Africa's potash pioneers hope to thrive even if price drops
"The major silver lining for us is that finally people will wake up and start looking at project economics," said Farhad Abasov, CEO of Allana Potash, working in Ethiopia on the $642 million Dallol project that aims to produce 1 million tonnes a year.
Allana estimates costs of around the industry average.
Africa's new mines will initially be set up to export. But the lure of the continent's increasing domestic demand - up from just 1 percent of global potash consumption today - will be vital to bring in investment.
This prospect has already attracted the attention of investors such as Nigerian billionaire Aliko Dangote, Brazilian entrepreneur and former CEO of Vale Roger Agnelli and even industry heavyweights like fertiliser group Yara, which has a stake in an Ethiopian project.
Allana forecasts African potash usage could rise to between 3 million and 7 million tonnes by 2020 from demand of less than 1 million now.
"What has changed now... is the rapid growth of demand for potash in Africa. Some of our initial production will definitely be destined for Asia, into India, but 20-40 percent of our production will actually stay in Africa," Abasov said.
He said Ethiopia had announced a tender for 4 NPK (nitrogen, phosphorus, potassium) fertiliser plants that would require 200,000 tonnes of potash a year.
Congo, meanwhile, stands to cash in on its logistical advantage - deposits 20 km to 100 km from the port of Pointe Noire, compared with distances of 1,700 km and more for certain mines in Canada.
Congo's planned mines appear to have ore grades of 20 to 25 percent, according to a 2012 World Bank report, making them comparable with Canada's Saskatchewan province. Crucially, they can be exploited at a depth of 300 metres, whereas deposits in Canada are explored at more than 1,000 metres.
The most advanced Congolese project is the 1.2 million tonne a year Mengo project, run by a company controlled by Chinese group Evergreen, and due to be completed at the end of 2015.
Elemental Minerals is due to produce at Congo's Sintoukola at costs of $79.70 a tonne, according to a 2012 report - in an industry where costs are typically closer to $100 to $150 and against a spot price of closer to $400. Marlow at African Potash hopes his costs, and margins, will be similar.
The problem for most, though, remains finding cash now.
"If there really are low cost options in Africa, perhaps they are possible, but you still have to get the financing and the capex costs are high," said analyst Sophie Jourdier at Liberum.
- Ag markets posted a mixed showing before the long weekend
- Central American farmers generate energy from coffee wastewater
- Big potential in China for U.S. corn, livestock exports
- Outback Guidance introduces next generation auto steer systems
- Ag markets proved quite mixed again Friday morning
- Court ruling in Hawaii finds that crop protection is state law
- No El Niño in 2014? Drought-weary California in trouble
- Suspected Bt corn rootworm resistance in Pennsylvania
- Commentary: Setting the record straight on 'Waters of the U.S.'
- Soybean aphid numbers on the rise
- BioNitrogen to build second fertilizer plant in Texas
- Pinnacle Agriculture, Tecomate Wildlife form alliance