Interested in Peak Phosphate Check out ASX: KRB

[Sparty]

As previously mentioned there is a connection between Phosphate and Biofuels due to corn and other broadacre crops requiring Phosphate for growth. While researching material for www.Phosphate-Australia.com I came across this little company: Krucible Metals Ltd ASX Code: KRB.

What intrigues me about this very low market cap company is that they have direct shipping ore, a direct train link to Darwin giving ready cheap access to Asia and a project area that surrounds Australia's only Phosphate Producer IPL (IPL has a huge market cap by Australian standards). KRB's lease is in yellow... IPL is the blue area.....



I'm invested so you shouldn't take my word for it but why not check out KRB's latest presentation

If you know of other speccies like this please let me know....

[Sparty]

PURE SPECULATION: Robin Bromby | October 26, 2009
Article from: The Australian

FIRST, some words that normally send shivers down the spine of your average resources share buyer: think long term. Apologies if, by uttering that ugly concept, we've given anyone a nasty turn over their morning soy or skinny lattes.

The UN now puts the number of people who don't get enough to eat at 1.02 billion. At the same time, prices of the two fertiliser feedstocks -- potash and phosphate -- are in the basement. Last week Potash Corp of Saskatchewan, the world's biggest miner of that mineral, posted an 80 per cent profit fall.

Nearly half the company's mining capacity is lying idle. One of Russia's largest potash producers is working at about 60 per cent capacity.

Meantime, we're seeing increasingly dire warnings about food shortages around the world. This will be worsened by the fact that farmers in the developed world -- the US particularly -- have been cutting back on fertiliser use because of financial problems and the fact that they can't borrow money to buy it. The bottom line is that there is no way that world food production can be lifted without chemical fertilisers.

Paul Deane, rural economist for ANZ Bank, says in his latest fertiliser report that global markets for the product have been in disarray for a year. India is the only country consuming potash at anywhere near the levels of last year and has just negotiated a new import price more than 20 per cent lower than its 2008-09 contracts. He notes that China is likely to be able get a big price drop for its new import contracts.

On the subject of phosphate, the ANZ report quotes a US manufacturer saying he has seen "probably the largest contraction of fertiliser usage in 75 years". But Deane adds that lower fertiliser application is unsustainable for any significant length of time, and there is hope sales will rise for the upcoming plantings in the US of corn and soybean.

What does all this mean for the investor here? Patience, that's what. But if you have been playing the market for any length of time, just think of all the times you have muttered something along the lines of "if only I had got in earlier and at the bottom of the cycle". Well, pal, this is close to the bottom for phosphate and potash. There may be a long wait ahead. However, not only do the world's hungry need to be fed but the growing middle classes in Asia and elsewhere in the developed world are demanding better food. Chinese rural people are now eating 10 times the amount of meat they consumed just a few decades ago.

Certainly, the prospective phosphate and potash producers here are proceeding on the basis that demand and prices will rebound.

We've just seen ActivEx (AIV) exercise its option to buy the Lake Chandler potash project near the West Australian wheat belt town of Merredin.

There is already an inferred resource that would support at least 20 years' mining. ActivEx says its market studies show a ready market in Australia, substituting for foreign potash which is now imported mainly from Canada, Taiwan and Germany.

On the phosphate scene, Phosphate Australia (POZ) has lifted its inferred resource in the Northern Territory to 14 million tonnes at 20 per cent phosphate oxide. The company says its objective is to develop the Highland Plains project as Australia's lowest-cost new phosphate mine.

Also in the NT, Minemakers (MAK) is starting to bulk sample high-grade phosphate rock to send a test product to potential customers. The company's latest quarterly addresses the issue of price falls. Minemakers notes that, while the world's largest producer, Morocco, has experienced prices dropping from $US450 a tonne in mid-2008 to $US110/tonne now, fertiliser manufacturers are almost unanimous that demand will pick up.

The fall in fertiliser use will inevitably lead to a catch-up phase as farmers strive to meet demand for food.

