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Dec 182013

By Nick Worth
There was mixed news for the potash concerns at the Dec. 12 Real AZ Corridor meeting as the group heard a report from Pat Avery, former head of American West Potash.
Speaking to the group by telephone, Avery told the meeting he has been traveling throughout the world evaluating the potash industry in several countries and he has found a couple of constants.
“The bankers are all gloom and doom, but the agriculture market is doing great,” said Avery. “There is record farm income around the world.”
He told the meeting that historically, potash prices go up in the spring when farmers buy fertilizer and go down again in the fall.
“Years like this are tough on manufacturers of fertilizer,” Avery said. “Potash was at $480 per ton last year. Now it’s at $320 per ton.”
Avery cited the split-up of the Russian potash cartel, in which the Uralkalai potash firm broke off from its partners, dropping potash prices throughout the world. He said the Russian company ended up selling potash to China at $300 per ton, which then brought the price down globally.
“The price of potash falls very quickly, but it’s tough to get the price back up again,” Avery continued. He said the lower price makes getting the needed financing for new potash mines a lot harder.
“Bankers are now basing their calculations on $320 per ton and that’s tough on the junior mining companies that are trying to raise money,” said Avery.
Despite the bad news from the financial front, Avery still said he believes in the potential of the Holbrook Basin.
“I think these projects are viable,” he said.
He then spoke to the volatile world of mining companies.
“I’ve told you guys for years that mining is unsettled,” said Avery. “I don’t know that many cases where one mining company comes in and is still the owner 10 years later.”
Avery then spoke of one of the main advantages the area has.
“The Holbrook Basin has geopolitical stability,” said Avery. He mentioned a large potash mining project set to go in Argentina that was scrapped because the local political situation was not conducive to doing business there.
He then ended his presentation on a note of hope.
“There will be potash mined in the Holbrook Basin,” Avery said.
Ken Bond, head of corporate development for Passport Potash, was also in attendance at the meeting.
“I agree with Pat,” Bond said. “We were in the middle of a capital raise when the Russian fiasco happened.” He said because of the falling prices, the investors backed out.
“At $300 per ton, if you’re already in production you can still make a healthy profit, but if you have to pay off debt, you can’t,” Bond noted.
“It is extremely difficult to raise money right now,” Bond said. “It’s a challenging time for us.”