All Posts from September 7, 2018

Itafos Eyes Phosphate Rock Options

News, News Briefs, Phosphate, Saskatchewan

Itafos, Toronto, has indicated to the U.S. Bureau of Land Management (BLM) that it is interested in securing the required permits to develop the Husky-North Dry Ridge surface mining project and the Paris Hills underground phosphate deposit previously owned by Agrium Inc. and Stonegate Agricom, respectively, in southeastern Idaho.

Itafos last January acquired the Conda Phosphate Operations near Soda Springs, Idaho, for $100 million from Agrium Inc. (GM Jan. 19, p. 1), which now is part of Nutrien Ltd., Saskatoon. Conda produces about 540,000 mt/y of MAP, super phosphoric acid, merchant grade phosphoric acid, and specialty products. Itafos sells 100 percent of the Conda MAP production to Agrium via an offtake agreement. In turn, Agrium has an ammonia supply agreement with Itafos tied to a phosphate benchmark. Some 40 percent of the Conda sulfuric acid is produced internally, with the remainder sourced from third parties at a benchmark price.

Nutrien will be responsible for any mine cleanup activities at the legacy Agrium sites in Idaho.

Jeff Cundick, BLM minerals branch chief in Pocatello, told Green Markets that Itafos has not yet had the BLM assign any of the Agrium phosphate leases to Itafos, but his office has been in contact with Itafos officials. Itafos had not responded to inquiries at press time.

When releasing its earnings in August (GM Aug. 17, p. 27), Itafos indicated that top priorities included executing its corporate strategy by focusing on optimizing its Conda operations, finalizing permits for its Paris Hills project, and integrating its Conda and Paris Hills projects. This is in line with August corporate filings in Canada in which Itafos said it intends to extend mine life through the development of Itafos Paris Hills and other alternatives. The Itafos Conda mines are 15 miles from the production site, and 35 miles from Paris Hills.

Itafos said the Itafos Conda mines have a combined reserve life through 2024. Itafos Paris Hills is still in the midst of a feasibility study, however, the company expects it will produce 1 million mt/y of phosphate rock. The company said its reserves represent a 19-year mine life.

In 2012, Agrium submitted an application to mine the Husky-North Ridge in the Caribou/Targhee National Forest, but ceased that permitting process in December 2015 to better concentrate on getting permits for its Rasmussen Valley Mine, also in Caribou County, Cundick said. He also noted that the phosphate reserves of what had been Agrium’s Rasmussen Valley Mine and a private Lanes Creek Mine will be depleted in 5-6 years.

As is common in the mining industry, Itafos initially offered resources for the BLM to hire a project manager as part of an interdisciplinary team, Cundick said. Itafos’ development of the Paris Hills property, acquired from Stonegate Agricom in July 2017, not far from Bear Lake on the Idaho/Utah border, will not involve the BLM, he said.

“That effort will not likely include BLM since there is very little federal phosphate associated with that deposit. Itafos will need to work with the State of Idaho Department of Environmental Quality, among other agencies, to gain approval to mine that property,” said Cundick.

In June, Itafos announced that it had closed a $165 million credit and guarantee agreement (GM May 25, p. 28) with CL Fertilizers Holding LLC, formerly Houston-based Zaff LLC, which was founded in 2011 with offices in Dubai, United Arab Emirates, and Singapore. Zaff changed its name to CL Fertilizers (CLF) last February.

CLF owns about 58 percent of Itafos’ 142 million outstanding shares. Itafos announced that some of the funds managed by BlackRock Financial Management Inc. could be used as working capital and other cash requirements for its Conda and Paris Hills projects.

OCI Pushing High-Margin DEF at Iowa N Plant; Urea, DEF Trade Patterns Adjusting

Featured, News

Citing a 20 percent annual growth rate for diesel exhaust fluid (DEF), OCI NV, Amsterdam, is investing to expand product storage capacity at its Wever, Iowa, nitrogen complex. “DEF is our highest margin product by far, and our intent is to grow that production platform,” OCI CEO Nassef Sawiris told analysts on Aug. 31. He added that every time the company shifts its product from urea and UAN to DEF, its margins expand.

“We have also introduced almost 300 railcars to be able to access more destinations for DEF,” he said, adding that OCI is seeing new uses for DEF in construction equipment and agriculture. “So it’s not just trucks and private diesel passenger cars. So, on the Iowa side, there is a lot of work being done on the DEF front.”

