Australian Resources Weekly Update

Submitted by Jim Thesiger on 19 May, 2008 - 22:09

BHP Billiton (BHP) acquired its outstanding stake in Anglo Potash from Australian stock analyst Macquarie Research Equities.

Australian Resources Weekly

Potash market overview

BHP acquires its outstanding stake in Anglo Potash:

Earlier in the week BHP Billiton sought to buy the outstanding 25% stake in its Potash vehicle, Anglo Potash. BHP has a 75% stake in the company and operational control over the JV. The total equity value of the transaction is approximately C$284m (US$282m) on a fully diluted basis. Anglo Potash provides BHP with exposure to potash, which is a key ingredient in fertilisers. BHP is targeting first production in the middle of next decade.

Potash in mainly used in fertilisers:

The main use of potash is in fertilisers (more than 95%). Besides fertilisers, the mineral is also used in home usage (feed supplements) and industrial production (glass, ceramics, soaps etc).

Potash demand supply gap:

Total fertiliser consumption has grown over time, increasing 6% in 2007 and is expected to increase by 4% in 2008E. We estimate there will be a supply shortfall of 4mt of material globally in 2008 and this deficit would ensure that 2009 will also be extremely tight.

UBS estimates US$611/t for 2008E and US$850/t for 2009E:

Our global team upgraded their potash price estimates last month and increased their estimates to US$611 per ton for 2008E and US$850 per ton for 2009E observing that the market continues to remain extremely tight with capacity utilisations at maximum. We believe Uralkali (URKA.RTS), Potash Corp (POT.N), Israel Chemicals (ICL.TA) provide good exposure to Potash.