Fertiliser and clay aren’t the most exciting of materials, but they are vitally important to our agriculture and manufacturing industries, which were only just recovering from COVID-19 when Russia invaded Ukraine and the geopolitical backlash sent supply chains floundering once more.
Kaolin has been a rising star over the last few years as Chinese supplies dry up and factories are shut down, while potash-based fertilisers – necessary for feeding most of the world – have come under increasing pressure as Belarus and Russia (who supply 40% of the world’s potash) are essentially cut off from the larger market.
Kaolin and Potash on the rise
Kaolin is a difficult market to describe, split as it is into a dozen different industries and end-use products, including paper, ceramics, white cement, fibreglass, fillers and extenders in rubber, paint, plastic and adhesives.
Secondary uses include pesticide and herbicide carriers, zeolite manufacture, catalyst supports, pharmaceuticals and cosmetics.
Demand has been steadily rising, especially for high-quality products like high-purity alumina (HPA), often used in battery anodes and cathodes and other high-tech applications.
The greater kaolin market share is forecast to rise at a compounding annual growth rate (CAGR) of 5.5%, reaching US$4.1 billion by 2025.
The potash fertiliser market, on the other hand, was forecast to expand at a CAGR of 4.4% and reach US$21.62 billion by 2026, although the war in Ukraine and resulting sanctions are likely to severely disrupt those predictions.
Potash prices have been pushed to a 13-year high, squeezed by rising global demands and a sudden drop in Eastern European exports. Mounting sanctions have cut off almost half of the world’s supply and created a dramatic spike in pricing:
Source: IndexMundi.com; Fertilizer Week; Fertilizer International; World Bank.
“It is a huge problem,” CF Industries – a manufacturer and distributor of fertilisers – CEO Tony Will said in a recent CNBC appearance.
“It’s a confluence of factors, unprecedented demand coupled with a huge fall off in supply availability, only just exacerbated by the war in Ukraine and what’s going on with exports coming out of Russia and Ukraine.”
Spotlight on ASX kaolin and potash stocks
Overall, the potash and kaolin industries are riding a wave of growth that may have just become a tsunami for potash fertiliser.
With no end to the Ukraine conflict in sight, food and fertiliser will likely continue to experience very high supply pressures, pushing prices up well beyond forecasts for the foreseeable future.
All-in-all, the rise of potash and kaolin markets offer a lucrative opportunity for those placed well enough to take advantage.
Highfield Resources
Highfield Resources Ltd (ASX:HFR) signed contracts for all key remaining process plant equipment for the Muga Potash Project in Spain with proceeds from a capital raise late last year, hedging inflationary risk as the company prepares to begin construction on the project.
Artist’s impression of the Muga Project’s processing plant
Highfield also inked an agreement concerning a non-binding term sheet for a €312.5 million project financing package with a group of European mining finance lenders including Société Générale, ING Bank N.V. and Natixis. The financing will cover a large portion of pre-production investment.
The company recently appointed an independent non-executive director and chair of the company, Paul Harris, and held A$18.64 million cash at bank as of the end of the March quarter.
Suvo Strategic Minerals
Suvo Strategic Minerals Ltd (ASX:SUV) generated A$3.54 million of revenue this quarter with the sale of 6,178 tonnes of hydrous kaolin from the Pittong operation in Victoria, totalling some A$847,000 in unaudited Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA).
The company also secured a major supply agreement extension with Norske Skog Boyer for 25,550 tonnes of product across a three-year term and brought the Pittong deposit’s mineral resource up to JORC standards, generating a maiden mineral resource estimate of 3.74 million tonnes and offering potential for a multi-decade mine life.
Suvo’s focus is now on upgrading and expanding the Pittong manufacturing plant to service a wider variety of kaolin products, supported by a A$7.5 million capital raise and a research agreement with Curtin University to develop High Reactivity Metakaolin for green concrete.
South Harz Potash
South Harz Potash Ltd (ASX:SHP) was able to confirm the quality of the Ohmgebirge potash resource with the first of two new confirmatory drill holes, returning 11 metres at 14.4% potassium oxide from 651.7 metres of depth and demonstrating strong consistency with historical data.
The company is targeting a resource update for Ohmgebirge – which currently holds 325 million tonnes at 13.1% potassium oxide – for the June quarter, and a scoping study for early in the same period.
Andromeda Metals
Andromeda Metals Ltd (ASX:ADN) completed the acquisition of Minotaur Exploration Limited in the quarter, creating a “leading Australian kaolin/halloysite and technology company” with the consolidation of the Great White Kaolin Project and Natural Nanotech into Andromeda.
During the quarter the company completed a definitive feasibility study with high margins of predicted cashflow, generating a net present value (NPV8) of A$613 million at an expected internal rate of return (IRR) of 36%.
Andromeda also upgraded the Great White Kaolin Project’s ore reserve estimate to 15.1 million tonnes and upgraded the Tiger Kaolin resource to 100% indicated resources, holding 12.1 million tonnes of bright white kaolinised granite.
Australian Potash
Australian Potash Ltd (ASX:APC) made sweeping progress across its Lake Wells Sulphate of Potash (SOP) Project, obtaining permits including Mining Leases, Mining Proposal, Mine Closure Plan and Environmental Approval.
The company also locked-in its environmental credentials with a Power Purchasing Agreement covering a high renewable energy fraction power station to service the processing plant and village power supplies.
In the same vein, Australian Potash secured an organic certification for its range of sustainable SOP products, supported by solar and wind power, and a Green Loan Verification for future debt issued to develop the project.
On the topic of finance, APC has been awarded a A$250,000 Regional Economic Development grant by the WA government to assist with training infrastructure construction at the company’s Laverton Training Centre.
First training at the Laverton Training Centre – chainsaw operations.