OCI earlier noted that its recent joint marketing agreement with Dakota Gasification would have benefits in both the fertilizer and DEF markets, saying as to the latter that buyers would prefer to buy from a marketer that could source product from two different plants rather than just one, in case one plant was offline and not able to supply product (GM May 25, p. 1).

Sawiris told analysts that OCI recently won a contract with a major truck stop that had been buying imported DEF from Poland, which was essentially shipping 50 percent water across the ocean. “So that is not efficient, because DEF is sold with a lot of water, so logistics in DEF are key.” He said OCI is now the largest DEF producer in the Midwest, and this gives it access to the Chicago hub and all the Midwest traffic. U.S. DEF imports were off 15 percent for the year ending June 30, 2018, to 155,356 st from the prior year 181,798 st, according to the U.S. Department of Commerce.

OCI is also growing its offshore DEF presence, planning to add DEF capacity during a turnaround at its OCI Nitrogen plant in 2019. It has also begun experimental shipments for DEF produced at its Egyptian nitrogen plants to Southern Europe.

Sawiris said the company is happy with how the Wever plant is performing, saying that on an average day it is producing about 115 percent of the nameplate capacity of urea, which goes downstream to DEF, granular urea, and UAN. “We are also seeing a higher nameplate performance on ammonia – around 110 percent, with a lot of room to improve…”

In the nitrogen market, Sawiris continued to reiterate the company’s plan not to participate in fill programs, and added that this would be true for the recent marketing joint venture with Dakota Gasification. He said the company continues to sell month-to-month, and that neither it nor Dakota Gas participated in the fill program.

OCI said the levels of fertilizer within the industry storage system are extremely low.

OCI said the Midwest premium for nitrogen is on the right trajectory and is expanding. Sawiris believes that going forward there will be less urea available at New Orleans. He said long-dated trader contracts with the Arab Gulf don’t make sense anymore, and that those producers can achieve better netbacks by sending their product to Asia and East Africa.

U.S. urea imports were off 27 percent during the fertilizer year ending June 30, 2018, to 5.17 million st from the prior year 7.05 million st.

He also noted that there are no new nitrogen plants coming in the Midwest – or at least no one has dug a hole for one to be built. “Yes, you have an attractive gas price,” said Sawiris, “but the entry ticket is painful in terms of Capex, in terms of project finance availability, and in terms of access to labor.”

OCI said the only nitrogen product with a price mismatch is ammonia, which should be trading at higher levels in order to justify continued production and an arbitrage with urea. OCI noted its own second-quarter turnaround at its OCI Nitrogen plant in The Netherlands, and that it did not shed a lot of tears at the time due to the high cost of gas. Like other European nitrogen producers, it said it bought ammonia cargoes, adding that other producers have been curtailing production in favor of imports.

Internationally, OCI expects Chinese urea exports to stay at structurally lower levels going forward, saying the country has exported only 800,000 mt year-to-date. It cited higher production costs for marginal producers in China and Europe due to higher coal and natural gas prices. In addition, OCI said exports from Iran, one of the largest urea exporters, are at risk of significant curtailments due to U.S. sanctions. It said as of now, Iran is fully exporting, but this situation could change – and if it did, could have a significant impact.

OCI shares rose as much as 5.3 percent on Aug. 4, its highest level in three years, according to Bloomberg, after Berenberg analyst Rikin Patel raised his price target for the company “owing to increased assumptions for nitrogen fertilizer pricing in 2018 and beyond, along with a slight increase in our volumes estimates.” This came after the company posted a second-quarter loss on Aug. 31, while noting increased volumes and improved price trajectory for the second-half (GM Aug. 31, p. 27). Patel noted that OCI trades at a 30 percent discount to CF Industries Holdings Inc., Deerfield, Ill., even though it has a similar position on the cost curve with CF. The analyst sees little reason for a price disparity to exist.

P&H Plans New Crop Inputs Facility in Manitoba

Alberta, Canada, Featured, News

Canadian agribusiness Parrish & Heimbecker Ltd. (P&H) announced in August that it plans to build a new crop input center and grain terminal in the rural municipality of Gilbert Plains, in northwestern Manitoba.

The new facility, which will be named Grand Plains, will house 25,000-30,000 mt of grain storage with a receiving capacity of 550 mt/hour and a load-out capacity of 1,500 mt/hour. The site will also have a 6,000 mt bulk dry fertilizer shed with a blending capacity of 250 mt/hour, as well as a chemical storage shed, seed treating facilities, and a new grain drying system.

