Potash Supply-Demand Dynamics Mr. William B. Burton 薄伟 Shanghai, December 2009

Transcription

1 Potash Supply-Demand Dynamics Mr. William B. Burton 薄伟 Shanghai, December 2009

2 Disclaimer Except for historical information, this presentation contains forw ard-looking statements, w hich reflect the Company's current expectation regarding future events. These forw ard-looking statements involve risks and uncertainties, w hich may cause actual results to differ materially from those statements. Those risks and uncertainties include, but are not limited to, changing market conditions, and other risks detailed from time-to-time in the Company's ongoing filings. We undertake no obligation to publicly update or revise any forw ard-looking statements, w hether as a result of new information, future events or otherw ise. In light of these risks, uncertainties and assumptions, the forw ard-looking events in this presentation might not occur. 2/3/2010 MAA / TSX 2

3 MagIndustries Corp Canadian publicly listed mining company (TSX: MAA) Focused on the development of Mengo Potash project 1.2 million tonnes per year planned operation Located in the Republic of Congo (ROC) Starts construction /3/2010 MAA / TSX 3

4 Agenda Roadmap 1. Potash overview 2. Demand drivers 3. Potash supply 4. Cost of production 5. Pricing 2/3/2010 MAA / TSX 4

5 Why is Potash important? Potash is the main source of potassium ("K"), which with nitrogen ("N") and phosphate ("P"), are the three essential nutrients for plant growth Potash helps plants develop strong root systems and retain water Potash contributes to greater resistance to disease and insects Potash improves the taste and the nutritional value of food There are no commercially viable substitutes 2/3/2010 MAA / TSX 5

6 About Potash Potassium (K): The 7 th most common element Economically recoverable deposits are rare Usually occurs in combination with chlorine (potash=kcl) 95% of potash production used as fertilizers 2/3/2010 MAA / TSX 6

7 Mineable potash deposits are rare RUSSIA CANADA BELARUS GERMANY DEAD SEA CONGO (ROC) Major commercially proven deposit 2/3/2010 MAA / TSX 7

8 Potash mining Potash is mined from natural deposits or extracted from brines Conventional mining techniques are used in approximately 80 percent of global capacity New operations such as Congo will use cost-effective solution mining techniques Brine mining operations have capacity limitations such as China (weather) and Israel (logistics) 2/3/2010 MAA / TSX 8

9 About the Potash Industry Mineable deposits are rare: Although there are many consumers, only 12 countries produce potash. Canada, Russia and Belarus together account for more than 80 percent of global reserves Barriers to entry are high: The most significant barrier to become a potash producer are money and time Expected growth in demand: Future agricultural concerns are fueling the need for more production 2/3/2010 MAA / TSX 9

10 Agenda Roadmap 1. Potash overview 2. Demand drivers 3. Potash supply 4. Cost of production 5. Pricing 2/3/2010 MAA / TSX 10

11 Potash Demand Drivers Population world population is expected to increase by over onethird by 2030; Less Arable Land need to increase yields from a declining inventory of arable land worldwide Changes in Nutrition increased meat consumption in developing countries is expected to continue to drive demand for more fertilizers; Nutrient Balance under-application of potash needs to be corrected to maximize yields in key markets such as Brazil, India and China; Commercial Crops potash is used extensively in key commercial crops such as corn, rice, soybean, palm oil and sugar cane; and Biofuels which is a relatively new source of demand, although the main impact will be in the next five to ten years 2/3/2010 MAA / TSX 11

12 Increasing population F 2020F Developing Countries Developed Countries F - Forecast * Source: United Nations 2/3/2010 MAA / TSX 12

13 The arable land base is shrinking The supply of arable land is falling The amount of land area available per capita provides a rough measure on the current carrying capacity for food security and for the development of additional agricultural products for export, such as biofuels The development potential available land per capita, in land use class 2/3/2010 MAA / TSX 13

14 kg/person/year Changes in nutrition 60 World Per Capita Meat Consumption F - Forecast F 2015F 2020F * Source: UN /3/2010 MAA / TSX 14

