All Posts from June 10, 2022

Uganda Seeks New Phosphate Project Investor

Africa, China, News, News Briefs, Phosphate

Uganda, which has East Africa’s third-largest economy, is seeking new investors for a stalled phosphate project focused on domestic fertilizer production, according to a Bloomberg report citing President Yoweri Museveni’s recent comments to lawmakers in Kampala.

The country wants a new backer after the initial Chinese promoters have struggled with financing for the 300,000 mt/y fertilizer project. Progress had halted as the COVID-19 pandemic froze access to loans.

Guangzhou Dongsong Energy Group said it planned to invest $620 million on production units for fertilizers, sulfuric acid, steel, and cement at its Sukulu development in the Tororo District (GM Feb. 12, 2016). Fertilizer production was initially planned to start in 2018.

“I have written to the president of China to get me another investor if the other one has problems, or, if not, I will get another solution,” said Museveni. “There are a number of offers,” he said without providing details.

Local output of fertilizer is key to increased productivity in the country, which relies on minimal use of the chemical and irrigation in its agricultural sector.

Mauritania, Algeria Study Petroleum Exploration, Fertilizer Industry Development

Africa, News, News Briefs

West African neighbors Mauritania and Algeria have signed a Memorandum of Understanding to undertake a feasibility study into expanding petroleum exploration in the sedimentary basins of Taoudenni and Tindouf, according to a Bloomberg report. In addition, the countries have agreed to conduct a study into the building of pipelines to transport gas between them.

The countries will also look into the possibility of Algeria supplying gas and petroleum products into the Mauritanian market, as well as rehabilitating liquefied gas storage facilities and developing phosphate and nitrogen fertilizer industries in Mauritania.

Scotts Shares Sink after New Guidance

News, News Briefs, Specialty

Scotts Miracle-Grow Co. shares tumbled as much as 12% on June 8, according to Bloomberg, after the maker of lawn and garden products said retailer “replenishment orders” were more than $300 million below its plans for May in the U.S. Consumer segment alone.

While Scotts said consumer purchases of its core lawn and garden brands surged in May, with unit volume now trending towards the company’s original assumptions for the season, a variety of factors prompted the company to lower its outlook for both sales and adjusted earnings for fiscal 2022.

“The recent improvement in consumer engagement has POS units trending toward our initial expectations, and we expect further gains as the year continues,” said Jim Hagedorn, Scotts Chairman and CEO. “POS dollars, however, will likely fall short of our initial assumption of flat from 2021 levels, due primarily to above average declines in lawn fertilizer and grass seed, which command higher prices and margins, but also tend to be more susceptible to poor spring weather. While there remains enough time in the year to see continued improvement in our controls and gardening categories, that is not likely to be the case with most of the products in our lawn care portfolio.

“This surprising trend has put significantly greater pressure on our fixed cost structure that, when coupled with the commodity cost increases we have experienced since the start of the war in Ukraine, will cause us to fall well short of the revised financial targets we established in March,” said Hagedorn.

Adjusted earnings per share are now expected in a range of $4.50-$5.00, compared to the $8.00 still thought to be achievable in March (GM March 11, p. 27). U.S. Consumer sales are expected to decline 4-6%.

Hawthorne sales are now expected to decline 40-45% for the year ending Sept. 30, 2022, compared to the March guidance of a 15-25% decline. Entering May, Hawthorne sales had begun to show signs of strengthening, but momentum in the business slowed again during the month as expected improvement in outdoor cultivation has been slow to materialize.

Scotts also said it is engaged in highly productive discussions with its lenders to obtain a temporary increase in the leverage ratio allowed. “Given the external factors currently impacting the business, we are seeking to adjust our debt covenants to allow for up to two additional turns of leverage in the near-term to maintain the appropriate level of flexibility in navigating the current market conditions,” added Hagedorn. “Obviously, we are focused on implementing aggressive plans to improve cash flow, reduce debt, and return leverage to our target levels as quickly as possible.”

Over the past month, Scotts said it has moved aggressively to reduce full-year SG&A through a series of organizational changes that created operational and management-level efficiencies. As a result, the company expects a year-over-year decline of 12-13% in SG&A for fiscal 2022. The company expects to incur restructuring charges in both the third and fourth fiscal quarters as a result.

Strike Moves Urea Project Inland

Australia, News, News Briefs, Urea

Strike Energy Ltd., West Perth, reported on June 7 that it is moving its Project Haber 1.4 million mt/y granular urea project from its planned location in the Geraldton Port some 100 kilometers inland to Three Springs Shire in Western Australia. Strike said it has entered into a binding agreement to buy 3,500 hectares of freehold farming land under which the company’s 100% owned South Erregulla gas discoveries and carbon sequestration reservoirs sit.

Project Haber will be located in what Strike is calling the Mid West Low Carbon Manufacturing Precinct. Strike is hoping to attract other renewables developers and low-carbon manufacturing collaborators to the Precinct.

The move to Three Springs removes the 105 kilometer natural gas pipeline from Project Haber’s capital costs, reducing the expense by some A$85 million. It also eliminates the potentially lengthy process of obtaining pipeline access agreements.

