Global Potash Prices set to Rebound in 2018, Bolstering Producer Stocks

LOS ANGELES, February 15, 2018 /PRNewswire/ --

USA News Group - After two years of record low prices, the global potash market is expected to rebound significantly in 2018-according to chemical equity analysts at Bernstein Research.

Fertilizer supply scares in China, combined with other factors are boosting fertilizer prices everywhere-including potash.

The economic impact on the agricultural sector, is to the benefit of several potash-focused companies, including Potash Ridge Corporation (TSX: PRK) (OTC: POTRF), Compass Minerals International, Inc. (NYSE: CMP), Nutrien Ltd. (NASDAQ: NTR) (TSX: NTR), Sociedad Química y Minera de Chile S.A. (NYSE: SQM), and Verde Agritech Plc (TSX: NPK) (OTC: AMHPF).

Thanks to natural gas shortages, Chinese fertilizer output dropped 7 percent from the year prior, according to the country's National Bureau of Statistics-and volume is also down 9.3 percent from the previous month.

The result of the decline on fertilizer production in China has been a spike in agricultural production costs, as their domestic producers languish in their efforts to make up the gap.

In other parts of the world, it's specifically the potash market that's been making moves.

Potash prices have been gaining ground over the last year, as lower prices prior led to more buying, and leaned out inventories.

Which has led to a push in both muriate of potash (MOP) and sulfate of potash (SOP)-with the latter being the far more valuable of the two.

Major producers such as newly-formed Nutrien Ltd. (NASDAQ: NTR) (TSX: NTR) combined the massive MOP production capabilities of Potash Corporation and Agrium.

However, it's the niche market of SOP production that may have the bigger potential of the two in the years to come, as production from North American outfits such as Potash Ridge Corporation (TSX: PRK) (OTC: POTRF) loom on the horizon.

A TALE OF TWO POTASHES 

There's quite a bit of difference between the muriate of potash (MOP) and sulfate of potash (SOP)-in form and in production method.

On a chemical level, MOP bonds the potassium (essential for plant growth) to the chloride molecule, whereas SOP bonds the potassium to sulfur and four oxygen molecules.

As industrial-sized agricultural operations increase around the world, so too do demands on the soil-With higher yields, more nitrogen, phosphorus, and potassium are stripped from the soil by the plants growing within it. Growers actively replace these elements through fertilizer applications.

And among those fertilizers on the market, sulfate of potash (SOP) is globally one of the most highly sought after premium fertilizers.

Which is why SOP prices are often nearly double those of MOP.

Brazilian granular MOP prices have been targeted to finish 2018 at $330/tonne-which is primarily the product of groups like Verde Agritech Plc (TSX: NPK) (OTC: AMHPF).

However, other MOP producers have been slowing down production, like Russian chemical and fertilizer major EuroChem, as groups like Nutrien Ltd. (NASDAQ: NTR) (TSX: NTR) shut down parts of older mines to make way for their new Rocanville mine.

The benefits of SOP over MOP are numerous. SOP gives plants added resiliency to drought, frost, insects, and disease-As well, using SOP improves the quality and crop yields in the applied areas.

Foods grown with SOP have notably improved look and taste, from improving the plant's absorption of nutrients like phosphorous and iron.

While many of the world's largest potash companies reside in North America, there is currently only one SOP production facility in operation at the moment-the Overland Park facility in Kansas, owned by Compass Minerals International, Inc. (NYSE: CMP).

Another major SOP producer is Sociedad Química y Minera de Chile S.A. (NYSE: SQM), through its South American salt brine operations.

But it is up-and-comer Potash Ridge Corporation (TSX: PRK) (OTC: POTRF) that is looking to add two major SOP projects in North America in the coming years, including one within the next 15 months.

POTASH RIDGE PUTTING NORTH AMERICAN SOP BACK ON THE MAP  

Demand for SOP is being drastically unmet-by a margin of 1.5 million tonnes

One third of that deficit comes from North America, where only Compass Minerals International, Inc. (NYSE: CMP) is producing.

Through its Valleyfield and Blan Mountain projects, Potash Ridge Corporation (TSX: PRK) (OTC: POTRF) is looking to be the North America's next SOP producer.

Projected to be in production within 15 months, Potash Ridge's Valleyfield project in the mining-friendly province of Quebec, is targeted to produce 40,000 tonnes per year.

However it's the Utah-based Blawn Mountain project the company sees as its future flagship, and potentially the lowest cost SOP production on the continent- at a projected cost of only US$177 per ton.

Blawn Mountain is targeted to pull in US$107 million in average cash flow-with operation believed to be plausible in the next 3 years.

Each using a different method, Valleyfield will use the Mannheim Process (a chemical reaction commonly used in Asia, the Middle East and Europe); while Blawn Mountain will use a mineral processing method called Alunite, proven effective to produce SOP from a soluble and granular form.

SOP production is currently 400,000 tonnes per year, whereas consumption is 500,000 tonnes per year-and demand is expected to double between now and 2020.

With both the Valleyfield and the Blawn Mountain projects on deck, Potash Ridge has a very good future ahead, in an effort to close the SOP gap and join the ranks of the other potash majors.

POTENTIAL COMPARABLES 

Compass Minerals International, Inc. (NYSE: CMP)

Compass Minerals produces and sells salt, and specialty plant nutrition and chemical products. It operates in three segments: Salt, Plant Nutrition North America, and Plant Nutrition South America. The company was incorporated in 1993 and is based in Overland Park, Kansas.

Nutrien Ltd. (NASDAQ: NTR) (TSX: NTR)

Nutrien Ltd. produces and distributes potash, nitrogen, and phosphate products for agricultural, industrial, and feed customers worldwide. It offers potash crop feed, fertilizer, industrial, metal finishing, and purified acid products, as well as blends. The company is also involved in the retail operations that serve growers in seven countries across three continents. The company was formerly known as Potash Corporation of Saskatchewan Inc. and changed its name to Nutrien Ltd. in January 2017. Nutrien Ltd. was founded in 1953 and is headquartered in Saskatoon, Canada.

Sociedad Química y Minera de Chile S.A. (NYSE: SQM)

Sociedad Quimica y Minera de Chile S.A., is a producer of potassium nitrate and iodine. The Company produces specialty plant nutrients, iodine derivatives, lithium and its derivatives, potassium chloride, potassium sulfate and certain industrial chemicals. Its segments include specialty plant nutrients, industrial chemicals, iodine and derivatives, lithium and derivatives, potassium, and other products and services Lithium and its derivatives are used in batteries, greases and frits for production of ceramics. Potassium chloride is a commodity fertilizer that is produced and sold by the Company across the world.

Verde Agritech Plc (TSX: NPK) (OTC: AMHPF)

Verde Agritech is an agri-tech company that explores for and develops mineral properties primarily in Brazil. The company focuses on the mining of glauconitic meta-argillite material, a potassium silicate rock, which is used in the production of TK47, an agri-tech fertilizer product. It holds interests in the Cerrado Verde potash project and the Calcario limestone project located in the western Alto Paranaiba region of Minas Gerais State, Brazil. The company was formerly known as Verde Potash PLC and changed its name to Verde Agritech PLC in June 2016. Verde Agritech PLC was founded in 2005 and is headquartered in Belo Horizonte, Brazil.

For a more in-depth look into PRK you can view the in-depth report at USA News Group: http://usanewsgroup.com/2018/02/05/the-potash-sector-is-growing-silently-at-a-massive-pace/

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