All posts by traceybg@gmail.com
BHP to spend $240 M on potash mine
BHP Billiton said Jan. 19 that it has approved US$240 million in capital expenditures to support the development of the first stages of the Jansen Potash Project in Saskatchewan, Canada. This expenditure will facilitate the early stage work for the establishment of the production and service shafts.
The Jansen project is being designed to produce approximately 8 million mt per annum of agricultural-grade potash. It represents BHP Billiton’s first production of potash.
The news solidifies BHP’s stance as one of the most likely new greenfield potash projects for Canada, if not the most likely. Sources say that as an international mining giant interested in an entrance into the potash business, BHP has the financial wherewithal to either take the slow road – build its own mine, something that could take five or seven years by most estimates – or take the fast track – buy an existing potash producer. With the recent resurgence of fertilizer industry stocks, the latter option may now be more problematic, as it was for CF Industries Holdings Inc. in its attempt to buy Terra Industries Inc.
In 2008, BHP spent C$284 million to acquire 100 percent control of Anglo Potash Inc. (GM July 14, 2008), a joint venture development project that it established with Anglo in 2006. At the time, BHP executives were quoted as saying that the company would invest up to US$10 billion to become a major potash producer.
BHP said the new funding will be used to start the required ground freezing to allow safe and effective shaft sinking to take place, as well as completing detailed engineering, equipment, and materials commitments and other elements that will allow the shaft sinking to begin once full environmental permits are in place, anticipated in mid-2011. The Jansen project is in the final stages of a pre-feasibility study and is expected to move to the feasibility phase in mid-2010, with a full investment decision expected in late 2011.
“The Jansen project is the first phase of what we expect to be our strong presence in the potash sector,” said BHP Billiton Diamonds & Specialty Products President Graham Kerr. “In conjunction with the Jansen project, we will continue to pursue other potash opportunities that fit within our portfolio of tier 1, long-life, export-oriented assets,” he said. In parallel with the Jansen project, BHP Billiton is also pursuing the Boulder and Young greenfield potash projects in Saskatchewan, as well as advancing work on logistics and a port.
BHP says it holds approximately 7338 km under exploration lease in areas of the Saskatchewan potash basin that are considered to be the most promising for economically viable potash deposits.
While there are several companies talking about developing new potash mines in Saskatchewan, the U.S., and elsewhere, as of the end of October BHP, Athabasca Potash Inc., and Potash One Inc. were the only companies to have actually applied for mining permits, with all awaiting approval, according to Kevin Stone with Natural Resources Canada (GM Nov. 2, 2009, p. 14.) He noted at the time that BHP was poised to start ground freezing in 2010, and suggested their mine could begin production in 2015. According to Stone, the cost to build a 1 million mt potash mine would be $1.5-$2 billion. He added that it takes five years to build a conventional underground mine.
PotashCorp President and CEO Bill Doyle has said that his company may be the next greenfield project in Saskatchewan (GM June 15, 2009, p. 1). All three major Saskatchewan producers have brownfield projects in the works to expand current capacity.
Globally, Stone noted projects advancing at Potasio Rio Colorado in Argentina, Mag Industries in the Congo, and Allana Resources in Ethiopia. Those already in the works include projects in China, Laos, Russia, and Turkmenistan.
Ohio co-ops to vote on merger
Members of two Ohio cooperatives have until Feb. 5 to vote on a proposed merger that has been unanimously approved by the boards of both co-ops.
Ballots were mailed on Jan. 14 to members of Advanced Agri-Solutions (AAS) Cooperative, headquartered in Wapakoneta, and Southwest Landmark Inc., headquartered in Xenia. If approved, the new cooperative will begin operations on Sept. 1, 2010, as Trupointe Cooperative Inc., headquartered in Troy, Ohio, and will operate some 45 facilities in 21 counties in Ohio and Indiana.
The consolidation has been roughly three years in the making, according to Gordon H. Wallace, CEO of Southwest Landmark. In a video message to co-op members, Wallace joined AAS President and CEO Larry J. Hammond in touting the merger’s advantages.
