All Posts from August 21, 2020

Chemtrade Logistics Income Fund – Management Brief

Canada, Management Briefs

Chemtrade Logistics Income Fund, Toronto, said on Aug. 17 that Mark Davis has informed the Board of Directors that he will retire as President and CEO in 2021. Scott Rook, currently COO, will replace Davis upon his retirement.

“Mr. Davis was instrumental in forming Chemtrade in 2001 and has served as its President and CEO since that time,” said Board Chair Lorie Waisberg. “Under Mr. Davis’ leadership, Chemtrade has substantially grown its business portfolio and organizational capabilities and has returned over $1.1 billion of capital to its unitholders.”

Waisberg noted that Rook joined the organization as COO in September 2019 as part of Chemtrade’s succession plan and has gained the full confidence of the board.

“Since joining Chemtrade, Scott has demonstrated genuine leadership and deep knowledge of our businesses,” said Davis. “I will be leaving Chemtrade in good hands.”

SQM Reports End of Deferred Prosecution Agreement, Charges to be Dismissed

Chile, News, News Briefs

SQM Inc., Santiago, on Aug. 19 reported that the three-year term of its Deferred Prosecution Agreement (DPA) entered into with the U.S. Department of Justice (DOJ) on Jan. 13, 2017, ended on April 30, 2020, and on June 1, 2020, the company submitted the certification regarding its disclosure obligations as required under the DPA.

The DOJ has since indicated that pursuant to the DPA it will file a motion to dismiss the criminal information against SQM with the U.S. District Court for the District of Columbia by Oct. 30, 2020. Subject to the court’s approval of the motion, all charges against the company will be dismissed with prejudice.

As part of the DPA, the U.S. Securities and Exchange Commission (SEC) announced on Jan. 13, 2017, that SQM agreed to pay more than $30 million to resolve parallel civil and criminal cases finding that it violated the Foreign Corrupt Practices Act (FCPA) (GM Jan. 20, 2017).

According to the SEC’s order, SQM made nearly $15 million in improper payments to Chilean political figures and others connected to them. Most of the payments were made based on fake documentation submitted to SQM by individuals and entities posing as legitimate vendors. The payments occurred for at least a seven-year period.

“SQM permitted millions of dollars in payments to local politicians while failing for years to exercise proper oversight over a key discretionary account and internal controls,” said an SEC spokesperson.

SQM agreed to pay a $15 million penalty to settle the SEC’s charges and a $15.5 million penalty as part of the DPA. SQM agreed to retain an independent compliance monitor for two years and self-report to the SEC and DOJ for one year after the monitor’s work was complete.

The Plaza Group – Management Brief

Houston, TX, Management Briefs

The Plaza Group (TPG), Houston, an international chemical marketing firm, on Aug. 18 said Jenna Engel has joined the company in the role of Global Sales and Marketing Manager, Agricultural Products, within the nitrogen, phosphate, potassium, and acid businesses.

“We’re so pleased to have Jenna join The Plaza Group, as she brings over twelve years of experience in international marketing, sales, and business development,” said Randy Velarde, TPG President and Founder. “Engel will report to Mia McGinty-Sherno, our Director of Industrial and Ag Sales, and her responsibilities will include managing the purchasing, selling, and marketing of various agricultural products with a particular focus in the feed ingredient business.”

Engel previously worked for six years at Yara International serving in various commercial roles in the industrial, animal nutrition, and crop nutrition segments. She completed an international assignment in the U.K. as Business Development Manager for Yara’s high-value crop nutrition products in North America and Brazil. Prior to that, she established Yara’s animal nutrition business unit in North America. Engel holds an MBA with Honors from the University of South Floridas.

K+S Group – Management Brief

Germany, Management Briefs

K+S Group, Kassel, announced on Aug. 17 that Alexa Hergenröther, Chairperson of the Board of K+S Minerals and Agriculture GmbH, as well as Head of the Europe+ operating unit, will leave the company at her own request as part of the restructuring of K+S’ organization in Europe and the new sizing of administrative functions.

Dr. Josef Wiebel has been appointed by the Supervisory Board of the company as Vice President Customer Segment Agriculture and as a member of the Board of K+S.

Meanwhile, the members of the Board of Executive Directors of K+S Aktiengesellschaft will waive part of their variable remuneration for the current financial year. If the annual variable remuneration component (STI, or Short Term Incentive) reaches 100 percent, the total amount waived by the board corresponds to €665,000 (approximately $791,846 at current exchange rates), the company said.

