South America Calling
Kieran Gartlan DTN South America Correspondent

Monday Nov 16, 2009

Work Starts On Amazon Potash Mine

Canadian company Falcon Metais will finally begin work this month on a huge potash mine in the heart of the Amazon rainforest. The mine, thought to be the third largest in the world with deposits of around 1.2 billion tons of potash, is expected to have annual production of around 2 million tons within five to seven years.

The move is part of a push by Brazil to become self-sufficient in fertilizer production within ten years so as not to be held ransom to international prices. Currently Brazil imports around 70 percent of its fertilizer needs.

The Amazon potash mine was first discovered by state oil and gas company Petrobras back in the 1980s, but was never explored. With potash prices rising last year the company was forced to either bring the mine into production or give up its rights.

Petrobras opted for the latter and Falcon Metais wons the right to explore the mine with a bid of around $90 million. The mine will require total investments of close to $2 billion.

Brazil currently consumes around 7 million tons of potash per year, but only produces 600,000 tons, at a mine in the northeastern state of Sergipe, operated by state mining company Vale. The remainder is imported.

Brazil hopes to increase potash production by 6 million metric tons a year within the next decade, replacing 90 percent of current imports.

The country also hopes to boost phosphate production by 4 million metric tons, and nitrogen production by 2 million tons.

Mining company Vale will be one of the biggest players in the production of phosphate and potash, while Petrobras will be responsible for boosting nitrogen production.

Given poor logistics and need for large quantities of fertilizer, the state of Mato Grosso will benefit most from Brazil's expansion in fertilizer production.

Poor natural soil fertility in Brazil's frontier regions means farmers have to apply double and sometimes triple the volume of fertilizer used by their Argentine and U.S. counterparts.

And with most fertilizer currently imported, freight costs mean farmers in Mato Grosso pay up to 50 percent more for their fertilizer than in other parts of the country.

According to the Scot consultancy, phosphate prices reached their lowest level in five years in November at around R$36.50 per 50kg sack ($400 per metric ton) on the local market, representing a 5% reduction on October. The price of phospate is around 60% lower than this time last year.

Posted at 05:24AM CST Nov 16, 2009 by Kieran Gartlan
Comments (1)
Kieran Regarding your article on Amazon Potash, I would like to inform you of a number of changes. The ownership of the exploration properties in Amazonas States is Potassio do Brasil. The Canadian comany's name is Brazil Potash Corp. Potassio do Brasil will NOT be clearing any rainforest for its exploration program or its production operations. Please contact me to discuss this project 31-3505-5200. Cheers David Argyle
Posted by David Argyle at 12:48PM CST Nov 18, 2009
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