In addition to geographic diversity, both CEOs said Southwest Landmark brings an emphasis on liquid fuels, propane, seed, and turf, and it also has access to barges through one of its locations on the Ohio River. AAS operates some 20 grain operations with 1.5 million bushels of storage on five railroads, and also manufactures liquid foliar, micronutrients, and seed starters. Both co-ops offer agronomy services and a wide range of fertilizer products. Southwest Landmark completed construction of a 40,000-ton fertilizer facility in South Charleston in 2008.
“The combined portfolio of the company would be enhanced,” said Hammond. “We would be able to offer more products and services. Supply and price risk can also be managed better due to larger volumes and a broader trade territory.”
“This may seem like a monumental change, but I think we have to go back to the previous consolidations, and I would argue that we wouldn’t have the facilities, the equipment, and the employee expertise that we have today without our former consolidations,” added Wallace. “Now it’s time to go to this next step so that we can meet the future needs of our members and customers with the right equipment, the right facilities, and the right expertise.”
Southwest Landmark has 16 owned facilities and one leased facility in nine counties in southwestern Ohio. The cooperative was formed in 2000 by the merger of Agri-Urban, Clinton Landmark, Clark Landmark, and Ag Tech cooperatives. It expanded that same year with the purchase of five former Terra agronomy plants from Land O’Lakes in Catawba, Cedarville, Roxanna, Sedalia, and Wilmington, Ohio.
Southwest Landmark has 176 full-time employees, along with 64 part-time or seasonal employees, and it has some 1,800 members in southwestern Ohio. It is governed by a ten-member board of directors. Its other facilities are located in Columbus, Georgetown, Lebanon, Medway, Pleasant Plain, South Charleston, Springfield, Winchester, and Xenia, Ohio, with agronomy operations focused in the Catawba, Cedarville, Georgetown, Sedalia, and South Charleston locations.
AAS has approximately 2,500 members, 205 full-time employees, and 65 part-time or seasonal employees throughout western Ohio and eastern Indiana. The co-op is governed by a nine-member board of directors. It was founded in 2007 with the merger of Auglaize Provico Co-op in Wapakoneta, EMP Co-op in Monroeville, Ind., and Minster Farmers Co-op in Minster, Ohio.
AAS has some 27 facilities in 12 counties. In addition to Wapakoneta, the co-op has Ohio locations at Buckland, Uniopolis, Kenton, Huntsville, Maplewood, Sidney, Botkins, Kettlersville, Greenville, Russia, Osgood, Minster, New Bremen, St. Marys, Celina, Fort Recovery, and Payne, and Indiana facilities at Woodburn, Monroeville, and Fort Wayne.
Southwest Landmark saw total sales of more than $217 million for the fiscal year ending July 31, 2009, while AAS posted total sales of $279 million for the fiscal year ending Aug. 31, 2009. Southwest sold nearly 57,000 tons of dry fertilizer in 2008, along with more than 48,000 tons of liquid fertilizer and 8,774 tons of anhydrous ammonia. Ag Chemical sales for 2008 totaled $13.35 million, with turf chemical sales totaling $1.26 million.
The board of directors of both co-ops voted unanimously in September 2009 to bring the consolidation proposal to a vote of the membership in January 2010. If approved, a board of ten directors will govern the new co-op, with five chosen from each of the current boards. Hammond is to be appointed as president and CEO, and Wallace is to be appointed as executive vice president and chief operating officer.
Both co-op boards have been engaged in an aggressive push to sell the idea to members. A website was created in December to provide details and answer questions. The site also features video presentations from Hammond and Wallace. The co-ops held six informational meetings about the consolidation in early January. In addition to absentee ballots, both co-ops have scheduled member meetings at Wapakoneta and Xenia on Feb. 5 to allow those in attendance to vote on the consolidation.
Results of the membership vote will be announced Feb. 8, 2010. The consolidation must garner 60 percent of the vote to move forward.
More companies add to Haitian relief
More fertilizer related companies announced major donations for relief to Haiti last week, adding to the previously reported list (GM Jan. 18, p. 15).