The price cycle will take a while to pick up -- but we're almost brave enough to ring the bell for the bottom. Be warned: we plan to harp on this subject. Ends.

MAK has DSO i.e. >30%
KRB also has DSO and has some very powerful "nearology". KRB's ore also doesn't require wet benefication and has great transport infrastructure and JV potential.

DSO = Direct Shipping Ore

I Hold KRB and MAK 4:1

"nearology" surrounds or appends to an exisiting project that is fast running out of ore.

For in depth information about Australian Phosphate - http://www.Australian-Phosphate.com

[Alite]

Hi Sparty,
As I understand it phosphate is not uncommon in concentrated places. MAK has enough phosphate to supply the worlds export market 3 times over if they so chose. Other places could also increase their supply. Phosphate is not a rare commodity. Capable oversupply is imminent.

[Sparty]

Hi Alite,
There is a perception that there are adequate supplies of Phosphate at the moment due to a markedly reduced consumption during the global financial crisis. But crop yields will fall dramatically if Phosphate isn't used for this season's crops.

True there is quite a lot of Phosphate in the world but getting economic deposits is the trick. The current world price of around 90-100 USD per ton means that only deposits with DSO (Direct Shipping Ore) are in the frame re cost effectiveness. There are four of these listed on the ASX. www.australian-phosphate.com lists the ASX's Phosphate plays: http://www.australian-phosphate.com/...te-stocks.html .

As phosphate is a "bulk" commodity these deposits also require good access to shipping and infrastructure. Australia supplies over 80% of SE Asia's Phosphate. Hence the Adelaide to Darwin link is of importance. Interestingly just before the GFC in 2008 IPL imported a huge quantity of Phosphate with the implication that Australian operations couldn't keep up cost effective supply.

There is an interesting and thought provoking article on Peak Phosphate here:
http://www.australian-phosphate.com/peak-phosphate.html

[Alite]

MAK: The current JORC Inferred Resource stands at 1,105Mt @ 18% P2O5,

[Sparty]

18% Phosphate requires benefication before shipping. Benefication costs can be quite high and also difficult in a dry place.

Phosphate ore concentrations above 32% are regarded as direct shipping ore. MAK and KRB both have DSO ore. KRB is very close to well validated infrastructure.

Alite: At the moment in economic terms we are fast approaching what has been termed "Peak Phosphate" where the cost of production becomes prohibitive... it is the same a situation as OIL where most of the cheap to get oil has been found and probably mostly used. There is a world of difference in getting oil to the surface from a 500m deep well to oil obtained by drilling under 1-2 kms of water and then down another 3-5,000m.

The term Peak Phosphate is an economic one as is the Peak Oil terminology.

"All modern agricultural systems are dependent on continual inputs of phosphate fertilizers derived from phosphate rock. Yet this is relying on a finite resource and current reserves could be depleted this century. More concerning is that before that point is reached, we will see a global peak in phosphate rock reserves, estimated to occur in the next 30 years. Read full paper"

[Sparty]

I've just read through an incredibly detailed review of Phosphate export prices achieved over the last couple of months from around the world.

"The phosphates market remains very firm with near-term DAP/MAP supply extremely tight. Those producers and traders with product are in no hurry to sell and there has been no price discovery out of Tampa this week. In terms of price movements, Russian DAP has been placed in Iran at around $440/tonne FOB, which is the benchmark level now being asked in other markets. Asking prices for Chinese DAP have risen to around $500/tonne FOB on tight supply."

AS you all know Australia has one Phosphate producer IPL and MAK's Wonarah is all but there and we have another, KRB, that is a little further away from production but has DSO and is very near to transport and IPL's Phosphate Hill Mine and could be in production by early 2011.

MAK has a huge amount of Phosphate (around 3x as much as IPL's 80MT) and KRB have a potentially large amount that is in the discovery/drilling phase. All three have JORC deposits that are near transport.

But the real point of my post is in the image

I know that there are a lot of people out there with a lot more knowledge than I have and I would be grateful on their take as to whether we are seeing the early part of the Phosphate lift off....