IT may not be considered a sexy commodity compared with the likes of iron and gold, but the rapidly growing importance of potassium and phosphate is attracting the focus of a number of resource companies based in Western Australia.
IT may not be considered a sexy commodity compared with the likes of iron and gold, but the rapidly growing importance of potassium and phosphate is attracting the focus of a number of resource companies based in Western Australia.
As part of a group of inputs needed for the manufacture of fertilisers, phosphate and potassium sulphate (the latter commonly called potash) have become hot commodities after escalating price movements from late last year.
Realising that it had a controlling force on phosphate, the world's major exporter Morocco increased phosphate rock prices from an average of $US42 per tonne to around $400/t earlier this year, according to broker firm BBY Ltd.
The price movement spurred West Perth-based Minemakers Ltd to reprioritise its suite of projects, changing its focus from tin and tungsten operations in Tasmania to its now flagship Wonarah phosphate project in the Northern Territory.
"[Wonarah] was our backburner project until Christmas, when the price of phosphate went through the roof," Minemakers managing director Andrew Drummond told WA Business News.
"We knew we had billions of tonnes of phosphate sitting out at the bush but back then it wasn't economical.
"When the price octupled, and based on the technical knowledge that we had from the previous work done by Rio Tinto, it looked as though it had potential to become very economical." Demand for phosphate and potash are driven by several factors including a growing world population, improving diets in China, India, Russia and Brazil thanks to increased disposable income, limited availability of agricultural land, and increasing use of land for production of bio-fuels.
Like other commodities, it's a case of demand outstripping supply and not enough new mines coming online.
According to a phosphate research note by BBY, production is forecast to increase from 167 million tonnes in 2006 to 220mt in 2020 at an annual rate of around 2 per cent.
Meanwhile, demand is forecast to increase by 33 per cent to 2020 at an average annual growth rate of 2.1 per cent, however short-term projections are more bullish with an anticipated annual growth of 4 per cent.
With the factors aligned, it provided a spark for Subiaco-based Uramet Minerals Ltd, which last week announced phosphate results from its Thortonia project in Queensland that prompted its share price to skyrocket 270 per cent.
Uramet managing director Bill Hewitt said the soaring share price took the company, a spin-off of Elkedra Diamonds Ltd, by surprise.
"[Elkedra] were aware back in 2005 when they went round and analysed samples for phosphorous, but at that stage phosphate wasn't interesting at all so it just sat there in the files," Mr Hewitt said.
"We had a bit of time earlier this year, so did a search through those files and other people's reports and generally came up with some interesting numbers." The future for potash explorers is equally bright.
Nedlands-based Reward Minerals Ltd is leading the way with its Lake Disappointment project in WA.
The company, which recently negotiated a landmark equity arrangement with the traditional owners, has previously claimed the project's in situ resource has a value of $15 billion based on a potash price of around $632/t.
Currently, Australia has no potash producers and therefore imports all of its potash requirements.
Fertiliser manufacturer Incitec Pivot, which operates the Phosphate Hill mine in Mt Isa, said it imports most of its potash requirements from Canada.
For East Perth-based Redstone Resources Ltd, the lure of potash led it to recently acquire the Aneba project in Brazil.
"Our interest as a company in this whole fertiliser scenario is Brazil, because firstly, Brazil has some of the most prospective ground in the world for the potassium deposits, and secondly it is one of the single largest consumers of potassium in the world," managing director Anthony Ailakis said.
"In fact, it is predicted that in the next few years Brazil will become the number one agricultural nation in the world in terms of output." Other companies with phosphate or potash in their project portfolio include South Boulder Mines Ltd, Bonaparte Diamonds NL, Arafura Resources Ltd, Metals X Ltd and Syndicated Minerals Ltd.