The Grand Plains facility will be located on a 150-car loop track with the CN Railway, which P&H said will provide greater access to fertilizer markets across North America and around the globe. The new site is intended to service Manitoba’s Parkland region, which includes the communities of Grandview, Gilbert Plains, Roblin, Swan River, Dauphin, and Ochre River. P&H said the on-site seed treating facilities at Grand Plains will service the direct-to-grower market and also supply the current P&H site in Swan River.

Justin Watson, P&H vice president, Crop Inputs Canada, told Green Markets that the company is currently finalizing contractors, with groundwork at the Grand Plains site expected to begin next summer. The facility will likely employ 15 or more staff when operational.

“P&H is committed to investing in state-of-the-art facilities that help farmers grow and market the best crop,” said John Heimbecker, P&H executive vice president and president of the company’s Grain Division. “Our investment in the Grand Plains location is key to bringing complete crop input and grain solutions to growers in the Parkland Region. The facility will not only provide crop input products and services, it will also expand the grain marketing opportunities for farmers in this area.”

P&H has been engaged in a multi-year expansion of its grain, fertilizer, and crop inputs business in Canada. The company is currently constructing a new crop input center and grain terminal in Viking, Alta., which is slated for completion in early 2019 (GM Dec. 8, 2017). The Viking terminal will include a 46,000 mt grain storage elevator, a 25,000 mt dry bulk fertilizer shed, and a chemical storage facility, all with access to CN Railway via a 150-car loop track. P&H said the Viking facility will support four crop input locations in Alberta that the company purchased from Crop Production Services (Canada) Inc. (CPS) in early 2017 (GM Jan. 20, 2017).

In addition to the Grand Plains, Viking, and CPS expansions, the company also reported in late 2016 that it had opened new fertilizer blending plants at Wilson Siding, Alta., Gladstone, Man., and Biggar, Sask., and was working to expand fertilizer storage capacity at existing Saskatchewan crop input and grain terminal locations in Moosomin, Tisdale, and Moose Jaw (GM Dec. 2, 2016).

Headquartered in Winnipeg, Man., P&H is a family-owned operation with more than 60 locations and over 1,500 employees across Canada. In addition to crop input products and services, the company has an extensive grain elevator network and also operates trading and merchandising, transportation and logistics, feed, and grain milling businesses.

Mexican N Plant Reported Under Construction

Ammonia, Featured, Mexico, News, Nitrogen, Urea

A new nitrogen complex is under construction in Topolobampo, Sinaloa, in Mexico, according to the Mexico Daily News, which reports that the first stage of the facility will cost US$1 billion and produce 770,000 mt/y of ammonia and 700,000 mt/y of urea. Total investment at the 202-hectare site is expected to be $5 billion, according to the paper, which pegged the investors as being Proman AG, Wollerau, Switzerland, and its Mexican subsidiary, Gas y Petroquimica de Occidente. Proman had not responded to inquiries at press time. However, on its website, the company said it is expanding in Mexico.

According to the paper, the plant has been delayed for years due to environmental concerns, which have since been overcome. Full capacity is expected to be reached in 2021, with the fertilizer going to both the domestic market and for export.

Proman, one of the world’s largest methanol producers, is also involved in fertilizer, and is invested in three Trinidad nitrogen projects – N2000, AUM, and Caribbean Nitrogen Co. (CNC).

Grupa Azoty Signs Deal to Acquire Germany’s Compo Expert Group

Featured, Germany, News, Specialty

Grupa Azoty SA, Tarnów, said it has concluded an agreement with Goat Netherlands BV, an entity of London-headquartered private equity firm XIO Group, for the acquisition of 100 percent of the shares of Germany’s Goat TopCo GmbH, which controls the companies of specialty fertilizer and biostimulant manufacturer Münster-based Compo Expert Group.

Grupa Azoty said the purchase price for 100 percent of the shares of the Compo Expert Group will not be higher than €235 million (approximately $273 million), and will be financed entirely with credit lines available to the Polish chemicals and fertilizer group.

Compo Expert’s key production assets are located in Krefeld, Germany, and Vall d’Uixo, Spain. Its high-value-added specialty fertilizers for professional use are sold in markets in Europe, Asia, the Americas, and South Africa. Compo Expert is a former business of K+S (GM June 27, 2011).

“With the acquisition of the shares in the Compo Expert group, Grupa Azoty will further strengthen its international position among the leading solutions providers for the agro market. Entering the area of specialty fertilizers is an important step in the group’s access to innovative technologies and unique know-how,” said Grupa Azoty President of the Management Board Wojciech Wardacki.

