puts heat on phosphate

Barry FitzGerald

February 7, 2011

The political turmoil in Egypt and Tunisia has raised the potential for the same sort of winds of change to start blowing in Morocco, the world’s dominant producer of phosphate.

THE political turmoil in Egypt and Tunisia has raised the potential for the same sort of winds of change to start blowing in Morocco, the world’s dominant producer of phosphate.

Fitch Ratings, for one, thinks that Morocco is unlikely to suffer contagion in the short term, even if it also suffers from the same sort of social inequality that is breeding unrest elsewhere on the Dark Continent.

There is a bunch of investors out there who are not so sure. They are the ones that last week chased Phosphate Australia (ASX: POZ) from 11.5¢ to 19.5¢ by the close of trade on Friday – a gain of 69 per cent, if you don’t mind.

Fellow Northern Territory phosphate developer, Minemakers (ASX: MAK), has also benefited from the question marks over Moroccan supplies. Its shares have bounced from below 40¢ a month ago, to 59¢ on Friday.

Those gains came as Stuart White from the Institute for Sustainable Futures at Sydney’s University of Technology was telling a US conference that political instability in North Africa and the Middle East was an additional component in a looming supply-demand gap in global phosphorus resources.

”Morocco alone controls the vast majority of the world’s remaining high quality phosphate rock. Even a temporary disruption to the supply of phosphate on the world market can have serious ramifications for nations’ food security,” the good professor said.

Sort of puts the high price of bananas in perspective.

GARIMPEIRO has been banging on about the market’s apparent undervaluation of Exco Resources (ASX: EXS) since before his hair went grey.

The last rant was back in August last year when Exco was a 33.5¢ stock. It is now a 58.5¢ stock, valuing the company at a little more than $200 million (undiluted). So the undervaluation has been at least partly addressed, not because anyone listens to Garimpeiro, mind you.

No, the reason has been the stellar performance at the group’s White Dam goldmine in South Australia. The project really hit its straps in the December quarter, producing its gold at a class best, for mines without the benefit of by-product credits, of $289 an ounce.

All that allowed Exco to pay off its gold loan. It now looks forward to generating a net cash flow of more than $5 million a month for the rest of the financial year. As good as the December quarter effort was, it is the group’s Cloncurry copper project in soggy north Queensland that remains its key asset.

Xstrata’s Ernest Henry treatment plant sits 8 kilometres away and is the obvious place for Exco’s resource to be processed. But after more than five years of shadow-boxing on the subject, no deal has been struck.

If a deal is not struck some time soon, you would have to think a stand-alone development is on the cards. Either way, there is good reason to value Exco’s Cloncurry project at upwards of $400 million (61 million tonnes containing 519,400 tonnes of copper and 500,000 ounces of gold).

That’s what Shaw Stockbroking did in its recent report on Exco that set a target price for the stock of $1.12. Fox-Davies Capital has a target price on the stock of 88¢ a share. Needless to say, both targets are well north of the current share price.

WHEN you’ve got Tony Sage’s Cape Lambert (ASX: CFE) on the share register with a 17 per cent stake, it is best to get on with things.

And so it is with last year’s float of Peruvian exploration specialist Latin Resources (ASX: LRS). It has not set the world on fire since raising $6 million in September. But it could be a different story in 2011, with last year’s float giving Latin the funds to do some serious work on the portfolio of coastal iron ore projects it has assembled over the three years in a country that relies more on its resources industry than does Australia, if that is possible.

Watch out for drilling programs to generate news in the months ahead at the Guadalupito, Ilo Norte, Ilo Sur and Mariela projects. Garimpeiro’s listing there is more than alphabetical; it is saying that Guadalupito in particular is the one to watch.

It is part of a large coastal placer deposit of magnetite and other heavy mineral-bearing sands in an uninhabited part of Peru, some 25 kilometres north of the port town of Chimbote, home to Peru’s biggest steel smelter.