Honeywell announced comprehensive plans to provide both immediate and long-term aid to Haitian earthquake relief efforts. The company will commit $1 million in cash, including a 100 percent match of employee donations, to fund rebuilding projects in Haiti. Honeywell is also making its business jets available and has already provided airlift support to Operation USA to deliver 1,500 lbs. of medical supplies, including urgently-needed, high-value antibiotics, and transported Partners In Health medical staff to Port-au-Prince.
“In the hours immediately following the earthquake, Honeywell Hometown Solutions began work to deliver emergency medical supplies and transport medical staff to Haiti,” said Honeywell Chairman and Chief Executive Officer Dave Cote. “The people of Haiti need the world’s help to meet their immediate needs for food, water, and medical care, and to rebuild.”
“We’ve reached out to our more than 120,000 employees globally who have been extremely generous in situations like this in the past,” said Cote. “The company has opened a website to facilitate employee donations and payroll deductions. Honeywell will also continue to support recovery and relief efforts with airlift support from Honeywell Aviation.”
Viterra Inc. said it will donate up to $100,000 to the Canadian Red Cross relief efforts in Haiti in a matching donation program with employees and farm customers. “Our corporate contribution will add to the employee fundraising efforts already underway and to a program developed to include our farm customers and partners who are also looking for ways to help,” said Mayo Schmidt, Viterra president and CEO.
Viterra is accepting donations from farm customers at its grain elevators across Western Canada. Farmers will have the ability to contribute money in the form of a deduction from their cash tickets.
In addition, Viterra’s oat milling business has donated one truckload of rolled oats (48,000 pounds) to Canadian Food for Children, an organization that collects food and distributes it to Haiti, among other countries in need.
Intrepid reports disruption to potash production
Intrepid Potash Inc. said Jan. 21 that in December 2009 it experienced a substantial production disruption at its Carlsbad East surface facility. It said sub-freezing temperatures in the region, which were substantially below historical averages during the month of December, together with record snowfall, led to a series of events at the Carlsbad East surface facility. These included interruption of the fresh water supply and disruption of electrical power provided to the facility, events which substantially impaired the surface processing of potash. As a result, Intrepid estimates that potash production at the Carlsbad East surface facility was limited to approximately 2,000 tons of saleable product in the month of December, a nearly 90 percent decrease from historical average monthly potash production at this facility. Intrepid expects that normal potash production levels at the Carlsbad East surface facility will resume in late January 2010.
Intrepid estimates that Trio?äó production during the month of December was largely consistent with average monthly production rates for 2009. Because it uses a different process to refine ore, Intrepid’s Carlsbad West surface facility was not significantly affected by the severe weather conditions. Also, underground mining operations were not significantly affected.
As a result of these unexpected production disruptions at the Carlsbad East surface facility, on an unaudited-basis, Intrepid anticipates that it will record abnormal production expense in the fourth quarter of 2009 of approximately $9-$10 million, or approximately $0.07-$0.08 per diluted share for the quarter. This estimated amount is approximately $3-$4 million more than was incurred in the third quarter of 2009.
On an unaudited basis, during the fourth quarter of 2009, Intrepid estimates that it produced between 120,000-130,000 st of potash and sold between 145,000-155,000 st of potash. Intrepid estimates that the average net realized sales price for potash during the quarter was approximately $400-$420 st. Intrepid estimates that it produced approximately 40,000-50,000 st of Trio?äó and sold approximately 20,000- 30,000 st of TrioTM. Intrepid estimates that the average net realized sales price for TrioTM during the quarter was approximately $180-$200 per ton. Intrepid expects to release its audited fourth quarter 2009 and fiscal year end 2009 financial results before market opening on Monday, March 1, 2010.
Viterra posts 4Q loss; fertilizer sales off
Viterra Inc. reported a net loss of C$920,000 ($0.00 per diluted share) on sales of $1.42 billion for the fourth quarter ending Oct. 31, 2009, compared to year-ago $46.8 million ($.20 per share) and $1.72 billion, respectively. EBITDA dropped to $40.2 million from $100.2 million.
