Last week our Hot Topic asked what if anything is wrong with investing in the potash sector? Nothing is wrong, suggested 62% of our readers. A further 29% believe existing producers have locked up all the potential markets, and 10% expect the potash price to weaken.
In response to our potash question, we received the following thoughts from Harvey Haugen of Beechy Industries in the Saskatchewan town of the same name.
"In due course you will find that the solution to potash development will not be with the established companies but in new solution mining technology. Beechy Industries has spent several years on a simplified plant and mine using horizontal drilling and a simple crystallization plant. [Capital expenditure] is expected to be less than $200 a tonne with [operating costs] of less than $50 a tonne. We currently are showing the technology to potash juniors and have some interest. (It is a hard sell due to the disruptive nature of the technology).
"The current plan of the majors is to continue shutting down plants to keep inventories low, to push the price up, to justify their expansion.
"This [reasoning] breaks down if the customers refuse to buy at the higher price. I think that is just what is happening now. Traditionally potash has been the cheap fertilizer ingredient and it was applied generously. The price is high even compared to other fertilizer, and use has dropped.
"We need to produce this product at competitive costs, otherwise it will be done elsewhere."