Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

BHP, Vale, Rio Tinto, World's Largest Miners Like Potash

Commodities / Agricultural Commodities Nov 30, 2011 - 02:16 PM GMT

By: Richard_Mills

Commodities

Best Financial Markets Analysis ArticleMiners are looking to enter the potash business, or expand existing operations, as they look for increased demand from developing nations such as China, India and Brazil.


BHP Billiton

In the spring of 1869 a German Chemist named Charles Rasp immigrated to Australia for his health. Unable to find work in his chosen trade Charles learned to ride a horse and began wrangling sheep. One day, while out riding his horse at Broken Hill, he discovered mineralized rock. He took out a mining lease, punched holes in the ground and eventually found rich veins of silver. The Broken Hill Proprietary Company - BHP - was incorporated in 1885 while mining silver and lead at Broken Hill in western New South Wales.

Billiton was a mining company that got its start in September 1860 when the articles of association were approved by a meeting of shareholders in the Groot Keizerhof Hotel in The Hague, Netherlands. Shortly afterwards the company acquired the mineral rights to the tin-rich islands of Banka and Billiton off the eastern coast of Sumatra.

BHP Billiton - also known by the nickname "the Big Australian" - is the world's largest mining company. It was created in 2001 by the merger of Australia's Broken Hill Proprietary Company and Anglo-Dutch Billiton. Today BHP produces - oil, natural gas, bauxite, aluminum, copper, silver, lead, zinc, uranium, diamonds, coal, titanium, well, you get the idea, they're miners, they pull "stuff" out of the ground and sell it.

BHP, seeking to benefit from surging demand for fertilizer made a $40 billion hostile bid for Potash Corp. of Saskatchewan Inc. Yielding to political pressure, Canada's Federal government nixed the deal.

BHP paid $341 million, C$8.35/share, to acquire Saskatoon's Athabasca Potash (TSX: API). This acquisition will give BHP Athabasca's Burr Project, which is located next to BHP's Jansen Project.

BHP Billiton announced on 24th June 2011, a further investment of US$488 million to support development at its Jansen Potash Project. This piece of additional capital will fund site preparation and the procurement of long lead time items during the project's feasibility study. This funding will also enable BHP to develop the first 350 meters of the production and service shafts.

The announcement takes BHP Billiton's investment in Jansen to, so far, $1.2 billion.

BHP likes big stories, the unfolding potash story is one of the biggest and in this author's opinion it can only get bigger.

Vale S.A

Formerly known as Companhia Vale do Rio Doce (CVRD) was founded by the Brazilian Federal Government in June 1942. The company was privatized in 1997 when the Brazil Consortium bought just over 40% of the Federal Government's stock.

Even though Vale has operations in the energy and logistics sectors both sectors combined contribute less than ten percent to Vales total revenues. Vale is a miner and controls the Brazilian iron ore industry owning all Brazilian iron ore exporters.

In recent years, in an attempt to diversify its operations, Vale has made a string of purchases getting into copper, kaolin, nickel and coal. In October 2006 Vale bought Canada's second largest mining company, Inco, for $18.9 billion. Vale also produces manganese, ferroalloys, bauxite, potash (Sergipe mine in Brazil), alumina and aluminum.

Vale S.A. has moved into the fertilizer business in a big way:

In January of 2009 Vale bought Rio Tinto's potash assets in Argentina and Saskatchewan Canada for US$850.

In January 2010 Vale announced it would acquire all the shares of Bunge Participacoes e Investimentos S.A. (BPI). Vale will pay $1.65 billion US for BPI - for its wholly owned phosphate mining operations in Brazil - and another $ 2.15 billion US for its 42.3 percent in Fertilizantes Fosfatados S.A. (Fosfertil) - a leading Brazilian fertilizer company.

Engineering work has started at Vales Rio Colorado solution mining potash project in Mendoza, Argentina. Estimated start-up is for the second half of 2014 with a nominal capacity of 4.3 Mtpy year of potash.

Vale said it's planning to consolidate its position in the potash industry by taking its fertilizer unit private. The change would give the Brazilian-based miner more control over the business that now represents about 2 per cent of global potash production. Vale is planning to build a $3 billion potash project in Saskatchewan, and has other potash projects in its pipeline.