“The challenges in times of the corona pandemic continue to be demanding for our company as well. It is important for us to send a clear message with the remuneration waiver,” said K+S Chairman of the Board of Executive Directors Burkhard Lohr.

The members of the company’s Supervisory Board a few weeks ago declared a waiver of remuneration in order to support institutions and projects in the vicinity of the K+S sites that have been disproportionally affected by the negative impact of COVID-19.

Kalium Lakes Ltd. – Management Brief

Australia, Management Briefs, Specialty

Kalium Lakes Ltd., Balcatta, Western Australia, reported on Aug. 20 that current Chairman Malcolm Randall will retire as a Director of the company at or before its next Annual General Meeting in November 2020. To allow for an orderly transition, Randall has advised that he will immediately step down from the role of Chairman. 

The Board has appointed Stephen Dennis, a Non-Executive Director, as Chairman, saying that he is an experienced and well-regarded company director with a successful career in the Australian and international resources sector spanning more than 35 years. Dennis joined the Kalium board in April 2019 as the nominee of the company’s major shareholder, Greenstone Resources. He will cease to be Greenstone’s nominee to the board and will be replaced in that capacity by current Non-Executive Director Mark Sawyer, who is a Senior Partner of Greenstone.

“I look forward to working with the Kalium Lakes’ team, led by newly-appointed CEO Rudolph van Niekerk, to ensure the success of the Beyondie SOP Project as we move towards operational start-up next year,” said Dennis.

“On behalf of the board, I would also like to thank Mal as the founding chairman for his valuable contribution to Kalium Lakes. Mal has led the company as Chairman for the past five years and has guided its growth from a small private company to an ASX listed business with more than 5,000 shareholders.”

Dennis said the changes at board level follow an internal review of the board composition and structure within the company that has taken place over the past two months. In preparation for Randall’s retirement as a Director, the board has commenced a process to identify an additional independent Non-Executive Director to join the board.

Belaruskali Resumes Production, Uncertainty Continues

Belarus, Featured, News, Potash

Strikes and mass demonstrations in Belarus over the disputed presidential election were reported to have closed down much of the country’s potash production at the start of this week. But by late Aug. 19, state-owned producer Belaruskali said all seven of its mines were operating as usual, and the processing plants of the RU-2, RU-3, and RU-4 production units are also operating. The producer added that the RU-1 plant will restart operations after the completion of scheduled maintenance work.

However, according to an Interfax report on Aug. 20, citing the producer’s strike committee press secretary Gleb Sandras, while all ore directorates are continuing to work at Belaruskali, they are not working “to the full extent.” The strike committee is also discussing further actions, whether to continue the strike or not, and, if it is continued, in what form, according to the report.

According to a report by the Russian news agency Tass earlier in the week, there were said to be concerns that workers could be coerced into returning to work or their contracts would not be renewed.

“The situation is very uncertain and unclear now. We are making adjustments to our sales plan for August in online mode, and it is hard to say as of now how quickly the situation will get back to normal,” a spokesperson for Belarus Potash Co. (BPC), which handles Belarus’ potash exports, told Green Markets on Aug. 19. “I can only say that now we are focused on fulfilling our existing commitments.”

“At this point, it appears like this is a very short-term supply disruption, which could potentially be made up with inventory,” said Green Markets Research Director Alexis Maxwell. She said there are very strong incentives for any government to keep Belaruskali operating.

“The company is profitable, with an estimated cash cost of production at $50/mt. It also employs many people with good-paying jobs. Perhaps most importantly, Belarus’ economy can most aptly be described as a planned economy, and large state-run companies, like Belaruskali, are a major linchpin in the economy,” said Maxwell. “All of which are very strong reasons to keep operating, especially as prices rise in the short-term response.”

Belaruskali is the world’s second largest potash exporter, with 2020 production capacity at 13.2 million mt. The producer also anticipates at least 100,000 mt of saleable tons this year from commissioning of its greenfield Petrikov mine and plant (GM June 12, p. 27).

Belaruskali said late on Aug. 21 it has made its first shipment of potash from its new Petrikov potash operation in Belarus’ Gomel region. This first consignment of 28.64 mt was shipped in bulk in vehicles from storage facilities at the Petrikov plant, the Soligorsk-based producer said in a statement on its website. The customer for this first consignment was Polesie-Agroinvest Agricultural Unitary Enterprise in Petrikov.

Back in June, Belaruskali had anticipated completion of the commissioning of the Petrikov flotation plant by the second half of the month (GM June 12, p.27). The Petrikov plant will produce fine and granular potassium chloride.

