Potash Investing: Top 10 Company Stocks to Watch in 2021 (II.Part)

Potash Investing: Top 10 Company Stocks to Watch in 2021 (II.Part)

Shigemura Hiroyuki (Tokyo, Japan)

In the summer of 1790, President George Washington signed the first patent ever issued in the United States, which was to be used for a new process and apparatus for making potash, America’s first industrial chemical. While the patent expired fourteen years later, potash remains an important product used globally today. There are nowadays quite a few companies exploring, developing and producing potash around the world. In terms of investment opportunities, many potash-focused companies, such as Agrium and Potash, have been acquired by larger rivals over the years. Israel Chemicals, K+S or Mosaic Company, however, both have substantial potash operations and those investors seeking a diversified play on Potash, they may consider investing into the Global X Fertilizers/Potash ETF (SOIL), an exchange traded fund that tracks the Solactive Global Fertilizers/Potash Total Return Index.

Potash has seen a slow few years due to low prices, oversupply and farmers tightening their belts. The COVID-19 pandemic is applying further pressure, but major players, including ASX-, TSX- and TSXV-listed potash stocks, remain confident in the long-term outlook for the potash market. Potash increases crop yields and food quality using more limited land, which will be vital if the world is to feed itself as the global population continues to increase and people’s dietary habits change. Therefore, demand for potash fertilizers is set to rise over the coming years, which may be positive news for prospective investors in the industry. The following second part of the list featuring ten ASX-, TSX- and TSXV-listed potash companies, which are exploring, developing and producing potash in Australia, Belarus, Canada, Russia, parts of Africa and elsewhere around the world, is designed to help those interested in the space learn about the investment opportunities.

KALIUM LAKES Ltd holds the Beyondie SOP project located in Western Australia that is, however, at a more advanced stage than most other companies. By Q3 2021, Kalium Lakes hoped to start producing SOP for foreign and domestic sale. In August 2020, the company announced that the Beyondie project is more than halfway complete and said construction had commenced on an SOP purification plant. Beyondie holds SOP ore reserves of 1.65 Mt proven and 3.49 Mt probable, as well as SOP drainable mineral resources of 1.98 Mt measured, 9.6 Mt indicated and 13.79 Mt inferred. Kalium Lakes has secured a binding offtake agreement with the world’s largest supplier of potash fertilizer, K+S.
Beyondie is expected to be a low-cost, high-margin producer that will initially produce 90,000 tonnes per year but hopes to double that output over the longer term, with the project thought to have a 30 to 50-year mine life.

KARNALYTE RESOURCES Inc is a Canada-based advanced development stage company focused on two fertilizer products, potash and nitrogen, to be produced and manufactured in Saskatchewan. As the owner of the 100% interest in Subsurface Mineral Leases KLSA 010, KL 247A, and KL 246 totaling 367 km2 of mineral rights, the company has focused on financing and building its construction-ready Wynyard Potash Project, Phase One. Karnalyte’s goal is to become the next greenfield potash mine, with low capital costs, a superior product, and the lowest environmental impact. A modular construction plan will initially produce 625,000 tonnes per year (TPY) of high-grade granular potash, and two subsequent phases of 750,000 TPY each, taking total production up to 2.125 million TPY.
Karnalyte is also exploring the development of the Proteos Nitrogen Project, which is a proposed small-scale nitrogen fertilizer plant with a nameplate production capacity of approximately 700 metric tonnes per day (“MTPD”) of ammonia and approximately 1,200 MTPD of urea, and a target customer market of independent fertilizer wholesalers in Central Saskatchewan. Karnalyte Resources Inc. is a publicly traded company listed on the Toronto Stock Exchange.

KAZAKHSTAN POTASH Ltd is an Australian miner that owns two potash deposits in Kazakshtan named the Zhilyanskoye project and the Chelkar project. The two projects have been included in a co-operation agreement between Kazakhstan and China, and forms part of the latter’s ‘One belt, One Road’ initiative. This will see the miner create a potash production base of over 7 million TPY to supply the domestic and Chinese markets. The company is also currently acquiring the Satimola potash deposit in Kazakhstan from Samitola Ltd.

K+S AG (Inc) is a German company and one of Europe’s largest producers of potash that also makes salts and magnesium. Its operations, which generate a total of about 7 million tonnes of agricultural products each year, are predominantly based in Germany, but it has been expanding elsewhere with projects in the US, Canada and Chile. In 2017, K+S introduced a long-term strategy to transform the company by 2030. This involves integrating its potash and magnesium business with its salt operations, which were acquired ten years ago. The strategy aims to increase annual earnings to €3 billion by 2030 from less than a €450 million in 2018.

