Turmoil in potash is an opportunity to Vale

Turmoil in the global potash market is creating an opportunity for Vale SA to buy assets at a discount as the mining company leads Brazil’s bid to become self-sufficient in crop nutrients.
Vale, whose output at Brazil’s only potash mine dropped for the past three years, should abandon plans for greenfield projects and consider instead purchasing existing producers or their assets, according to Stifel Nicolaus & Co. Potash companies are trading at a “great discount,” making acquisitions a cheaper option for Vale than starting from scratch, said Terence Ortslan, managing director of research firm TSO & Associates.
Vale suspended two potash projects in Argentina and Canada worth $8.9 billion in the past year as cost increases made the ventures unfeasible. Fertilizer producer shares have slumped 14% on average since July 30 when OAO Uralkali ended output restrictions through a venture with Belaruskali, triggering speculation prices would tumble. Their average price-to-book ratio fell to 1.69 yesterday from 2.55 at the end of last year.
“It’s tough to justify the economics of a new project at today’s pricing,” Stifel Nicolaus analyst Paul Massoud said by telephone from Washington. “Looking at more established producers, if they can get the balance sheet to work, is the right way to go.”

Fertilizer Losses
Vale isn’t changing its strategy of seeking low-cost potash projects and maintains the business among its five main areas of focus, Chief Executive Officer Murilo Ferreira said during a conference call Aug. 8. While taking a cautious approach, the company is actively looking at potash growth options, head of fertilizers and coal Roger Downey said on the same call. Roberto Moretzsohn, commercial director for fertilizers, echoed those comments in Sao Paulo yesterday.
Fertilizers generated a net loss for the Rio de Janeiro- based company in the three quarters through June 30, according to data compiled by Bloomberg. Vale produced 233,000 metric tons of potash from its Taquari-Vassouras mine in northeastern Brazil in the first half of the year, 5.3% less than the previous year. It’s targeting 550,000 tons this year, similar to last year and 23% below a 2009 record.
Shares of Vale dropped 21% this year, underperforming rivals BHP Billiton Ltd., the world’s biggest miner, Rio Tinto Group and Anglo American Plc. An even steeper slide by potash producers makes an acquisition a more attractive option than spending years on new projects, TSO’s Ortslan said.

Import Dependent

“I would go with buying an existing producer,” he said by telephone. “I am sure it would be a serious consultation in any major company because you have seen a major drop in the market cap of the companies.”
Vale’s press department in Rio declined to comment further on potash expansion plans.
Brazil, the world’s largest producer of coffee and sugar, has said that boosting potash output is a priority to help reduce its dependence on imported nutrients. Amid record crops, Brazil boosted imports of potassium chloride to $1.65 billion in the first half, 20% more than a year earlier, according to the Development, Industry and Trade Ministry.
Brazil spent $8.58 billion in fertilizer purchases last year, its sixth-most imported item. Latin America’s largest economy imports more than 90% of its potash needs and 75% of its nitrogen-based fertilizers supplies, according to industry association ANDA.

Brazil Discount

“No potash project in Brazil is competitive now, and things tend to get even more difficult after Uralkali’s decision,” Mario Barbosa, who headed Vale’s fertilizers businesses until 2011, told reporters in Sao Paulo yesterday. “Potash prices have slumped and will continue dropping.”
Soc. Quimica & Minera de Chile SA, Latin America’s biggest fertilizer producer, is in talks to sell potash in Brazil for as much as a 10% discount on July prices, said two people with direct knowledge of the process. Plant Bem Fertilizantes SA, based in the southern farming state of Parana, may pay SQM $375 to $380 a ton for a 15,000-ton shipment, from $400 to $415 last month, said one of the people, who asked not to be identified because the talks are private. Vale should focus on delivering the heavy investments needed to expand its iron-ore business rather than making additional acquisitions, Oliver Leyland, who helps manage Brazilian stocks including Vale shares at Mirae Asset Global Investments, said by phone from Sao Paulo. “Nobody incorporates any expectation of increasing valuation in potash in the fair value of Vale shares,” he said.
‘Reassess Strategy’

Moretzsohn told an event in Sao Paulo yesterday that Vale will press on with its potash projects as it assesses the impact of Uralkali’s decision. The company should rethink that strategy as average annual prices are headed for another 11% drop next year, Stifel Nicolaus’ Massoud said.
“If they are serious about their claim of wanting to become a big, major fertilizers producer, they are going to have to do something about potash,” he said. “I just don’t think that building is the way to do it.”
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Brazil's Vale says signs accord to quit Argentine Potash project

