EDITOR: | April 12th, 2013

The Pulse: China aims to buy huge potash deposit; Hydropower growth booming

| April 12, 2013 | No Comments

The-Pulse-Robin-BrombyChinese interests have signalled they want to buy a large potash deposit in the Republic of Congo —a further sign that Beijing continues to seek to tie up key resources around the world. In fact, the move can also be seen as part and parcel of the relatively new thrust by that country into food security. Chinese interests have been buying up farmland around the world, so why not also control the fertilizer sources?

It has to be noted, however, that the offer to Elemental Minerals (ASX and TSX:ELM) is “an indicative, non-binding, incomplete and conditional” proposal, and not a firm takeover bid. Quite a number of such approaches in the past, most recently in the case of an iron ore project that straddles the Gabon-Congo border,  have fallen through as Chinese parties change their minds mid-negotiation.

That said, the significance of this move should not be underestimated. Even if this deal were to fall through, it still indicates China is planning to nail down its own potash supplies from abroad.

The proposal has been made by a company listed on the Hong Kong Stock Exchange, Dingyi Group Investment (HKEx:508). This company is controlled by Li Kwong Yuk, a Chinese entrepreneur, who also has investments in infrastructure, real estate, financial institutions and natural resources.

The proposal, set at A66c a share, is a premium of 126% over Elemental’s average price over the past 20 trading days. However, the Australian market had a subdued reaction to the news, with the stock closing at A47c a share, although that was up 12c (or 34.3%) on the session.

The resource at the Sintoukola project in Congo-Brazzaville stands at 1.32 billion tonnes at 15.65% K20 (measured and indicated) and a further inferred 948 million tonnes at 16.2%

As Elemental’s website explains, potash was discovered in the coastal Congolese Basin during oil prospecting in the region in the 1930’s. Subsequent exploration between the 1930s and 1950s revealed that the salt formations continued through Republic of Congo and into Gabon. In the 1960’s significant exploration for potash was completed in the Kouilou portion of the Congo Basin. There have been no historical estimates of Mineral Reserves, nor any production of potash or related products within the Sintoukola property. Underground mining of sylvinite seams has occurred near Holle, some 70 km south of the Kola deposit.

GREEN ENERGY: The London-based International Hydropower Association (IHO), in its 2013 report, says that last year saw significant investments in this type of power generation. The estimated figures for added hydropower capacity in 2012 are quite impressive: there was 14,400 megawatts (MW) of added capacity in China alone of pure hydro (with another 1,500MW of pumped storage capacity there). West Asia added 5,275MW, North and Central America 1,988MW, South America 1,833MW, Europe 532MW and Africa 374.5MW.

There was also record power production at some of the major schemes, including Brazil’s Itaipu Binacional and China’s Three Gorges dams. There was also a continuing trend for international power sharing, notably Central America’s Electrical Interconnection System. This year will see the completion of the world’s longest transmission line, the 2450km line from the Madeira River scheme in Brazil.

Investors are also looking to open up new regions for hydropower. Examples include South Korean investment in Nepal, Pakistan and the Philippines, along with China and India driving investments in Africa. Last year saw the inauguration of the Chinese-financed 1,200MW Djibloho project in Equatorial Guinea, which now provides 90% of the latter’s electricity supply.

But older established markets have their potential, too.

The IHO report noted that Canada is now the world’s third largest hydropower generator with more than 750GW of installed capacity. But there is still scope to more that double hydropower generation in Canada.

Other projects in that region include the 750MW La Yesca hydro scheme in Mexico, a new 305.5MW plant in Costa Rica, while the Dominican Republic is looking to overhaul its old stations and Panama plans to build another 30 hydro stations.



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