Potash mine in England threatened by sector turmoil
The plans to develop a potash mine in England, the first new mine in England in 40 years, may have been derailed by disruption caused to the potash sector by OAO Uralkali’s decision to withdraw from the the Belarusian Potash Company (BPC), a joint venture with Belarussian partner Belaruskali in July. (ME, July 31.)
The move to break up the BPC, was likely to spark a price war for the key crop nutrient and pummel the shares of companies that produce it and the mine planned by Sirius Minerals which is proposing the $1.9 billion project, Bloomberg reported.
For Sirius Minerals chief executive officer Chris Fraser the fallout from Uralkali’s move is just the latest obstacle in his three- year effort to build the U.K.’s first potash mine in more than four decades. The Australian’s current focus is winning support for the mine from a key local planning authority.
Sirius’s York Potash will help inject an estimated 1.4 billion pounds ($2.1 billion) annually into the U.K.’s economy should the mine start producing in 2017. The implications of Uralkali’s move may even help his project, Fraser said.
“High-cost producers will come under stress and therefore we will have possibly over the medium term a more consolidated, more rational, stronger industry.”
The potash marketing venture that Uralkali, co-owned by Kerimov, is abandoning is one of two that until now have controlled most of the world’s supply by negotiating fixed-term supply contracts for their members.
That means producers don’t compete with each other individually in export markets, helping them to match output with demand. The move could be a “game changer” and start a price war that could last as long as 18 months, Citigroup said July 30.
Potash is a key crop nutrient used to strengthen plant roots and protect them against drought. In the U.S., potash accounts for 21 percent of fertilizer used by farmers.
Key to Sirius’s strategy is that it has already signed sales agreements with customers for future exports of its product. The mine will extract polyhalite, Greek for “many salts,” which contains sulfate of potassium, calcium and magnesium. Sirius says its 2.66 billion ton resource at 85.7 percent polyhalite is the biggest of its kind in the world.
The company estimates it can produce polyhalite for an average cost of $36.90 a ton. Uralkali has costs of $62 a ton, which compares with more than $100 for North American miners and almost $240 for producers in Europe, according to a July presentation by Uralkali. Liberum Capital Ltd.
Sirius’s plan involves extracting polyhalite more than a mile underground, then crushing, milling and feeding it into a pipeline -- all beneath the surface to protect the Yorkshire moor parkland. The submerged 44.5 km (28 mile) pipe will transport slurry to a port on Teesside, about 220 miles north of London, where five million tons of product a year will be dried, granulated and shipped.