April 26, 2013|Sabrina Lorenzi | Reuters

RIO DE JANEIRO (Reuters) - Global miner Vale SA signed an agreement with the Argentine government on Friday that will allow the Brazilian company to leave the $6 billion Rio Colorado potash mining project, a company spokeswoman told Reuters on Friday. The agreement could put an end to months of uncertainty for Vale , which suspended work on the fertilizer project in December and announced its intention to pull out in March.
Under the terms of the agreement, Vale's existing concession at the mine remains in place for up to four years, the spokeswoman said. In the meantime, Vale is free to seek a buyer or partner for the venture.
Between December and March, Vale sought and failed to get the Argentine government to approve tax breaks to help ease rising costs related to surging Argentine inflation and the country's tightly controlled official exchange rate.
Vale said the inflation and exchange rate could make the project unviable.
People familiar with Vale's plans have said the company, the world's second-biggest miner, planned to sell the project in efforts to recoup the $2.2 billion it has already spent on the mine and on railway and port improvements needed to move the potash to market.
In a conference call with analysts and investors on Thursday, Vale said it is seeking new potash projects in Brazil and abroad to replace the Rio Colorado project.
Since approving plans to pull out and seek a buyer for the project, Vale and the Argentine government have been at loggerheads over the fate of at least 6,500 jobs at the Rio Colorado site.
Despite the suspension, an Argentine court ordered Vale to maintain work sites and continue paying its workers.
Brazilian president Dilma Rousseff said on Thursday, after meeting with Argentine President Cristina Fernandez in Buenos Aires, that she was confident Vale and Argentina would come to an agreement.
The Rio Colorado project includes an 800-km (500-mile) rail line from the mine in Mendoza province to Bahia Blanca, an Atlantic Ocean port.
Potash, a potassium salt, is a key fertilizer and is considered a strategic product for Brazil. While it is the world's largest producer of coffee, orange juice, sugar and beef and the No. 2 exporter of soybeans, Brazil must import the vast bulk of its fertilizers, including about 90 percent of its potash.
Potassium is one of three key plant nutrients along with nitrogen and phosphorous.
(Reporting by Sabrina Lorenzi.; Writing by Jeb Blount; Editing by Gary Hill and Lisa Shumaker)

A Copebrás é parte do Anglo American

Fosfato e Nióbio
Integram a Anglo American Nióbio Brasil (Ouvidor e Catalão/GO), que produz nióbio desde 1976, e a Anglo American Fosfatos Brasil (Ouvidor e Catalão/GO, Cubatão/SP), fundada em 1955, que fabrica produtos fosfatados, especialmente fertilizantes e insumos para alimentação animal.
No Brasil ainda integram o Anglo American os Negócios de Minério de Ferro e Níquel. Fosfatos tem o Ruben Fernandes (ex Vale e Votorantin) como o atual CEO.

Algérie - 6,5 millions de tonnes de phosphates en 2016 et complexe a Tébessa

La production annuelle de phosphate brut atteindra, dans la wilaya de Tébessa (est algérien), 6,5 millions de tonnes en 2016, soit "plus du triple de la production actuelle", a affirmé le directeur général de la Société des mines et phosphate (Somiphos). Une importante partie de cette production, soit 4,5 millions de tonnes, sera transformée en acide phosphorique (un acide minéral obtenu par traitement du minerai de phosphate) dans une usine en cours de lancement dans la région d’Oued El-Kebrit (Souk-Ahras). Le reste est destiné à l'exportation et à la satisfaction des besoins locaux, a ajouté le directeur général, Noureddine Zaïdi, dont l’entreprise relève du groupe public Ferphos.

Mosaic Seeks Bidders for Operations in Argentina and Chile

Mosaic Co. (MOS), the world’s largest phosphate-fertilizer producer, is selling its Argentina and Chile operations, a company spokesman said. “After significant evaluation and review, Mosaic has decided to pursue a sale of our operations,” Rob Litt, a Mosaic spokesman, said in an e-mailed statement today in response to Bloomberg questions. “We will immediately begin preparations for a sale process and will work quickly to complete a transaction.” Litt declined to comment on reasons for the sale in a telephone interview from Plymouth, Minnesota. He also declined to confirm that the unit on the sales block produces 550,000 tons a year of fertilizer, employs 130 workers and has annual sales of $300 million, as reported earlier today by the Buenos Aires-based newspaper La Nacion. “It is clear Mosaic’s strategic plans are in a different part of the world,” Pablo Bussetti, president of the producers association called Fertilizar, said in a telephone interview from Bahia Blanca, Argentina. “They are the largest producers of phosphate in Argentina, with more than half of the market share, and I am sure they will receive many offers.” Mosaic produces phosphate north of Buenos Aires in a factory near Rosario, Argentina, and handles distribution from Chile. Mosaic agreed Oct. 28 to acquire a mine and other assets from CF Industries Inc. for $1.2 billion to boost its output of the crop nutrient in Florida.