In February, Grupa Azoty disclosed that it had submitted a non-binding indicative offer to acquire 100 percent of the shares of Compo Expert (GM Feb. 23, p. 27; March 23, p. 31). Last week, the Polish company revealed that it was holding talks over potential takeovers of three foreign companies, including one in Germany, and that it may finalize one “significant” transaction by year-end, according to a PAP Biznes report, citing the group’s Vice President of Finance, Paweł Łapiński (GM Aug. 31, p. 1).

The transaction will be finalised after the approval of Grupa Azoty shareholders at an extraordinary general meeting and receipt of consent from relevant merger control authorities in certain countries of operation. Closing is not expected earlier than the fourth quarter of 2018 and no later than the first quarter of 2019.

 

Sirius Says Polyhalite Project Cost Likely to Increase

England, Featured, News, Polyhalite, Specialty

Sirius Minerals plc, Scarborough, England, this week said it has upwardly revised the capital cost requirement of its polyhalite mining project under development in North Yorkshire to US$4.17 billion (including contingency). The polyhalite developer said in a Sept. 6 statement it probably will now need an additional $400-$600 million in its stage 2 funding, and puts its revised stage 2 capital funding requirement at between $3.4-$3.6 billion, up from the previous estimate of $3 billion.

The cost revision comes as the company finalized procurement and associated risk allocations.

Sirius Managing Director and CEO Chris Fraser said the expected increased funding requirement coming from this process reflects an optimization of the materials transport system (MTS) tunnel design and a significantly improved risk allocation for the company to support senior debt financing.

“The project’s economics remain extremely compelling, and we are confident they support the expected additional funding requirement,” said Fraser.

Sirius said it will present an updated financing plan to lenders in the fourth quarter. It is targeting a maximum of $3 billion in senior debt financing. Options to support the increase in debt funding needs will include selling convertible notes or new shares, or bringing in a strategic partner, the company said.

Sirius’ target for the close of stage 2 financing has also been pushed into the first quarter of 2019, which remains subject to the successful completion of due diligence and receipt of a satisfactory financing plan. Prior to the capital cost estimate increase, the company had been anticipating financial close before the end of 2018 (GM July 6, p. 27).

The City of London’s financial community reacted badly to the news of a rise in Sirius’ polyhalite project costs, with the company’s shares down over 21 percent on the day at 16.42 BST.

The revised project costs announcement came as Sirius reported that it had agreed to design and build contracts with Vienna-based Strabag AG, a subsidiary of Strabag SE, for the construction of Drive 2 and 3 of its MTS to carry polyhalite from its Woodsmith mine, under development near Whitby in North Yorkshire, to a processing facility at Wilton on Teeside. The Austrian contractor already has the contract for Drive 1 (between Wilton and Lockwood Beck) of the MTS (GM March 30, p. 28).

Sirius attributed the higher MTS cost to an increases in the planned internal diameter of the tunnel and in lining thickness, and a decrease in advance tunneling rates, following the company’s increased understanding of the geotechnical characteristics of the strata within which the MTS will be excavated. The higher cost is also due to a commercial risk allocation, which transfers construction and delivery risk to Strabag.

Sirius also said it had inked an engineering, procurement, and construction (EPC) contract for its materials handling facility (MHF) at Wilton with Jacobs UK Ltd., a subsidiary of Jacobs Engineering Group, Dallas, Texas. The MHF is where the polyhalite is brought to the surface and granulated. The plant has been scoped to include 7 million mt/y of Poly4 granule and 3 million mt/y of coarse product in the first phase of development, but with a footprint for up to 20 million mt/y of granulated product.

The polyhalite developer said the target price of the MHF’s EPC contract is consistent with its optimized DFS estimates. The company also expects the cost of the outstanding procurement contracts, which include the MTS fit-out and port facilities, to be in line with these optimized DFS estimates. It said it had identified Strabag as the preferred contractor for the MTS fit-out, and is in advanced negotiations for the provision of port facilities.

Sirius is still targeting first polyhalite production towards the end of 2021 and is working to bring that date earlier, with ramp-up to 10 million mt/y production in 2024. But it has revised its production capacity expansion plan to incorporate the expected senior debt facility terms that would restrict its ability to use cash flows from operations to fund the expansion of the project to 13 million mt/y production. Under the revised assumptions, it now expects to reach 13 million mt/y by 2026 and 20 million mt/y in 2029.