Belarus exported 5.39 million mt of potash in the first six months of 2020, and some 5.61 million mt in the same year-ago period, according to Trade Data Monitor, citing the Belarus National Statistical Committee.

Most of Belarus’ potash is exported through the Lithuanian port of Klaipeda via the Biriu Kroviniu Terminalas terminal, in which Belaruskali has an ownership stake (last reported to be 30 percent (GM Oct. 11, 2019). It typically takes two days or less to deliver product from Belaruskali’s production sites to the port.

Political tensions in Belarus show no sign of easing as strikes continue and opposition protests snowball against the country’s incumbent president, Alexander Lukashenko, who has insisted he won’t resign or call a new vote.

Belarusian First Deputy Prime Minister Nikolai Snopkov has been appointed government representative to Belaruskali, according to an Interfax report on Aug. 21, citing the government press service. Appointing senior government members to joint stock companies with a government stake in them is reported to be standard governance practice in Belarus. The Belarus potash producer is 100 percent owned by the Belarusian state.

It was being reported late on Aug. 21 that Belaruskali miners who are currently on strike may be replaced with other workers, according to the country’s state-owned news agency, Belta, citing Lukashenko. He said these other workers could include workers from Ukraine, according to the report.

BHP Pushes Back Jansen Decision

Australia, News, News Briefs, Potash

BHP Ltd., Melbourne, now expects to present its Jansen Stage 1 potash project to its board for a final investment decision in the middle of calendar year 2021, the group said in its full-year earnings report released on Aug. 18.

The group previously planned to make the presentation in February of next year. It said the decision follows delays to the completion of the shafts. These delays are a result of initial challenges with placement of the shaft lining, since rectified.  The group’s COVID-19 response plan also impacted on the work. It had said in April it was reviewing the timeline for the completion of the two Jansen shafts (GM April 24, p. 31).

The forecast capital cost for the execution of Jansen Stage 1 – which currently is designed to provide between 4.3 million and 4.5 million mt/y of potassium chloride production capacity on completion – remains unchanged at between US$5.3 to US$5.7 billion. But BHP said “some additional costs” are now expected to be incurred on the US$2.7 billion shaft project currently in execution as a result of the delays. It said these additional costs are currently under review. This project stage in now 86 percent, just 1 percent up from 85 percent in April.

The group’s potash capital expenditure for the year to June 30, 2020 totaled US$201 million, up from US$174 million in FY2019. It expects potash capex of approximately US$285 million for FY2021.

BHP CEO Mike Henry said the final investment decision on Jansen Stage 1, like all of BHP’s projects, must satisfy the group’s Capital Allocation Framework. Earlier this year, the CEO had insisted that Jansen would not be pushed ahead for the sake of diversification. The group is particularly keen to get out of thermal coal mining as investors are increasingly uncomfortable with big name companies mining the dirtiest fuel, and is looking to what it has termed “future-facing commodities”, namely copper and nickel, as well as potash.

The group’s medium-to-long term view on potash remains unchanged; that the nutrient stands to benefit from population growth and rising living standards. It anticipates trend demand growth of 1.5 to 2.0 million mt/y, equating to between two and three per cent growth per annum, through the 2020s.

However, while BHP believes this rate of demand growth “would progressively absorb the excess capacity currently present in the industry”, it now expects “the window for new supply to be open by the late 2020s or early 2030s”, which is later than the mid-2020s it had been anticipating last year for the absorption of latent capacity (GM May 24, 2019).

The group also now appears to be looking at a five-year construction period for Jansen Stage 1 – if it goes ahead with the project – with a two-year ramp-up. Previously, it had indicated the first stage would take less than five years to complete (GM May 24, 2019).

BMO Capital Markets chemicals and fertilizers/ag analyst Joel Jackson said their view is that it does not take five years to build a potash plant, so they would assume this decision is “at least partially market based.”

“This implies that instead of us assuming 1 million mt from Jansen in 2025 (ramping up to 4 million mt in 2027), we would need to delay first tons by up to 18 months into 2026,” said Jackson.

BHP has estimated that it can produce potash at Jansen for ~$100/mt FOB Vancouver, excluding royalties (GM May 17, 2019).

“This is below the current market prices, and in line with its Canadian peers,” said Green Markets Research Director Alexis Maxwell.