Gross profit and net revenues from Viterra’s Agri-Products segment, which includes fertilizer, were $36.5 million with an EBITDA of $4.5 million on sales of $240.1 million for the fourth quarter, down from the year-ago $89.8 million, $44 million, and $308.1 million, respectively. Viterra says the decreases were largely a reflection of lower fertilizer prices, slightly offset by higher sales volumes of dry fertilizer. It noted that year-ago fertilizer prices were at record highs. Viterra said that anhydrous ammonia volumes were up in the fourth quarter, but that excessive moisture in the current and last year fourth quarters limited application.
Fourth-quarter North American fertilizer sales dropped to $103.8 million from the year-ago $228.1 million. Crop protection sales were up, at $47.1 million from $41 million. Seed sales were off at $1.17 million from $1.6 million, while equipment sales and other revenue were up, at $47.4 million from $37.4 million.
Viterra remained in the plus column for the year, though results were down, to $113.1 million ($.45 per share) on sales of $6.6 billion, versus the year-ago $288.3 million ($1.31 per share) and $6.78 billion. EBITDA dropped to $323.7 million from $532.6 million.
Agri-Product gross profit and revenues were $278.6 million for the year with EBITDA of $122.6 million, down from the year-ago $437.6 million and $276.9 million, respectively. Sales dropped $55.3 million, to $1.6 billion from the prior year.
For the year, fertilizer sales were $897.3 million, down from the year-ago $1.01 billion, while crop protection sales were $406.9 million, down from $416.8 million. Seed sales were up at $184.4 million from $174.5 million, while equipment/other were as well, to $101.7 million from $83 million.
Vale says offer for Bunge assets will not exceed $3.8 B
Brazilian mining giant Vale says that a transaction to acquire Bunge Ltd.’s fertilizer assets in Brazil will not exceed US$3.8 billion. Bunge confirmed last week (GM Jan. 18, p. 10) that it is in negotiations with Vale.
The Bunge interests in Brazil include a 42.3 percent in the equity capital of Fosfertil S.A. Bunge’s assets consist of phosphate rock mines and processing plants of intermediate fertilizers based on phosphorus (phosphates) and nitrogen (ammonium nitrate and urea).
Fosfertil, a Brazilian publicly-traded company, owns 100 percent of Ultrafertil S.A. Fosfertil is the largest phosphate-based fertilizer manufacturer in Brazil, operating a phosphate rock mine and a phosphate processing facility. Ultrafertil is a major nitrogen company that operates two nitrogen plants, a modern port facility at Santos, a phosphate rock mine, and two smaller phosphate processing facilities. The Mosaic Co. owns 19.9 percent of Fosfertil.
Vale and Bunge say these are only negotiations and they may not lead to a deal. Vale said the outcome of the negotiations will be publicly disclosed immediately after their conclusion.
The Brazilian government is seeking to make the country self-sufficient in fertilizer, and it has urged domestic companies to rev up expansion. At the same time, after huge gains during 2008, Bunge saw a loss of $442 million in its fertilizer segment for the nine months ending Sept. 31, 2009, down from a year-ago profit of $610 million (GM Oct. 26, p. 10). While nine-month sales volumes were off only 5 percent, sales were off 44 percent, to $2.7 billion from $4.87 billion.
Last fall the Vale board of directors approved an investment budget for 2010 involving capital expenditures of $12.9 billion dedicated to sustaining existing operations and fostering growth through research and development and project execution. The capex budget for 2010 represents an increase of 29.3 percent over the US$ 10 billion invested in the last twelve-month period ending June 30, 2009. The investment plan continues to reflect the focus on organic growth as the priority of Vale’s growth strategy: 76.6 percent of the budget is allocated to finance R&D and greenfield and brownfield project execution, up from an average of 71.1 percent over the last five years.
Vale said that although iron ore and nickel will continue to be its main businesses, it plans to boost the production capacity of copper, coal, and fertilizers, creating a more diversified portfolio of world-class assets. Given the current project pipeline, Vale expects to reach the following production flows in 2014: 450 million mt of iron ore, 380,000 mt of nickel, 650,000 mt of copper, 30 million mt of coal, 3.1 million mt of potash, and 6.6 million mt of phosphate rock.
