By Jemima Kelly
LONDON (Reuters) - A disputed plan to build a $1.7 billion (1.1 billion pounds) mine in one of Britain's best-known national parks has thrown a spotlight on the obscure mineral it will dig for, a fertiliser ingredient coveted by some Chinese farmers battling for increased yields.
The York Potash project in northern England planned by London-listed Sirius Minerals would tap the world's biggest reserve of the mineral - polyhalite - and could, the company hopes, help open up a hitherto unexploited market.
But a report published last week by engineering consultancy AMEC Plc, commissioned by the North York Moors National Park, said Sirius had overstated the need to build the minehead within the park.
It also raised concerns over the potential environmental impact, forcing the company to ask for more time and sending its share price tumbling by 33 per cent over the week.
Sirius now faces the daunting task of having to assuage the park authority's concerns before it decides whether to approve the project, not to mention the challenge of raising capital totalling more than four times its $380 million stock market value to fund construction if it does get the go-ahead.
The company is therefore working to sell the idea of polyhalite as the "future of fertiliser".
Sirius sees the value of polyhalite, meaning "many salts", deriving from its blend of key nutrients. Other forms of potash do not naturally contain the same elements, which must be added by fertiliser blenders if they are required.
Its low chlorine level also attracts farmers in regions where crops such as tobacco and pineapple are sensitive to the chlorine component in traditional potassium chloride - or MOP - fertilisers, which make up about 93 per cent of annual global potash sales of between 50 and 55 million tonnes.
The existing alternative to MOP fertiliser - SOP, or sulphate of potash - is also low in chlorine and is in large supply in China. But it is sold at a premium of between 35 and 40 per cent to MOP's average price of $400 per tonne because of its high processing cost.
GLOBAL DEMAND
Sirius Chief Executive Chris Fraser believes polyhalite can exploit a resulting gap in the market.
Sirius is lining up contracts to deliver the mineral despite the uncertainty over clearance for the York Potash project. It has already secured a 10-year agreement with China's Yunnan TCT Yong-Zhe Co Ltd, under which it would sell 1 million tonnes a year to the Chinese company from 2017.
"The demand is coming from everywhere," Fraser told Reuters.
He expects global demand will meet or even exceed the 5 million tonnes that Sirius intends to mine in the first year of production, scheduled to start in late 2016, though delays in getting approval could push that back.
In total the company has signed sales agreements totalling more than 2 million tonnes.
Some analysts are sceptical about polyhalite's potential, noting its relatively low potassium component.
"This is a project driven by a man who is extremely committed to it," said Michael Freeman, an industry consultant, referring to Fraser. "But the thing about polyhalite is that as a potash fertiliser, it is very low grade."
Polyhalite contains 14 per cent potassium, about a quarter the level in MOP fertiliser. It also contains sulphur, magnesium and calcium, all of which are used in agriculture but to lesser extents.
A report prepared in April by Integer Research for AMEC said the main value of polyhalite would come from its potassium content, despite the existence of other nutrients, which it said would be seen by most buyers as "worthless bulk".
"Either you accept Chris Fraser's proposition that this is a product whose time has come and that the world now needs sulphur and magnesium, or it's a fantasy," said Freeman.
The only company in the world currently mining polyhalite is Cleveland Potash, a subsidiary of Israel Chemicals Ltd. Its mine lies 11 miles north of Sirius's planned site but sits just outside the North York Moors' boundary.
Last year it mined just 50,000 tonnes of the mineral, a hundredth of what Sirius intends to produce annually.
"They're clearly only doing that to show the world they can do it, that it's not just Sirius who has polyhalite. They have no interest in polyhalite," said another industry consultant who did not want to be named. Cleveland declined to comment.
(Additional reporting by Karen Rebelo; Editing by David Holmes)
Source: http://news.yahoo.com/future-fertiliser-fantasy-uk-company-bets-mineral-154155513.html
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