MOSAIC Ltd is an US Fortune 500 company based in Tampa, Florida, which mines and processes phosphate and potash into crop nutrients, and operates through segments such as international distribution and mosaic fertilizantes. As the largest US producer of potash and phosphate fertilizer, Mosaic also markets and ships its own products around the world. The company has capacity to produce over 10.5 million tonnes of potash each year. Although it is a US company with one mine in the country, most of its mines and refineries lie in Canada. Its newest mine, Esterhazy K3 in Saskatchewan, due to become operational in 2024, is set to be ‘the largest, most competitive underground potash mine in the world’.
Mosaic’s North American phosphates operations have the capacity to produce 11.7 million tonnes of phosphate fertilizer, while its South American arm can produce another 10.5 million tonnes of finished concentrated phosphate.

NUTRIEN Ltd is a global giant that makes over 27 million tonnes of potash, nitrogen and phosphate-based products for the agricultural industry each year. The Canadian fertilizer company based in Saskatoon, Saskatchewan, was formed in early 2018 after PotashCorp, one of the world’s largest potash producers, agreed to merge with its smaller rival Agrium. Over 20 million tonnes of production is potash, which makes Nutrien the largest producer in the world. It mainly produces from six mines in Saskatchewan, Canada. The company’s shares are listed in New York and Toronto, with a market capitalization of $34 billion as of January 2018.

PACIFIC SILK ROAD RESOURCES GROUP Inc, formerly Pacific Potash Corp, is a Canada-based exploration mining company that is involved in the acquisition, exploration and development of mineral properties, primarily focused on potash. The company is engaged in the process of acquiring and exploring its interest in the Amazonas Potash, Provost Potash property and Roam property, which are located in Brazil and Canada. Its Provost Property consists of over two permits encompassing approximately 40,000 acres in Alberta, Canada. The Company also holds interest, along with Grizzly Discoveries Inc, in approximately 200,000 hectares of metallic and industrial mineral permit applications surrounding the Provost Property. Pacific Silk Road Resources Group Inc trades on the Toronto Stock Exchange and on the Frankfurt Stock Exchange.

REWARD MINERALS Ltd is an Australia-based company engaged in mineral exploration, whose flagship project is the advanced-stage Lake Disappointment SOP project in Western Australia. The company claims Lake Disappointment is Australia’s largest high-grade brine SOP deposit, projected to produce 400,000 tonnes of SOP per year for sale to Australian farmers and international markets over a 27 year mine life. The SOP project is expected to require CAPEX of AU$451 million, and should go on to generate life-of-mine revenues of AU$6 billion. In June 2020, Reward Minerals announced that Lake Disappointment had received a green light from EPA regulators.

SALT LAKE POTASH Ltd, an Australian mineral exploration company dual-listed in Sydney and London, focused on potash assets in Australia. The company is developing a number of salt lakes in Western Australia, collectively known as the Goldfields Salt Lakes project, expected to produce up to 200,000 tonnes of SOP per year. Its Goldfields Salt Lakes SOP project includes nine salt lakes that cover over 4,750 square kilometers, which has a high-grade SOP probable ore reserve of 5.4 Mt of SOP, plus a drainable SOP mineral resource estimate of 11.4 Mt, giving it a projected 20 year mine life. Salt Lake Potash is initially building a 50,000 tonnes per year demonstration plant that will provide a template for the larger project. The Goldfields Salt Lakes SOP project, currently on track for first production in Q1 2021, is shallow and fairly low-cost, with the capex budget set at AU$237 million with just over a three-year payback.

SIRIUS MINERALS Plc was a UK-based fertilizer development company established in 2010 that was acquired by global mining giant Anglo American in March 2020. Sirius Minerals was gradually developing the Woodsmith mine in the UK’s North Yorkshire region, which is ultimately expected to produce up to 20 million tonnes of polyhalite – the name given to the unique mix of potash at the site – each year. With over 2.6 billion tonnes of the stuff, it is the largest reserve of polyhalite in the world. However, as the project is vast, expensive and more akin to those developed by major mining companies, Sirius was racing to find the billions it needed to finish construction and avoid total collapse, leaving this potentially world-class project at risk. The takeover by Anglo America – which was officially completed earlier in March – is hoped to rejuvenate the struggling Woodsmith mine project and speed up its completion.