The mining group reported a 0.7 percent decline to US$9.06 billion in underlying attributable profit for the year to June 30, down from the year-ago US$9.12 billion, and will pay out a final share dividend of US$0.55 per share, or a total of US$2.8 billion to shareholders, which includes an additional amount of US$0.17 per share (equivalent to US$0.9 billion) above the 50 percent minimum payout policy.

The group said the total impact from COVID-19 on its operations was US$348 million (pre-tax), including an exceptional charge of US$183 million, in the 2020 financial year.

Grupa Azoty Cuts 2Q Net Profit Estimate to Pln70.1 M

News, News Briefs, Poland

Polish chemicals and fertilizer group Grupa Azoty has cut its second-quarter net profit forecast to Pln70.1 million (approximately $19.0 million at current exchange rates), down from the previous estimate of Pln105.6 million earlier this month, according to a company market filing (GM Aug.7, p. 36). The second-quarter EBITDA estimate has also been cut, to Pln315.1 million versus the earlier Pln353.4 million, which will be a 5 percent decline on year-ago EBITDA.

 The reduced estimate follows a change in the booking policy with respect to CO2 emission rights at Azoty subsidiary Puławy that also has led to a revision of Puławy’s preliminary results. Azoty said the change will have no impact on its full-year results.

The company will publish its final financial results for the second quarter and first half on Sept. 10.

SQM 2Q Income Beats Analyst Estimates; Earnings Drop Pegged on Low Lithium Prices

Chile, Lithium, News, News Briefs

SQM Inc., Santiago, posted second-quarter net income of $50.8 million ($0.19 per share), beating analyst estimates of $44 million, according to Bloomberg. Income was still some 27.6 percent below the year-ago $70.2 million ($0.27 per share), with the company continuing to face lower prices in its Lithium segment.

Prices were off some 45 percent in first-half from the year-ago period. Total SQM revenues were $458.5 million, down from $494.1 million. Adjusted EBITDA was $153.6 million, down from $163.4 million.

“The hard work and commitment of our team, especially in the north of Chile, during these difficult times, has allowed us to report a net income for the second quarter of approximately US$50 million,” said SQM CEO Ricardo Ramos. “On top of this, as of today, we have met or exceeded all internal production goals, which included record production levels of lithium carbonate.

“Although the downward lithium pricing trend continued during the second quarter, I would like to highlight that lithium sales volumes exceeded 12,600 mt, almost 50 percent higher than sales volumes reported in the first quarter of the year, in line with our goal of selling higher lithium sales volumes this year, when compared with last year, thus increasing our market share,” he added.

SQM said its lithium production levels are at all-time high and it is currently producing at a rate of 70,000 mt/y. While the company cited the uncertainty of the short-term market, it is upbeat long-term, seeing a growing electric vehicle market. As a result, it continues with lithium carbonate and lithium hydroxide expansion plans, and expects both to be finalized by the end of 2021.

In the meantime, sales volumes lagged in two of the company’s fertilizer-related segments – Specialty Plant Nutrition (SPN) and Potassium Chloride & Potassium Sulfate (PCPS) – though the company still expects to sell some 700,000 mt of the latter in 2020.

Second-quarter SPN volumes were off 4 percent, to 267,600 mt from the year-ago 279,700 mt. SPN revenues were down 8 percent, to $182.7 million from $199.3 million. Within the group, potassium nitrate-related product saw the only volume drop (12 percent), at 162,000 mt from 183,500 mt. SQM still believes this market demand growth could be 3 percent this year. Specialty Blends were up 17 percent, to 58,600 mt from 49,900 mt.

The company said second-quarter SPN sales volumes grew 14 percent from first-quarter. However, it expects annual sales levels in 2020 to be lower than those seen in 2019. It said average prices dropped just over 3 percent during the second-quarter. It said the lower prices in the potassium chloride market and the uncertainty in the short-term have indirectly and negatively impacted specialty fertilizer price trends.

Six-month SPN volumes were down 6 percent, to 501,200 mt from the year-ago 535,500 mt. Revenues were off 9 percent, to $347.8 million from $383.8 million. Potassium nitrate-based volumes were off 14 percent, at 300,300 mt from 349,400 mt. Specialty Blends were up 11.6 percent, to 104,200 mt from 92,700 mt.

Second-quarter PCPS volumes were off 9 percent to 105,700 mt from the year-ago 116,500 mt. Average prices were under 4 percent lower than prices reported during the year-ago period. The company believes some price volatility could continue in the short-term. Revenues were off 23 percent, to $34.2 million from $44.4 million.