Last year Vale paid $850 million for potash deposits in Argentina and Saskatchewan (GM Feb. 9). It also operates Taquari-Vassouras in the state of Sergipe, Brazil, where it produced 607,000 mt of potash in 2008. In addition, it is evaluating the feasibility of potash projects in Brazil (Carnalita) and Argentina (Neuquén), which will involve the use of solution mining. Simultaneously, it is developing the Bayóvar phosphate project in Peru, expected to come onstream in the second half of 2010, with an estimated capacity of 3.9 million mt/y and budgeted capital expenditures of $479 million.
Merger news heated up last summer, when it was rumored that Vale was looking to buy Mosaic (GM July 20, p. 1). However, the news soon fizzled after Vale denied any interest in Mosaic (GM July 27, p. 12).
Pryor Chemical begins ammonia production
Oklahoma City-LSB Industries Inc. said Jan. 19 that production of anhydrous ammonia, the initial feedstock for the production of UAN, began at its Pryor Chemical Co. this month, but that the production of UAN from the ammonia feedstock has not yet started. Production rates of ammonia are currently below targeted annual rates. When in full production, Pryor Chemical expects to produce and sell approximately 325,000 tons of UAN and approximately 35,000 tons of ammonia annually. LSB also reported that since there was no significant production at Pryor Chemical in the fourth quarter of 2009, it continued to incur and expense approximately $1.6 million per month in start-up costs, in addition to variable costs such as natural gas and electricity. Those costs are consistent with those incurred during the third quarter of 2009. LSB said that during this start-up phase, management expects production rates to increase to the targeted annualized rates, and that interruptions in production may occur due to issues that often take place in the course of reactivating a once-idle chemical plant. LSB said when production of UAN and ammonia reaches sustained targeted annual rates, it will issue a notice. “Equipment and supplier issues have played a role in the delays at Pryor. Despite these delays, we continue to believe that Pryor Chemical represents a valuable asset for LSB,” said LSB Chairman and CEO Jack Golsen. Koch Nitrogen Co. will market the UAN from the plant.
Agrium hopes to open Lynchburg site in April
Lynchburg, Va.-Agrium Inc. is working towards an April startup of its new $5.5 million Lynchburg terminal that will replace the 100-year-old warehouse that burned to the ground in 2008 (GM, Jan. 21, 2008). “Agrium has had plans all along to rebuild,” reported Wayne Kendrick, terminal supervisor. “They were just waiting to see what would be right for the customers.” As it turns out, not only will the new building be about two-thirds the size of the former terminal, but with all of the latest equipment only three full-time employees will be required, instead of the five who manned the operation owned by Royster-Clark that Agrium acquired in 2006. “With the new technology it won’t take as many people as it has in the past,” he added. “But it will have the same dedication that Agrium has had to the community, the environment, and its employees.” Kendrick said the new building will include modern efficiencies such as the four holding hoppers that will drop down into the weigh hopper, saving a lot of time weighing the product instead of the truck. “We won’t have any branding or bagging, but we will handle bulk material mainly consisting of urea, potash, and DAP,” he explained. “There will be some bagged products coming from others that we will sell to wholesalers but won’t sell to individuals.” Kendrick expects the facility will distribute about 30,000 tons of fertilizer each year in an area that grows mostly pasture hay, some corn, soybeans, and tobacco.
Gavilon expands into Peru
Savannah-On Jan. 21 Gavilon Fertilizer LLC announced the establishment of a merchandising and distribution office in Lima, Peru. The Peruvian subsidiary, Gavilon Peru SRL, commenced business operations in January 2010. “We are pleased to be continuing the expansion of our global distribution network,” said Brian Harlander, president of Gavilon Fertilizer. “Gavilon Peru marks our fourth international expansion project completed within the last twelve months. Our newest South American venture will tap into our world-wide origination volume to competitively supply the Peruvian market.” Fernando Chocano will serve as managing director of the Peruvian operation. Chocano brings more than 15 years of regional fertilizer commodity experience to Gavilon. Prior to joining Gavilon, Chocano worked at Misti Fertilizantes in Peru.