CF Industries to Sell Phosphate Business to Mosaic for $1.4 Billion

Companies Enter Into Ammonia Supply Agreements for Donaldsonville and Trinidad Production
DEERFIELD, Ill.--(BUSINESS WIRE)--Oct. 28, 2013-- CF Industries Holdings, Inc. (NYSE:CF) (“CF Industries” or “the Company”) today announced that it has entered into a set of strategic agreements with the Mosaic Company (NYSE:MOS). The agreements include: a definitive agreement to sell the entirety of CF Industries’ phosphate mining and manufacturing business to Mosaic for cash consideration of $1.4 billion, subject to adjustment; a long-term agreement under which the Company will supply Mosaic with between 600,000 and 800,000 tons of ammonia per year from its Donaldsonville, Louisiana nitrogen complex beginning no later than 2017; and an agreement to provide ammonia to Mosaic from the Company’s Point Lisas Nitrogen Ltd. (PLNL) joint venture beginning at the close of the phosphate sale.
“This is a set of agreements with significant strategic value to both CF Industries and Mosaic,” said Stephen R. Wilson, chairman and chief executive officer, CF Industries Holdings, Inc. “The sale of our phosphate operations represents good value for our shareholders and the full set of transactions enables us to sharpen the strategic focus on our nitrogen business.”
Phosphate Business Sale
The phosphate sale includes: the Hardee County Phosphate Rock Mine; the Plant City Phosphate Complex; an ammonia terminal, phosphate warehouse and dock at the Port of Tampa; and the site of the former Bartow Phosphate Complex. In addition, Mosaic is assuming liabilities related to the phosphate business, including responsibility for closure, long-term maintenance and monitoring of the phosphogypsum stacks at the Plant City and Bartow complexes. CF Industries is also transferring to Mosaic the value of its asset retirement obligation trust and escrow funds totaling approximately $200 million.
Donaldsonville Ammonia Agreement
Under the long-term ammonia supply agreement, beginning no later than 2017 CF Industries will supply between 600,000 and 800,000 tons of ammonia per year for up to 15 years from its Donaldsonville nitrogen complex for Mosaic’s use in phosphate production. The ammonia price will be based on the cost of natural gas delivered to Donaldsonville. “This agreement strengthens our confidence in the return we expect to generate from our Donaldsonville capacity expansion by providing a steady base demand for ammonia at a price that insulates us from movements in natural gas costs,” stated Wilson.
Trinidad Ammonia Agreement
Following the close of the sale of the phosphate segment, CF Industries will supply its share of the ammonia produced by the Company’s 50% owned PLNL ammonia production facility in the Republic of Trinidad and Tobago to Mosaic for use in phosphate production. Pricing under this supply agreement will be similar to that in the existing agreement under which the Company purchases ammonia from PLNL.
Other Information
The phosphate sale transaction is subject to customary closing conditions and regulatory clearances, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act and approval from the applicable governmental agencies under CF's consent decree with respect to certain environmental matters related to the phosphate business. The sale is expected to close sometime in 2014. Both companies’ boards of directors have approved the transaction. The Donaldsonville ammonia agreement is not conditional on the phosphate sale transaction and will go into effect beginning no later than 2017. The Trinidad ammonia agreement is conditional on and goes into effect at the closing of the phosphate sale transaction.

Coromandel, GSFC's JV in Tunisia starts production

Tunisia's Groupe Chimique Tunisien (GCT) and Compagnie Des Phosphat De Gafsa (CPG), the entities belonging to Tunisian government own majority state in the company.
The first shipment is expected to reach Coromandel's facility in Kakinada, Andhra Pradesh by this month-end, it said.
Coromandel International has made a strategic investment in TIFERT aimed at securing uninterrupted supply of phosphoric acid for the company's operations. The Company and GSFC have entered into an agreement with TIFERT to import the entire production of phosphoric acid at the Skhira plant on a long- term basis. CIL and GSFC hold 15 per cent state each in this USD 498 million project with balance 70 per cent being held by GCT and CPG. The Plant which was scheduled to be commissioned in 2011 was delayed due to some internal developments in Tunisia. However, the project is now operational and running near to its full capacity, it said. Kapil Mehan, Managing Director of Coromandel said India would get much needed Phosphatic fertilisers to further improve its food security and the project will go a long way to ensure smooth functioning of the company's recently commissioned fertiliser Plant (C Train) in Kakinada. CIL shares were quoting at Rs 179.95 on the BSE during afternoon trade.