INSIGHT: Brazil Potash – King of the jungle?

LONDON (ICIS)–Deep in the Amazon lies a wide clearing – an unremarkable space overlooked by jungle trees with little sign of human habitation.

However, if muriate of potash (MOP) start-up Brazil Potash pulls off its plan, the sleepy jungle of Autazes could soon be home to the nation’s largest MOP mine – a scheme CEO Matt Simpson believes could vastly reduce Brazil’s near-complete reliance on imported potash fertilizer.

Simpson – an experienced industry professional in the field of mining – heads up Brazil Potash, which formed in 2009 with a simple plan: to provide Brazil’s immense agricultural industry with a homegrown source of the vital mineral fertilizer.

‘Potash’ is the umbrella term for a number of potassium-rich fertilizers used the world over to support plant nutrition, improve yields, and fend off disease.

A multi-billion-dollar industry, the global potash market is largely producer-controlled, and centred in just a few key producing nations, including Russia, Canada, Belarus, and Germany.

Brazil, meanwhile, cannot claim a burgeoning MOP industry of its own. In fact, despite being the world’s largest net exporter of agricultural products, Brazil Potash says the country imports 94% of its MOP from mines as far afield as 20,000km distant.

Brazilian granular potash prices edged to $300/tonne CFR (cost and freight) in late January – and are likely to increase further as continued availability concerns, strong demand, and high international freight costs combine to keep MOP producers bullish in their negotiations.

“That’s where Autazes comes in,” says Simpson. “It’s frankly not possible for the majors to compete with us on price. We will have the lowest cost to Brazilian farmers. They can’t get down to our level. In fact, our cost to mine, process, and deliver is less than the majors’ delivery costs alone.”

“Ours is a very disruptive project,” Simpson adds. “The majors will have to sit up and pay attention.”

A MULTI-GENERATIONAL MINE
Autazes’ potash reserves – which are estimated at 87m tonnes of proven material, and 161m tonnes of probable material – actually constitutes only 10% of Brazil Potash’s permitted land, making the location’s potential lifespan some 200-300 years.

“We’re talking about a multi-generational mine,” adds Simpson. “We’re planning to break ground in the first quarter of 2019, and have production online by 2023.”

Brazil Potash’s leadership team isn’t rushing to exploit the site’s full potential, however; instead opting to ramp up to 2.4m tonnes/year of granular potash output initially – all of which will be consumed by Brazil’s voracious domestic appetite for the crop nutrient.

Also playing to Brazil Potash’s strengths is Autazes’ relative closeness to the region’s key amenities.

The site’s nearest source of manpower – Autazes municipality – is home to 30,000 people, while the larger town of Manaus lies 120km to the southeast; boasting 1.8m residents and a ready supply of gas and electricity.

Added to this potential workforce is a government-run college some 64km distant, whose skilled students would be a good source of technical skill.

As a result, Simpson adds, there’s no need to build a large fly-in, fly-out workers’ village in the basin as the 1,050 workers will only need to travel 20km to and from the City of Autazes.

Plus, although rail links are available nearby, Simpson takes pains to highlight what he sees as Brazil Potash’s key selling point – the nearby Madeira River.

The Autazes basin lies just 8km from the Madeira – a key waterway for the transportation of foodstuffs between farms and Brazil’s international port.

The Madeira also links to the Amazon, opening up further domestic custom elsewhere in Brazil.

“The plan is to build a barge port, and back-haul potash cargoes using the empty barges passing on our doorstep,” Simpson says.

He adds that the Autazes’ project is located north of Brazil’s ‘Cerrado’ and ‘Matopiba’ regions, which feature vast soybean fields, and account for roughly 50% of total agricultural production in the country, according to Brazil Potash’s data.

INTERNATIONAL AMBITIONS
Although Brazil Potash’s plans focus on feeding the domestic market, the company says it would consider international exports – if the initial project proves successful.

Some 60km upstream from Brazil Potash’s planned barge port lies the port of Maggi Itacoatiara, which can handle vessels up to Panamax-class, typically with a maximum cargo capacity of 52,000 tonnes.

However, despite the potential to target other countries in the Gulf of Mexico and further afield, Simpson remains cautious. He adds: “We will have the ability to export, but at this point, we’ll be looking to sell our production 100% domestically.”

“With the world population growing, we’ll need more arable land, and more fertilizer to feed the soil,” concludes Simpson, adding: “We’ll need more crops. A lot of that production will come from Brazil – and we’ll be there.”

‘A TERRA DO LEITE E DA POTASSIO’
With the mining rights to a potash-rich basin two-thirds the size of Canada’s Saskatchewan claim – and twice that of the basin in Russia’s Ural region – in hand, Brazil Potash could indeed be as disruptive to the global MOP market as Simpson claims.

The company’s plan to target the domestic market, without the high freight costs imposed by the globe’s international importers, gives Brazil Potash a strong selling position. Meanwhile the considerable resources available – on paper, at least – are likely to make the company’s potential as a long-term investment enticing.

The Brazilian government is also keen to see the nation’s dependence on imported potash brought to heel, and has set tax breaks in place across Amazonas State to aid development.

Brazil Potash is also working to make Autazes as sustainable and ecologically-conscious as possible, including its intent to minimise surface footprint by returning the majority of its waste back underground, by establishing a water recycling and rain-catchment plan, and by engaging the community with regular meetings, where local residents can air their concerns.

The initial outlay required to bring production online comes in at $1.9bn, according to the prospective producer, with some $646m going to the mine, and $834m set aside for the plant and production equipment.

However, despite what appears to be a strong business case, Simpson and Brazil Potash still have a lot of work to do before the project can break ground.

This includes securing a number of concessions, sourcing equipment, applying for and securing mining rights – which will require the support of the Environmental Protection Agency of the State of Amazonas – and gaining the backing of buyers with initial off-take agreements – all challenging commitments which have derailed projects in the past.

Indeed, a source at a major MOP producer said of Brazil Potash’s lofty goals: “There’s a lot of hoops to jump through. We’ve seen these ideas come up before, and they rarely go anywhere. Time will tell.”

Nonetheless; despite this unsurprising pessimism, the same doubt is seemingly absent in the hearts of the Azatures’ community, which has erected a sign welcoming travellers to the region with a cheery “Bon-vindos a terra do leite e da potassio!”

“Welcome to the land of milk and potash.”

By Andy Hemphill

Picture source: Brazil Potash