Some smarter guys than Garimpeiro reckon it has got serious potential as a multi-commodity play covering magnetite, andalusite, monazite rare earths elements, mineral sands, wolframite and, for good measure, maybe gold.

What would make it even more interesting would be if Latin could secure a bigger ground position than it already has. On that score, Garimpeiro’s Peruvian cousins have passed on the tip that a deal that would allow Guadalupito to shape up as something potentially much bigger for Latin could be close at hand.

THE ability of junior explorers to re-invent themselves is a joy to behold. That’s just what TNG has been doing, switching its focus from its Manbarrum zinc-lead project in the Northern Territory to its Mount Peake iron-vanadium project, also in the Top End.

The change of focus has put some much needed pep into the group’s share price. It motored off to 12¢ a share on Friday, a gain of 3.1¢ or 34.8 per cent on the day. Still, Garimpeiro can remember writing up TNG when it was a 50¢ stock and more.

While TNG may well extract some value from Manbarrum before long, it’s the potentially large scale Mount Peake project that is going to provide the near-term interest. A scoping study into the project’s potential is likely to hit the ASX platform this week.

The market’s main interest will be in what the study says about a new hydrometallurgical process that TNG and the Perth-based metallurgical consultant, METS, have been working up for use at Mount Peake to extract the metal units of vanadium, titanium and iron.

The new process has the potential to deliver major capital and environmental advantages over the conventional pyrometallurgical processes (roasting), making it a possible game-changer for TNG and its Mount Peake ambitions.

Sourced & published by Henry Sapiecha

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BHP Billiton Jansen Project Update

8 October 2010

Saskatoon, Canada and Vancouver, Canada

BHP Billiton welcomes the Conference Board of Canada’s considered and comprehensive examination of the prospects for Saskatchewan and their recognition that BHP Billiton’s interests as the owner of PotashCorp would be aligned with the interests of the province.

The Conference Board identifies the Jansen development as a project that will have a significant impact on the economy of Saskatchewan. Indeed, these benefits are compelling, but the full extent of them was unavailable to the Conference Board as it completed its work.

BHP Billiton is pleased to provide some updated information on the project’s economic impact – taken from its forthcoming Environmental Impact Statement.

• During the construction phase the on-site workforce is expected to peak at approximately 4,200. On average during construction of the Jansen Project, the equivalent of 2,900 full time jobs will be created in Saskatchewan from direct, indirect, and spin-off employment.
• These employees, and the companies that work with us, are likely to pay an average of C$280 million per year in Federal and Provincial taxes⁽¹⁾ over the project’s construction phase.
• Over the multi-decade operating life of Jansen, BHP Billiton expects to pay approximately C$90 billion in royalties and taxes to the municipal, provincial and federal governments⁽²⁾. Approximately 65% of such payments will be to the Government of Saskatchewan.

The Conference Board notes that provincial tax receipts could fall initially as payments would be deferred while BHP Billiton offsets certain tax deductions related to the construction of Jansen against PotashCorp revenue. BHP Billiton notes that in future years when Jansen starts to operate and such deductions have been utilized, the reverse occurs and the Province receives more taxes than it would have otherwise. Such deductions, which apply to all participants, are part of the Government of Saskatchewan’s sound policy of encouraging investment and apply to new Greenfield developments and Brownfield expansions.

In addition, BHP Billiton believes that the additional corporate, income and sales taxes paid by those building Saskatchewan’s first new potash mine in 40 years, are likely to offset the deferred payments. The transfer of a large number of highly paid management jobs from Illinois, USA to Saskatchewan is also likely to materially increase the Province’s tax receipts.

⁽¹⁾ This figure includes tax revenues for all Canadian Provinces.

⁽²⁾ This figure is an estimate based on the Government of Saskatchewan’s published 2014 potash price assumption from the 2010-11 budget.