Rio Tinto

A site along the Rio Tinto river in the Andalusian Province of Huelva, Spain has been mined for copper, silver, gold, and other minerals since 3000 BC.

After being lost for centuries the mines were rediscovered in 1556, the Spanish government began operating them in 1724 but sold them in 1873

to Matheson and Co. Hugh Matheson formed a syndicate consisting of Deutsche Bank (56% ownership), Matheson (24%), and railway firm Clark, Punchard and Company (20%). The syndicate registered the Rio Tinto Company on 29 March 1873. The Rothschild family had control by the end of the 1880s.

After selling its South American and Saskatchewan, Canada potash assets in 2009 to cut debt Rio has re-entered the potash business. The company is teaming up with North Atlantic Potash Inc. - the Canadian subsidiary of Russia's JSC Acron, a fertilizer producer - to hunt for potash in Saskatchewan.

A joint venture between Aluminum Corp. of China (Chinalco) and Rio Tinto has received approval for exploration in China. The JV will initially focus on exploring for copper in China but has plans to expand into coal and potash.

"This is a solid business and the big mining companies agree. If they can find a way to participate in it, they will." Mark Connelly, New York brokerage Sterne Agee.

As I've just shown you, three of the world's biggest miners are moving into fertilizer in a big way.

Consider this plus $3.6 billion investment into potash...

K+S AG

Bought Canada's Potash One, the previous owners of Legacy, in a 2010 deal worth $434 million. Potash prices at the time were 40% lower than today.

After saying on March 8th 2011 that it expects global demand for potash to rise 3-5 percent per annum, Europe's largest, and the worlds fourth largest potash producer, Germany's K+S AG said on November 29th 2011 that it will move forward with construction of its $3.2 billion Legacy project in Saskatchewan.

The reality is the potash story is just starting. Unlike other resource plays there is no cycle, demand is always going to be there and its rising year over year making potash an excellent play in what will be a long term agricultural commodities bull market.

"Just when we need more soil to feed the 10 billion people of the future, we'll actually have less--only a quarter of an acre of cropland per person in 2050, versus the half-acre we use today on the most efficient farms." David Montgomery, author of the 2007 book Dirt: The Erosion of Civilizations

Fertilizers are going to become increasingly important for many reasons:

  • There's 220,000 people being born every day, that's 220,000 more mouths to feed every day
  • An increasing disposable income in a growing middle class, more money in more pockets means more and more people climbing the protein ladder
  • Loss of arable land, topsoil degradation
  • Desertification and climate change
  • The Green Revolution's impact on crop production is declining, in some cases reversing
  • Some older mines are going to become more inefficient or be lost
  • Underutilization of potash in many countries
  • Demand from the countries whose economies are starting to develop and have the ability to get into farming
  • Security of supply

Conclusion

Two junior potash players who are trying to become independent producers are on this authors radar screen. Both could threaten the industry dominance of the two main potash marketing companies.

Canpotex Ltd. and Belarusian Potash Co. control two-thirds of the global market - Canpotex markets potash produced in Saskatchewan by Potash Corp., Mosaic Co. and Agrium Inc. while BPC is an arm of Belaruskali and Russia's Uralkali.

China produces just 10% of the potash it utilizes, India's economy is 60% agricultural based and the country produces very little potash. Brazil is one of the worlds breadbaskets and imports most of its potash. Both the Chinese and Indians have groups given government mandates to secure potash assets. Brazil's government is also very active in regards to its agricultural sector.

There's a global macro theme - "Feeding the World" - and certainly longevity to the potash story.

Potash should be on every investors radar screen. Is it on yours?

If not, maybe it should be.

If not, maybe they should be.

By Richard (Rick) Mills

www.aheadoftheherd.com

rick@aheadoftheherd.com

If you're interested in learning more about specific lithium juniors and the junior resource market in general please come and visit us at www.aheadoftheherd.com. Membership is free, no credit card or personal information is asked for.

Copyright © 2011 Richard (Rick) Mills - All Rights Reserved

Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules