low capital cost. Wapiti East is 75km from Tumbler Ridge, a coal mining centre. It is close to railways and the company sees itself as able to supply the U.S. and Canadian markets. If the mine proves viable, of course.
However, in its prospectus Fertoz had some interesting points to make about the North American market. Some of the points are obvious ones, but often we assume these points and dwell on market and political issues; therefore, occasionally it is worth just restating them just to remember why phosphate (and potash) are so critical to the future of North America.
Get our daily investorintel update
As is pointed out, the U.S. and Canada are agricultural powerhouses and, as such, each is highly dependent on phosphate-laden fertilizer. Canada is the world’s leading producer of rapeseed from which canola oil is made, the fifth largest producer of wheat and a top-ten producer of turkey meat, soybeans and milk. The U.S. is the top producer of corn, soybeans, cow’s milk, beef, chicken and turkey meat and a top-three producer of tomatoes, lettuce, pig meat, oranges, cherries, eggs and wheat. The U.S. is the second leading producer of hops and third largest grape grower. Corn and wheat are particularly phosphate-intensive crops.
Fertoz makes another key point we may have forgotten: the U.S. phosphate rock mining industry has not exported phosphate rock since 2003 and the country has imported 2.5 million tonnes each year since 2002 to meet American demand. In 2011 this increased to 3.35 million tonnes, and the 2012 import estimate by the U.S. Geological Survey was 2.85 million tonnes.
U.S. phosphate rock production will likely remain the same or decrease slightly through 2015, the prospectus argued. Domestic phosphate rock in the U.S. was in 2012 mined at 11 mines in four states; a twelfth mine in Idaho is in the permitting process but it will not be additional production as it is planned to replace an existing mine.
And, as now know, Canada is losing its only operating mine.
InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.