Potash Basics Mark Arundell IMEx Consulting All data in this - PowerPoint PPT Presentation

Potash Basics Mark Arundell IMEx Consulting All data in this presentation are the intellectual property of IMEx Consulting (except where obtained from public domain) and must not be reproduced, copied, shared or forwarded in any form without the express permission of IMEx Consulting

Potash  What is Potash?  What is it used for & why its important  Supply demand metrics  Current operations globally  Known projects coming on stream  Key Project metrics  what grade is good/bad, capex etc 2 Proactive Investor Forum ‐ July 16th

The IMEx Group - Experience Exploration Projects and Regional Studies Belarus Zechstein Uralian Elk Point Basin Maritimes North Caspian Paradox Basin Michigan Catalonia Afghanistan Carlsbad Khemiset Nagaur (India & Pakistan) Oman Udon Thani Sicily Danakil Amazon Gabon Sergipe Congo Canning Atacama Carnarvon Adavale Neuquen Lake Auld Timaru IMEx Office Proactive Investor Forum - July 16th 3

What’s Potash?  The mineral (K) is one of the three main macro nutrients required by plants, along with nitrogen (N) & phosphate (P)  Potash helps  improve a plant's disease resistance  crop quality  increases yields  Only potassium fertilizer source  No practical substitutes Proactive Investor Forum - July 16th 4

Why Potash? It’s a Growth Story!! Proactive Investor Forum - July 16th 5

Why Potash? Proactive Investor Forum - July 16th 6

Why Potash? Rio Tinto 2015 Proactive Investor Forum - July 16th 7

Why Potash? Potash Corp $US Jul 15 US$29.18 2010 : BHP US$43.33 2013 US$2.8 Billion 2008 US$4.9 Billion 2011 US$2.7 Billion 2013 7.8 MMT 2011 9.3 MMT 18.1 MMT PCS 2007, 2014 Proactive Investor Forum - July 16th 8

Supply Demand Metrics  Demand  Global Development  Rising income  better diets; demand for high quality fruit, vegetables & meat  Increase production  Fertiliser has a key role PCS 2014 Proactive Investor Forum - July 16th 9

Supply Demand Metrics  Shift to Urban in Dev countries  + 80M people per year Asia & Africa  2014 : ½ ; 2050 : 2/3  Econ Grow, inc Food  Fruit, veg + protein  Brazil, China, Indo - now  India, Africa - begin PCS 2014 Proactive Investor Forum - July 16th 10

Supply Demand Metrics  Pressure to inc. prod on existing land  Less arable land  Fertiliser essential to crop yield  Yield growth PCS 2014 Proactive Investor Forum - July 16th 11

Supply - Where Potash? PCS 2014 Proactive Investor Forum - July 16th 12

Production and Demand PCS 2014 Proactive Investor Forum - July 16th 13

PCS offer for K+S  BHP poison pill?  Gain control over undisciplined tonnes  Regulators will prevent  Volume over price is inevitable  Market :  K&S  Brazil  PCS – New Brunswick (non Canpotex)  Brazil ScotiaBank 2015 Proactive Investor Forum - July 16th 14

PCS offer for K+S  Largest export market  Brazil  USA  China  India  An aside….  Producers are “Industrials” on NYSE not “Miners”  PCS, IPI, MOS  Dividend Yield Bloomberg + Capital IQ Proactive Investor Forum - July 16th 15

Supply  Only 12 countries produce potash.  Canada, Russia, Belarus & Germany - + 75%  Seven companies control > 80% of global supply:  Potash Corp of Saskatchewan, Mosaic Co, Agrium Inc, K+ S, Uralkali, Belaruskali & Israel Chemicals  Two marketing conglomerates did control > 68% exports.  Canpotex - Potash Corp, Mosaic and Agrium  Belarussian Potash Co - Uralkali and Belaruskali. Proactive Investor Forum - July 16th 16

Supply/Demand Balance Proactive Investor Forum - July 16th 17 Fertecon, CRU, IFA, PCS

Potash Mining  Solar : Dead Sea, Utah, China  Underground : Conventional & Solution  Conventional : Room & Pillar < 1200m  Saskatoon, SK, Canada  Solution: 300 - ~ 2,000m  Regina, SK, Canada Proactive Investor Forum - July 16th 18

Southern Saskatchewan Potash Mines & Depth to Potash Conventional Saskatoon Solution Regina BHPB Proactive Investor Forum - July 16th 19