Other benefits include wind and solar power generation at the site, the potential to use 1,500 hectares for a carbon farming project to generate carbon credits, and an R&D grain farm, which can facilitate the testing and consumption of Project Haber’s outputs as the facility evolves. The farming activity could also provide a complementary revenue stream during construction and over time.

Last month, Strike selected Koch Fertilizer LLC, a subsidiary of Koch Industries Inc., Wichita, as the preferred bidder for the offtake of 100% of Project Haber’s 1.4 million mt/y of urea production (GM May 20, p. 1).

Xplore to Acquire 51% in Utah Phosphate Project

Canada, News, News Briefs, Pacific N.W., Phosphate

Toronto-based exploration company Xplore Resources Corp. said on June 7 that it has entered into a definitive agreement to acquire a 51% interest in the Diamond Mountain Phosphate Project from Revival Gold Inc., Toronto. The project is 30 kilometers northeast of Vernal, Utah. The remaining 49% interest is held by Utah Mineral Resources LLC, Kaysville, Utah.

Diamond Mountain includes a 547-hectare State Mining Lease situated adjacent to Simplot Phosphates LLC, a current producer of phosphate concentrates, which are transported by pipeline to their fertilizer processing facility in Rock Springs, Wyo., for conversion into various fertilizer products.

“We are very pleased to have reached an agreement with Revival to acquire an initial 51% interest in the Diamond Mountain phosphate project,” said Xplore President and CEO Wes Hanson. “Our financial advisors suggest strong underlying fundamentals in phosphate supply and demand, with projected long-term demand growth of at least 2% per annum solely based on agricultural demand.

“This is one of the top ten undeveloped phosphate projects in the world that is not owned by a major fertilizer producer,” he continued. “Located in the state of Utah, in a resource-focused economic enclave where phosphate ores have been continuously mined since the 1960s, made this a compelling acquisition to consider. We see an opportunity to rapidly and cost effectively convert the currently identified inferred resource to the measured and indicated classification through systematic exploration drilling.

“We believe Diamond Mountain offers both short- and long-term value creation for our shareholders, especially in light of recent disruptions in global phosphate deliveries and a renewed increase in demand due to the resurgence of lithium-iron-phosphate (LFP) batteries for the burgeoning electric vehicle market,” Hanson added.

Xplore said the existing measured and indicated resource is estimated to be 26.8 million mt averaging 19.67% P2O5, in addition to an inferred resource estimated at 23.1 million mt averaging 19.67% P2O5. Phosphate mineralization at Diamond Mountain was originally identified by U.S. Steel Corp. in the mid-1960s, with additional drilling later conducted by Revival (formerly Strata Minerals Inc.).

Under the terms of the agreement, Xplore may acquire up to a 51% interest in the Diamond Mountain project by a C$250,000 cash payment on closing of the transaction; C$250,000 cash payment on the first anniversary of closing; and issuance to Revival of such number of common shares in the capital of Xplore as is equal to 19.9% of Xplore’s issued capital upon completion of the financing.

Closing of the transaction is subject to the completion of a minimum C$5 million financing by Xplore. Further financing details are to be released at a later date. Xplore said the closing of the transaction is expected to be completed by the end of June 2022.

The company noted that a financial advisory fee to an arm’s length party consisting of 2 million shares of Xplore will be issuable by Xplore as consideration for introducing Xplore to Revival and for other financial advice provided in connection with the acquisition, upon completion of the purchase of Revival’s interest in Diamond Mountain.

“Revival Gold has arranged to vend its noncore holding in Diamond Mountain to a growing new industrial minerals business in a transaction that will provide immediate cash proceeds and ongoing indirect participation in the asset,” said Revival Gold President and CEO Hugh Agro. “Upon closing, proceeds will be directed towards the company’s core focus in gold and advancing the Beartrack-Arnett gold project located in Idaho, USA.”

Revival Gold acquired its 51% interest in Diamond Mountain for exploration expenditures totaling approximately C$1.2 million through a joint venture earn-in agreement with Utah Minerals LLC in December 2014.

Yara-Backed Agoro Distributes $9 M

News, News Briefs, Tampa

Agoro Carbon Alliance, Tampa, said on June 8 that it has distributed more than $9 million in payments to U.S. farmers and ranchers in its first year.

“We are extremely proud of the company’s success in the first year,” said Agoro Carbon Interim CEO Elliot Formal. “We have connected with farmers and ranchers throughout the U.S., and look forward to our carbon journey together in the years to come.”

Yara International ASA, Oslo, launched Agoro Carbon last year (GM May 7, 2021) as a global business created for farmers to earn additional revenue from positive climate action. Yara said that by adopting climate-positive practices, farmers can produce Farm Carbon Credits or climate-smart certified crops and help to decarbonize food supply chains.

Agoro Carbon supports farmers with the agronomical expertise and practical support to successfully sequester carbon in the soil and reduce emissions from the field. This in turn generates third-party certified carbon credits and increases farmers’ income.