Additional Information

IMPORTANT INFORMATION:

The offer to purchase all of the issued and outstanding common shares of the Potash Corporation of Saskatchewan Inc. (“PotashCorp”) together with any associated rights issued and outstanding under the PotashCorp Shareholder Rights Plan (the “Offer”) is being made by BHP Billiton Development 2 (Canada) Limited (the “Offeror”), an indirect wholly-owned subsidiary of BHP Billiton Plc. This document is for information purposes only and does not constitute or form part of any offer to purchase or any solicitation of any offer to sell PotashCorp’s common shares. The Offer (as the same may be varied or extended in accordance with applicable law) is being made exclusively by means of, and subject to the terms and conditions set out in, the offer and the circular, the letter of transmittal, the notice of guaranteed delivery and other related tender offer materials (the “Offer Materials”).

In connection with the Offer, the Offeror, BHP Billiton Limited and BHP Billiton Plc have filed with the Canadian securities regulatory authorities the Offer Materials and have filed with the U.S. Securities and Exchange Commission (the “SEC”) a Tender Offer Statement on Schedule TO (the “Schedule TO”), including the Offer Materials.

THE OFFER MATERIALS AND THE SCHEDULE TO, AS THEY MAY BE AMENDED FROM TIME TO TIME, CONTAIN IMPORTANT INFORMATION, INCLUDING THE TERMS AND CONDITIONS OF THE OFFER, THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE OFFER MATERIALS AND OTHER DOCUMENTS FILED BY THE OFFEROR, BHP BILLITON LIMITED AND BHP BILLITON PLC WITH THE SEC AT THE WEBSITE MAINTAINED BY THE SEC AT WWW.SEC.GOV AND WITH THE CANADIAN SECURITIES REGULATORY AUTHORITIES AT WWW.SEDAR.COM. MATERIALS FILED WITH THE SEC OR THE CANADIAN SECURITIES REGULATORY AUTHORITIES MAY BE OBTAINED WITHOUT CHARGE AT BHP BILLITON’S WEBSITE, WWW.BHPBILLITON.COM, OR BY CONTACTING THE INFORMATION AGENTS FOR THE OFFER, MACKENZIE PARTNERS, INC. AND KINGSDALE SHAREHOLDER SERVICES INC., BY PHONE AT 1-800-322-2885 AND 1-866-851-3215, RESPECTIVELY, OR BY EMAIL AT potash@mackenziepartners.com AND contactus@kingsdaleshareholder.com, RESPECTIVELY.

While the Offer is being made to all holders of PotashCorp common shares, the Offer is not being made or directed to, nor will deposits of PotashCorp common shares be accepted from or on behalf of, holders of PotashCorp common shares in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction. However, the Offeror may, in its sole discretion, take such action as it may deem necessary to extend the Offer in any such jurisdiction.

This document contains information, including information relating to PotashCorp, that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of such information.

Cautionary Statement Regarding Forward-Looking Statements

This document may contain, in addition to historical information, certain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “expected”, “scheduled”, “estimates”, “intends”, “anticipates”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements of the Offeror and BHP Billiton to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements, including the risk that all conditions of the Offer will not be satisfied. Many of these risks and uncertainties relate to factors that are beyond BHP Billiton’s ability to control or estimate precisely, such as future market conditions, changes in regulatory environment and the behavior of other market participants. BHP Billiton cannot give any assurance that such forward-looking statements will prove to have been correct. The reader is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. BHP Billiton disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of any member of the BHP Billiton Group, PotashCorp or the enlarged BHP Billiton Group following completion of the Offer unless otherwise stated.

Sourced & published by Henry Sapiecha

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The commodity market activity  throughout the world has to keep moving between countries to ensure that all have a share of the global wealth and resources.

There are some who are not ‘pulling their weight whilst others are producing abundantly. These things are like that for different reasons.

Here we will bring them and others, together at a common market place where all can exchange goods and or services or sell for cash to the highest bidder or ready buyer.

MORE TO COME SO WATCH THIS SPACE

Henry Sapiecha

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