Conventional Mining  Depth : 300m - 1200m  Thick Salt : 120m - > 150m  Room & Pillar - 5-12m high; 10-20m wide;  70% recovery (30% pillar)  Drill & Blast, road headers or continuous miners  Salt : 30cm bottom; 1-2m roof  Prairie Evaporite  Strong impermeable rock 10-15m above  Not shale, sand, etc. Proactive Investor Forum - July 16th 20

Conventional Mining Proactive Investor Forum - July 16th 21

Room & Pillar Natural Sciences Grade 9, SA Proactive Investor Forum - July 16th 22

Conventional Mining Vanscoy, Sk Agrium Room & Pillar Proactive Investor Forum - July 16th 23

Solution Mining  Steam or Hot water injected  Salt saturate inc. Potash recovery  Single well (concentric casing)  150-1500m deep (Barradeel, NL : 2800m)  One well - 100,000 tonnes Proactive Investor Forum - July 16th 24

Solution Mining  Major cost  Evaporation Ponds  plastic liner  Drying Kilns - Canada  Production  Sol : 4.5Mt, Belle Plaine, SK (Mosaic)  Con : 3.0Mt, Colonsay, SK (Mosaic) Proactive Investor Forum - July 16th 25

Solution Mining Proactive Investor Forum - July 16th 26

Solution Mining 100m Proactive Investor Forum - July 16th 27

Zechstein Style Proactive Investor Forum - July 16th 28

Belle Plaine - Mosaic 3 km Salt Tailings Cooling Ponds Cluster House Plant – Crystalliser, Compactor Proactive Investor Forum - July 16th 29

Belle Plain Potash Proactive Investor Forum - July 16th 30

Potash Milling Proactive Investor Forum - July 16th 31

Know n New Projects  2015 : Prod 60Mt; Capacity 70Mt  Committed new projects + 10Mt  Eurochem (Russia) – 4.6-8.3Mt  Rocanville (NA) – 3.0Mt (2015)  Legacy (NA) – 2.0Mt (2017); 2.9Mt (2023)  Esterhazy K3 (NA) – 1.0Mt (2017); + $1.7B Proactive Investor Forum - July 16th 32

Know n New Projects  Potential new projects ~ 20Mt  BHP : Jansen (NA) 8-10Mt  Sirius : York (E) 2.0-5.0Mt PH  Am Potash : Holbrook (NA) – 2.5Mt  ROC (A) Elemental 0.4-1.2Mt; MagInd – 1.2Mt  Vale : Carnalita (SA) 0.5-1.7Mt  HFR : Muga (E) 1.1Mt  ICL/Allana : Ethiopia (A) 1.0Mt  SBM : Eritrea (A) 0.4Mt; SO 4 Proactive Investor Forum - July 16th 33

Key Project Metrics  Market  Mineralisation inc. Grade  Capex  Opex  “Realised price” Proactive Investor Forum - July 16th 34

Key Project Metrics  “Success in potash is about Capex & Margin (not grade & scale)”  Market  Potash is an industrial mineral  Where are the buyers? Contracts not spot  Transport can be a killer  SK : US$50-60/ton  AU : US$80/ton Proactive Investor Forum - July 16th 35

Key Project Metrics  Mineralisation  Grade, Product, Depth, Insolubles  Mining method  Resource recovery  K 2 SO 4 > KCl US$ Dom  Crystallisation  Drying Kilns - Canada  Evaporation Ponds  Intrepid : solar > $110 less than conventional Proactive Investor Forum - July 16th 36

Key Metrics - Minerals • Mineral Formula % K 2 O  Sylvite KCl 63 Chlorides  Carnallite MgCl 2 .KCl.6H 2 O 17  Kainite MgSO 4 .KCl.3H 2 O 19  “Sylvinite” KCl.NaCl ~ 20  Polyhalite Sulphates 2CaSO 4 .K 2 SO 4 .MgSO 4 .2H 2 O 16  Langbeinite MgSO 4 .K 2 SO 4 23  Anhydrite CaSO 4 0 Proactive Investor Forum - July 16th 37

Key Project Metrics  Capex  Why spend US$4B?  Mine life - + 50 yrs  Old mines dying – K+ S PCS, K+ S Proactive Investor Forum - July 16th 38

Summary  Potash is necessary to increased crop production – no practical substitute  Potash is an industrial not a metal  Market is the important key metric  Supply/demand balance – excess supply  The old way is dying – volume will overtake price control Proactive Investor Forum - July 16th 39

Interested in Potash?  Potash Investing News  http://www.potashinvestingnews.com/  Potash News  http://www.mining.com/potash/  Potash | Industrial Minerals  http://www.indm.in/tag/potash/  Potash Works  http://www.potashworks.com/ Proactive Investor Forum - July 16th 40