Russia Considers Extending Fertilizer Export Quotas through May 2023

Featured, News, Nitrogen, Russia

Russia may extend fertilizer export quotas until May 31, 2023, according to an Interfax report on June 6, citing Deputy Prime Minister Viktoria Abramchenko. According to the report, a government commission supports the extension.

The Russian government on May 31 extended the quotas for the export of nitrogen fertilizers and complex fertilizers, with the restrictions to be in effect between July 1 and Dec. 31, 2022 (GM June 3, p. 1).

The previous quotas – applied on exports of nitrogen and complex fertilizers and introduced on Dec. 1, 2021 (GM Nov. 5, 2021) – expired on May 31. For the month of June, producers will be able to export these fertilizer products without limits.

The new quotas to run between July 1 and Dec. 31 are slightly more than 8.3 million mt for nitrogen fertilizers and 5.95 million mt for complex fertilizers, according to the report.

Meanwhile, Russian companies are maintaining their fertilizer output plan for 2022 “at a level not lower than last year’s output of at least 58 million mt,” according to a Tass report this week, citing Russia’s Deputy Minister of Industry and Trade Mikhail Ivanov.

United States Trade Representative – Management Brief

Management Briefs, U.S.

President Biden announced June 8 that he intends to nominate USDA Advisor Doug McKalip to serve as Chief Agricultural Negotiator with the United States Trade Representative.

“This position is important to corn growers,” said Brooke S. Appleton, Vice President of Public Policy at the National Corn Growers Association. “We are very pleased to see this nomination in place and moving forward, and we look forward to working with Mr. McKalip on some of our key trade issues.”  

McKalip has worked on agricultural policy and trade for over 28 years. He most recently served as Senior Advisor to Secretary Vilsack. The position, which requires a Senate confirmation, is charged with conducting and overseeing international negotiations related to trade in agricultural products.

E.U. Adds EuroChem’s Aleksandra Melnichenko to New Sanctions List

Europe, News, News Briefs, Russia

The European Union (E.U.), as part of its sixth sanctions package against Russia and Belarus adopted on June 3, added EuroChem Group AG’s main beneficiary Aleksandra Melnichenko to its list of sanctions against Russia (GM June 3, p. 1), according to the E.U.’s Official Journal, published on June 3.

Melnichenko became the new beneficiary of the trust holding the controlling 90% stake in EuroChem in May (GM May 27, p. 29). Her husband, Russian billionaire Andrey Melnichenko, withdrew as main beneficiary of the group and resigned his position as Non-Executive Director following his inclusion on the E.U.’s expanded sanctions list in March (GM March 11, p. 1).

The E.U.’s decision to sanction Aleksandra Melnichenko puts into question whether Switzerland and Belgium will reverse their recent decisions to lift sanctions on EuroChem.

Certainly, Switzerland’s Federal Council is reported to have adopted the E.U.’s sixth sanctions package, and the country’s Federal Department of Economic Affairs, Education, and Research (EAER) also approved the sanctioning of over 100 further Russian and Belarusian individuals and entities.

According to a Bloomberg report on June 10, Switzerland’s list of sanctioned individuals and entities is identical to that of the E.U.

The Swiss government lifted its sanctions on the Zug-headquartered group following the ownership change, according to an Interfax report, citing Swiss newspaper Tages-Anzeiger.

In line with the charter of Switzerland’s State Secretariat for Economic Affairs (SECO), the organization responsible for monitoring sanctions against Russia, EuroChem’ s bank accounts and payments were unfrozen following the lifting of sanctions.

Swiss banks UBS and Credit Suisse temporarily froze EuroChem’s accounts in March after Andrey Melnichenko was put on Switzerland’s sanctions list.

Following the ownership change, the Belgian government around May 24 allowed EuroChem’s Antwerp plant to restart production, and also for the plant to buy raw materials (GM May 27, p. 29).

A representative for the Melnichenko couple described the E.U. decision to extend sanctions to include Aleksandra as “irrational” because she has never held Russian citizenship or resided in Russia, according to a Reuters report, citing an emailed statement from the representative.

Aleksandra Melnichenko, who was born in Belgrade, Serbia, and holds Serbian and Croatian citizenship, will “vigorously contest the unfortunate decision against her,” according to the report.

Meanwhile, EuroChem has announced the resignation of Kuzma Marchuk as Chief Financial Officer, effective June 1. Marchuk has also resigned from his positions on the group’s Board of Directors.

Ukraine Vetoes Belarus’ Offer of Outlet for Grain

Belarus, Featured, News, Russia, Ukraine

Ukraine this week said it is not ready to export grain through Belarus.

Belarus President Alexander Lukashenko last week offered for Ukrainian grain exports to be routed by rail through the country to ports on the Baltic Sea. However, the offer was made only on the basis if Belarus could use German, Baltic, and Russian ports to ship Belarusian goods, including potash.

Russia has blockaded Ukraine’s ports on the Black Sea, which were previously the main export route for Ukrainian grains and oilseeds. The war with Russia has left nearly 25 million mt of grains stuck in silos in Ukraine, including some 20 million mt of wheat, according to a U.N food agency official on May 6, as cited by a Reuters report (GM May 27, p. 1 & p. 32).

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