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Junior potash companies adapt to lower prices

16 May 2017, 5.58 pm GMT

Junior potash companies adapt to lower prices

Houston, 16 May (Argus) — North America's junior potash companies have changed strategies to become viable producers amid a challenging global potash market that has seen MOP prices fall and existing producers cut production.

Numerous MOP and SOP projects were announced after prices peaked in the $800s/t fob Vancouver in 2008, and established producers have since completed brownfield expansions. But only one greenfield North American mine has come to fruition over that span as prices have fallen by about $600/t: K+S' newly-dubbed Bethune site in Saskatchewan, a 2mn t/yr MOP solution mine that began operations this month.

Even that project required an established producer--Germany-based K+S--acquiring a project owned by a junior mining company, Potash One. Independent junior miners have a faced an uphill battle, with some canceling projects altogether.

Remaining prospective potash producers have shifted their focus amid the downturn in prices. Some have opted to pursue specialty products and niche markets. Others have scaled down mine projects to lower capital expenses. And some have secured supply agreements with major offshore importers prior to having begun any construction.

Potash Ridge goes regional

Potash Ridge is poised to become the first new potash company to reach production in North America, but on a smaller scale. Its 40,000 t/yr Valleyfield SOP project in Quebec, which it bought in 2015, is expected to break ground by the end of 2017. Operations are slated to start in mid-2018, six years after the company's initial public offering.

Valleyfield will produce SOP using the Mannheim process, which reacts MOP with sulfuric acid and produces byproduct hydrochloric acid. The company has secured an offtake for the hydrochloric acid and a supply deal for sulfuric acid.

If realized, Potash Ridge would become the second North American SOP producer, joining Compass Minerals.

Potash Ridge chief operating officer Ross Phillips told Argus that the company intends to market production from Valleyfield to the east coast of North America. The company's goal is to provide SOP to growers whose production schedule is out of sync with Compass Minerals' solar harvesting schedule in Utah, Phillips said.

Potash Ridge is in "advance discussions" for securing offtake and financing agreements by the end of the second quarter of 2017, according to Phillips.

Meanwhile, Potash Ridge's original, larger Blawn Mountain SOP mine project in Utah remains in a developmental stage.

The company has reduced the projects estimated SOP production capacity from 580,000 t/yr to 255,000 t/yr and will consider expanding operations at its proposed Utah mine to include alumina production.

Encanto Potash looks to India

Encanto Potash has taken an unconventional path during its eight-year journey to develop the Muskowekwan MOP project in Saskatchewan. While the mine is still three to four years away from production, the company has secured two separate offtake agreements with major Indian distributors MMTC and NACOF to supply a total of 7mn t/yr of MOP. These agreements account for more than the Muskowekwan project's proposed 2.8mn t/yr capacity. This approach was instrumental in securing $70mn in financing.

Encanto's 2016 offtake agreement with MMTC allows Encanto to create a trading arm to immediately begin supplying MOP to India.

A feasibility study is ongoing for the Muskowekwan project as the company is looking to expand production to fulfill the requirements of the offtake agreements.

Gensource Potash gets small

Gensource Potash has taken a small-scale approach and partnered with another firm in its attempt to begin MOP production.

Gensource reduced its proposed Vanguard project in Saskatchewan to 250,000 t/yr MOP using mining techniques that are "small and scalable." Traditional solution MOP mines have capacities around 3mn t/yr, while conventional mines can produce even more. The company's goal is to eventually establish multiple small mines, whose production would be pre-sold.

Gensource also formed a joint venture with Essel Group Middle East, which took 70pc ownership and will provide financing toward a feasibility study and construction. The feasibility study was 85pc complete as of 23 April.

IC Potash bets on cannabis

IC Potash is exploring the potential for direct-application polyhalite use for cannabis growers.

This year, IC Potash created the ICP Organics subsidiary, which will focus on research about enhancing yields for organic medical cannabis growers.

The company recently switched its focus to direct-application polyhalite production instead of SOP at its Ochoa project in New Mexico as a result of lower cost estimates. The Ochoa mine has a theoretical capacity of 2mn st/yr of polyhalite, a mineral that contains potassium, sulfur, magnesium and calcium.

Existing polyhalite production is largely limited to Israel-based ICL, which produces it at its UK operations. Newcomer Sirius Minerals will soon begin construction on a massive polyhalite mine in the UK as well, having raised more than $1bn in capital.

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