Six-month PCPS volumes were off 3 percent, to 234,600 mt from 241,000 mt. Revenues were off 12 percent, to $77.5 million from the year-ago $88.5 million.

Industrial Chemicals were a stand-out during the second quarter, with revenues up 325 percent to $59.1 million from the year-ago $13.9 million. This was due to anticipated sales of solar salts during the quarter, when SQM sold some 60,000 mt, a portion of the total solar salt sales volumes of 150,000 mt that it expects to sell this year. Overall, within the segment, Industrial Nitrate sales were up 326 percent, to 75,800 mt from 17,800 mt.

Six-month Industrial Chemicals revenues were up 139 percent to $73.7 million from $30.9 million, while Industrial Nitrate sales were up 143 percent, to 94,500 mt from 38,900 mt.

Company-wide, SQM posted six-month net income was $95.8 million ($0.36 per share) on revenues of $850.5 million, down from the year-ago $150.7 million ($0.57 per share) and $998.4 million, respectively. Adjusted EBITDA was $286.5 million, down from the year-ago $332.6 million.

Tribes Plan Appeal of Simplot/BLM Land Exchange

Featured, News, Pacific N.W.

The Shoshone-Bannock Tribes of Fort Hall plan to appeal a land exchange agreement between the J.R. Simplot Co. and the U.S. Bureau of Land Management (BLM) after a top BLM official from Washington flew to Pocatello, Idaho, to sign the deal.

The Black Rock Land Exchange will enable Simplot to expand its operations near its Don phosphate fertilizer complex west of Pocatello in exchange for Simplot providing BLM a greater amount of acreage that will provide permanent protection for crucial mule deer winter habitat and public recreational access within the Blackrock Canyon Recreation Management Zone.

The Shoshone-Bannocks, however, said they are against the exchange because they are concerned the agreement will pave the way for more pollution of the already contaminated site, imperiling cultural resources. “The tribes strongly oppose the Blackrock Land Exchange, which will expand an existing Superfund site that’s on the national priorities list as one of the most highly contaminated sites in the country,” said Tribal attorney Paul Echohawk.

Among the tribal cultural concerns are that the agreement could lead to continued groundwater contamination reaching the Fort Hall Bottoms, which the tribes consider sacred land where tribal members exercise their hunting and fishing treaty rights. It plans to appeal to the Interior Board of Land Appeals.

The Portneuf Resource Council, a local conservation organization, said the agreement would allow part of the Power County fertilizer plant to expand into Bannock County and make Simplot’s huge gypsum slag waste pile more visible to Pocatello residents. It complained the exchange’s approval was done with little fanfare, impact evaluation, or public input. “It’s something that is going to affect Pocatello for at least 80 years,” said Chairman Mike Engle.

The 713.5 acres of federal land being conveyed to Simplot adjacent to its plant will enable the company to construct cooling ponds to reduce fluoride emissions, provide additional space for plant operations, and extend the plant’s life. In exchange, Simplot is donating 160 acres and providing an additional 666.46 acres of non-federal land within the Chinese Peak-Blackrock Canyon area.

Casey Hammond, Principal Deputy Assistant Secretary of the Interior for Land and Minerals Management, who visited Pocatello, and William Perry Pendley, BLM Deputy Director for Policy and Programs, praised the land exchange for providing outstanding recreational opportunities while protecting crucial habitat for mule deer and other native species.

“This exchange also ensures that Simplot can continue to contribute to eastern Idaho’s economy,” Hammond said, noting it will protect about 600 Simplot jobs at the Pocatello plant and Smoky Canyon Mine and another 1,300 jobs that indirectly rely on the Don Plant. “The first and most important thing is it allows them to continue operating into the future.”

Hammond said BLM considered tribal comments and chose to amend its plans to remove 4.12 acres from the exchange that contained a concentration of cultural resources so tribal members may retain access to them.

Simplot first proposed the exchange in 1994, but the approval process was delayed after concerns arose regarding groundwater quality in the Eastern Michaud Flats near Simplot’s Don Plant and the adjacent FMC elemental phosphorus plant, which was designated a Superfund site in 1998 under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

BLM approved the Blackrock Land Exchange in 2007, but the Shoshone-Bannocks challenged it in U.S. District Court in Idaho, charging that BLM was obligated to prepare an EIS under the National Environmental Policy Act (NEPA). In May 2011, the court agreed with the tribes and ordered BLM to prepare the EIS. BLM issued a final environmental impact statement for the Blackrock Land Exchange earlier this summer (GM June 5, p. 1).

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