15 Nutrient balances In the developed world, fertilizer application is generally at optimal levels with the right balance between N, P and K. In many regions, particularly parts of Asia, an increase in potash (and phosphate) application is required to provide balanced fertilization. Without balanced nutrient application, agricultural yields diminish over time. As a result, countries such as India and China have official policies to increase the use of potash to maximize yields. This will increase potash demand 2/3/2010 MAA / TSX 15

16 Commercial crops Used extensively for global staple crops such as sugar cane, palm oil, corn, wheat, rice, soybeans and cotton Major component of the global food supply chain Major customers are large international food producers 2/3/2010 MAA / TSX 16

17 Potash uptake and use by crop 14% 23% Corn Rice 13% Wheat Soybeans Sugar Crops 6% Palm Oil 22% 8% Fruits and Vegetables All other Crops 5% 9% * Source: IPNI, PotashCorp 2/3/2010 MAA / TSX 17

18 Biofuels Significant driver in Brazilian sugarcane biofuel industry US is a recent entrant and is focused on corn biofuel Long term influence may not be a major demand factor 2/3/2010 MAA / TSX 18

19 Potash Demand Growth ( CAGR 2.8%; CAGR 3.3%) CAGR - Compound Annual Growth Rate 2/3/2010 MAA / TSX 19

20 Agenda Roadmap 1. Potash overview 2. Demand drivers 3. Potash supply 4. Cost of production 5. Pricing 2/3/2010 MAA / TSX 20

21 Today s Potash producers PotashCorp (Canada) Belaruskali (Belarus) Mosaic (Canada,US) Silvinit (Russia) ICL (Israel,Spain, UK) Uralkali (Russia) K+S (Germany) China APC (Jordan) Agrium (Canada) Intrepid (US) SQM (Chile) Vale (Brazil) Million Tonnes KCl Production 2008* *Sources: Fertecon, IFA, PotashCorp 2/3/2010 MAA / TSX 21

22 Projected New Capacity Advanced Greenfield Projects Company Area Project Name Expected Capacity Est. CAPEX (US$, Mln) Earliest construction Start MagIndustries Republic of Congo Kouliou Potash Project 1.2 $1, Vale Argentina Mendoza 2.4 $4, Potash One Canada Legacy Project 2.5 $1, BHP Billiton Canada Jansen Project 4.00 $6, Eurochem Russia Gremyachinskoe 2.3 TBD 2012 Agrium Canada St. Lazare / Leech Lake / Fenwood 2 $3, Athabasca Potash Canada Burr Project 2 $2,500 TBD Potash Corp. Canada Bredenbury 2 $2,500 TBD Source: CIBC Institutional Equity Research industry update, MagIndustries Corp 2/3/2010 MAA / TSX 22

23 Few producers but many customers Production Demand North America Latin America Europe Africa Middle East FSU Asia Oceania *Sources: Fertecon, PotashCorp 2/3/2010 MAA / TSX 23

24 Agenda Roadmap 1. Potash overview 2. Demand drivers 3. Potash supply 4. Cost of production 5. Pricing 2/3/2010 MAA / TSX 24

25 Production costs Typical production unit cost 30% 23% 29% 18% Labor Energy Supplies Other 2/3/2010 MAA / TSX 25

26 Cost of production comparison (2008) MagIndustries Mengo project Republic of Congo 2/3/2010 MAA / TSX 26

27 Agenda Roadmap 1. Potash overview 2. Demand drivers 3. Potash supply 4. Cost of production 5. Pricing 2/3/2010 MAA / TSX 27

28 Potash price (FOB Vancouver) $700 $600 $500 $400 Potash Price $300 Fertecon $200 $100 $ /3/2010 MAA / TSX 28

29 Pricing outlook and industry leaders Pricing outlook Forward prices need to include return on capital for industry to expand This requirement suggests prices of > US$ 400 tonne on a long term basis During times of constrained supply (2007/2008) higher prices will occur Investment criteria Landlocked sources will have lower returns than near-port suppliers (transportation costs) Profitable producers with large land holdings can continue to add production Access to low cost energy MagIndustries is well positioned to become an industry leader 2/3/2010 MAA / TSX 29

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