Tiger-Sul Products – Management Brief

Management Briefs, Specialty

Tiger-Sul Products, Shelton, Conn., announced on Sept. 5 that it has hired veteran marketer BJ Harrington, who will drive marketing and new initiatives for the company’s Tiger-Sul sulfur bentonite, sulfur bentonite micronutrients technology, and other crop performance products.

Harrington previously led the marketing and branding programs for Stoller and Control Solutions, overseeing long-term strategies and product launches in the U.S., Canada, Latin America, Europe, and Asia-Pacific regions. He has a background in communications and graphic arts from the Art Institute of Houston, and has completed various postgraduate work in his more than 30-year career.

“BJ is a tremendously experienced marketer, and we’re excited to welcome him to Tiger-Sul,” said Tiger-Sul President and CEO Don Cherry. “BJ’s hiring is an example of our ongoing commitment to educating the industry about the important role sulfur fertilizer plays in modern crop production, and how growers can use Tiger-Sul products more effectively to improve yields and return on their fertilizer investment.”

International Fertilizer Development Center – Management Brief

Management Briefs

Dr. J. Scott Angle, president and CEO of the International Fertilizer Development Center (IFDC), Muscle Shoals, Ala., has been nominated for the position of director of USDA’s National Institute of Food and Agriculture. Angle has been with IFDC since October 2015. A soil scientist and a former Fulbright scholar, he previously served as dean of the College of Agricultural and Environmental Sciences at the University of Georgia.

Dr. Angle currently remains as president and CEO. An interim IFDC leader is expected to be named at a board meeting later this month, and a search committee will be formed.

Summit Agricultural Group – Management Brief

Management Briefs

Summit Agricultural Group, a diverse farming, agricultural investment, and farm management company headquartered in Alden, Iowa, announced in late August that it has expanded its investment team to focus on the group’s newly launched $300 million Summit Ag Opportunities Fund.

J.D. Schlieman has been added as an operating partner. His responsibilities will initially include relationship management with potential portfolio companies. In addition, he will evaluate potential investments and serve as a resource to executive teams within the fund. Schlieman’s experience includes serving as chief financial officer at Heartland Pork, and most recently as CFO, and eventually president, of Hawkeye Renewables.

Jon Probst has been hired as a vice president. His responsibilities will include sourcing and evaluating potential investment opportunities. Probst previously worked in Dallas, where he evaluated potential private investment funds and sourcing, structuring, and closing commercial real estate transactions.

Summit’s current operations include row crop, beef cattle, and pork farms in the U.S., and a growing presence in the South American biofuels market. Summit said the goal of the Ag Opportunities Fund is to “acquire controlling interest equity positions in five to eight agricultural-centric investments over a three-year period beginning in mid-2018. The Summit Ag Opportunities portfolio will include investments across the agricultural supply chain, from production to manufacturing to distribution.”

Investor Keeps Heat on Oxbow’s Koch

News, News Briefs

An investor in billionaire William Koch’s Oxbow Carbon LLC, West Palm Beach, Fla., is demanding files that it said will show “wasteful spending’’ on lawyers hired to represent the company in the fight over the forced sale of the energy-products firm, according to a Bloomberg report. Crestview Partners LLC accuses Koch of falsely hiring the law firm of Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo PC to represent Oxbow in the sale dispute, when the firm actually served as his personal lawyers.

Crestview’s Robert Hurst and Barry Volpert, who serve as Oxbow directors, said in a Delaware Chancery lawsuit that Koch paid the firm as much as $50 million to help unsuccessfully stymie an investment fund’s demand for an exit sale under an agreement with the company.

Last month, Delaware Chancery Court Judge Travis Laster, in a longstanding lawsuit (GM Aug. 10, p. 1; Feb. 16, p. 24), ordered Koch to sell Oxbow Carbon so that Crestview, along with Load Line Capital LLC, can recoup their $150 million investment and also receive damages for Koch’s failure to put the company on the auction block. Koch is the brother of David and Charles Koch of Koch Industries Inc.

While Judge Laster said he would appoint a monitor to oversee the sale, the case is expected to be appealed.

Over the years, Oxbow has been involved in several commodities, including fertilizer, sulfur, sulfuric acid, petroleum coke, coal, carbon, and gypsum. It bought the fertilizer and sulfur trading business of International Commodities Export Corp. (ICEC) in 2011 (GM Feb. 7, 2011; Nov. 29, 2010). However, it sold its Oxbow Fertilizer LLC unit to Oakley Fertilizer Inc., North Little Rock, Ark., in late 2017 (GM Nov. 3, 2017).

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