Potash Basics Mark Arundell IMEx Consulting All data in this presentation are the intellectual property of IMEx Consulting (except where obtained from public domain) and must not be reproduced, copied, shared or forwarded in any form without the express permission of IMEx Consulting
Potash What is Potash? What is it used for & why its important Supply demand metrics Current operations globally Known projects coming on stream Key Project metrics what grade is good/bad, capex etc Proactive Investor Forum July 16th 2
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What s Potash? The mineral (K) is one of the three main macro nutrients required by plants, along with nitrogen (N) & phosphate (P) Potash helps improve a plant's disease resistance crop quality increases yields Only potassium fertilizer source No practical substitutes 4
Why Potash? It s a Growth Story!! 5
Why Potash? 6
Why Potash? Rio Tinto 2015 7
Why Potash? Potash Corp $US Jul 15 US$29.18 2010 : BHP US$43.33 2008 2011 2013 US$4.9Billion US$2.7Billion US$2.8 2013 2011 7.8 9.3 MMT 18.1 MMT PCS 2007, 2014 8
Supply Demand Metrics Demand Global Development Rising income better diets; demand for high quality fruit, vegetables & meat Increase production Fertiliser has a key role PCS 2014 9
Supply Demand Metrics Shift to Urban in Dev countries +80M people per year Asia & Africa 2014 : ½; 2050 : 2/3 Econ Grow, inc Food Fruit, veg + protein Brazil, China, Indo - now India, Africa - begin PCS 2014 10
Supply Demand Metrics Pressure to inc. prod on existing land Less arable land Fertiliser essential to crop yield Yield growth PCS 2014 11
Supply - Where Potash? PCS 2014 12
Production and Demand PCS 2014 13
PCS offer for K+S BHP poison pill? Gain control over undisciplined tonnes Regulators will prevent Volume over price is inevitable Market : K&S Brazil PCS New Brunswick (non Canpotex) Brazil ScotiaBank 2015 14
PCS offer for K+S Largest export market Brazil USA China India An aside. Producers are Industrials on NYSE not Miners PCS, IPI, MOS Dividend Yield Bloomberg + Capital IQ 15
Supply Only 12 countries produce potash. Canada, Russia, Belarus & Germany - +75% Seven companies control >80% of global supply: Potash Corp of Saskatchewan, Mosaic Co, Agrium Inc, K+S, Uralkali, Belaruskali & Israel Chemicals Two marketing conglomerates did control >68% exports. Canpotex - Potash Corp, Mosaic and Agrium Belarussian Potash Co - Uralkali and Belaruskali. 16
Supply/Demand Balance Fertecon, CRU, IFA, PCS 17
Potash Mining Solar : Dead Sea, Utah, China Underground : Conventional & Solution Conventional : Room & Pillar <1200m Saskatoon, SK, Canada Solution: 300 - ~2,000m Regina, SK, Canada 18
Conventional Saskatoon Southern Saskatchewan Potash Mines & Depth to Potash Solution Regina BHPB 19
Conventional Mining Depth : 300m - 1200m Thick Salt : 120m - >150m Room & Pillar - 5-12m high; 10-20m wide; 70% recovery (30% pillar) Drill & Blast, road headers or continuous miners Salt : 30cm bottom; 1-2m roof Prairie Evaporite Strong impermeable rock 10-15m above Not shale, sand, etc. 20
Conventional Mining 21
Room & Pillar Natural Sciences Grade 9, SA 22
Conventional Mining Vanscoy, Sk Room & Pillar Agrium 23
Solution Mining Steam or Hot water injected Salt saturate inc. Potash recovery Single well (concentric casing) 150-1500m deep (Barradeel, NL : 2800m) One well - 100,000 tonnes 24
Solution Mining Major cost Evaporation Ponds plastic liner Drying Kilns - Canada Production Sol : 4.5Mt, Belle Plaine, SK (Mosaic) Con : 3.0Mt, Colonsay, SK (Mosaic) 25
Solution Mining 26
Solution Mining 100m 27
Zechstein Style 28
Belle Plaine - Mosaic 3km Cooling Ponds Salt Tailings Cluster House Plant Crystalliser, Compactor 29
Belle Plain Potash 30
Potash Milling 31
Known New Projects 2015 : Prod 60Mt; Capacity 70Mt Committed new projects +10Mt Eurochem (Russia) 4.6-8.3Mt Rocanville (NA) 3.0Mt (2015) Legacy (NA) 2.0Mt (2017); 2.9Mt (2023) Esterhazy K3 (NA) 1.0Mt (2017); +$1.7B 32
Known New Projects Potential new projects ~20Mt BHP : Jansen (NA) 8-10Mt Sirius : York (E) 2.0-5.0Mt PH Am Potash : Holbrook (NA) 2.5Mt ROC (A) Elemental 0.4-1.2Mt; MagInd 1.2Mt Vale : Carnalita (SA) 0.5-1.7Mt HFR : Muga (E) 1.1Mt ICL/Allana : Ethiopia (A) 1.0Mt SBM : Eritrea (A) 0.4Mt; SO 4 33
Key Project Metrics Market Mineralisation inc. Grade Capex Opex Realised price 34
Key Project Metrics Success in potash is about Capex & Margin (not grade & scale) Market Potash is an industrial mineral Where are the buyers? Contracts not spot Transport can be a killer SK : US$50-60/ton AU : US$80/ton 35
Key Project Metrics Mineralisation Grade, Product, Depth, Insolubles Mining method Resource recovery K 2 SO 4 > KCl Crystallisation Drying Kilns - Canada Evaporation Ponds Intrepid : solar >$110 less than conventional US$ Dom 36
Key Metrics - Minerals Mineral Formula % K 2 O Chlorides Sylvite KCl 63 Carnallite MgCl 2.KCl.6H 2 O 17 Kainite MgSO 4.KCl.3H 2 O 19 Sylvinite KCl.NaCl ~20 Sulphates Polyhalite 2CaSO 4.K 2 SO 4.MgSO 4.2H 2 O 16 Langbeinite MgSO 4.K 2 SO 4 23 Anhydrite CaSO 4 0 37
Key Project Metrics Capex Why spend US$4B? Mine life - +50 yrs Old mines dying K+S PCS, K+S 38
Summary Potash is necessary to increased crop production no practical substitute Potash is an industrial not a metal Market is the important key metric Supply/demand balance excess supply The old way is dying volume will overtake price control 39
Interested in Potash? Potash Investing News http://www.potashinvestingnews.com/ Potash News http://www.mining.com/potash/ Potash Industrial Minerals http://www.indm.in/tag/potash/ Potash Works http://www.potashworks.com/ 40