Potash prices have stabilized and looking up

The gloomy clouds that cast shadows over the global potash market last summer after the breakup of the Russian/Belarusian BPC cartel have not collided and the stormy forecasts have changed for far more agreeable forecasts. The conflict between Russian and Belarusian potash producers threatened to flood the market with quantity, undoing the oil like cartel pricing system that has worked so effectively in the past decade. The reasons for the disintegration of BPC turned out to be more complex, extending far beyond potash into bilateral Russo-Belarusian relations. Close ties between the new president of Ukraine, Petro Poroshenko, and Belarus’s President Alexander Lukashenko, have not discouraged talks to revive the BPC cartel. In April, Lukashenko is believed to have held very “constructive” talks with new Uralkali co-owner Dmitry Mazepin about bringing back the Belarus Potash Company, or BPC, joint venture. Such a development would certainly help to boost potash prices to at least 2012 levels. The main obstacles are no longer political or diplomatic (the BPC breakup was a full scale diplomatic incident); simply, Uralkali wants to ensure that its shareholders get the best possible deal while moving the new BPC headquarters from Minsk in Belarus to Switzerland.

The potential for sanctions to be applied to Russian potash, meanwhile, remains even if so far, its importance to the European Union suggests this resource will be kept out of geopolitics for the time being. The EU issued a list of critical raw materials last week: phosphate (though more generally meaning mineral fertilizers) was one of the six. Uralkali, therefore, will experience only minor if any impact at all from Western sanctions against Russia. Its main focus is on the so called BRICS nations (Brazil, Russia, China, India, South Africa) where potash demand has been growing fastest.

Recent pricing statistics have only confirmed the bullish climate for potash. The average per ton FOB price per ton for potash at the Vancouver port, which was still 459 dollars in 2012 dropped to 379 dollars average last year largely due to the BPC related conflict. The predicted market flood did not occur, even if volume surplus exists and the average for 2014 is expected to hover around USD$ 300/ton (though mostly on the higher end of that plateau considering that both the CANPOTEX and former BPC partners signed contracts with China and India at above USD$ 300. The potash market is expected to remain in substantial surplus over the next five years according to Australian bank Macquarie, which predicts Canadian producers will increase production from the 15.88 million tons of 2013 to 17.42 tons in 2014. Russia and Belarus should also increase their supply in 2014.

Canada, Russia and Belarus hold three of them 90 % of global potash reserves. Canada alone accounts for 46% of proved reserves and probable reserves of 33% also according to Macquarie. The lower prices, however, have discouraged major projects, which will benefit the current majors and any junior potash company close to reaching production stage such as IC Potash (TSX: ICP | OTCQX: ICPTF) or Allana Potash (TSX: AAA | OTCQX: ALLRF). The three majors Potash Corp, Uralkali and Belaruskali, will simply expand existing mines. Chinese demand is expected to rise in the next few years, rapidly absorbing the predicted surplus.

Agriculture is the driving force behind potash demand and its consumption is linked to the needs of agriculture and varies with changes in agricultural prices. Potash helps increase crop yields, improve plant quality, reduce water needs and accelerate their growth. Lower agricultural commodity prices tend to reduce fertilizer demand; not surprisingly, demand or use of potash increases when its price drops. This period of ‘cheap potash’ will serve to get more farmers around the world using potash; the results will then convince them to continue using potash even after prices inevitably rise again. China, Brazil and the United States (on average using some 10 million tons each) use more than half of the 62 million tons of potash that Macquarie expects will be consumed in 2018. While, it makes the biggest ‘splash’ in determining price, China is only the third largest potash importer (6.1 Mt in 2014, 6.9 Mt in 2018).

The main importer is Brazil, while the main consumer is the United States, which imports as well as produces potash. Potash demand is rising fastest in such other major Asian countries as India, Indonesia and Malaysia – the latter two being driven by the large potash amounts needed to stimulate the cultivation of palms for palm oil (used in a number of applications and as a biofuel). Finally, the potash scenario in the near future may be summarized as one that will be marked by a slower growth of supply and improving demand, which will lead to a price recovery in the next few years.

Potash prices show signs of slow recovery but don’t expect fertiliser joy soon: Rabobank

Holland’s Rabobank expects bearish tones to continue in the third quarter. There is not much good news in the Fertiliser Quarterly Q2 2014 except for potash: the bank, which has a worldwide business in agribusiness finance, says that, “after the collapse of potash prices, the first signs of a slow recovery are on the horizon”.

That’s the one spot of cheerful tidings. As for the U.S. fertiliser market, the bank says the bubble is bursting. There is lower corn acreage, partly offset by higher rice and cotton acreage; and spring demand is ending. Indian demand is the greatest unknown.

Indian potash prices settled at $322/tonne in the quarter starting April 1, the beginning of the fertiliser year. With the $105/tonne discount on last year’s prices, India is the last big importer to negotiate a hefty 25% price reduction following Uralkali’s decision back in July 2013 to buy market share in an over-supplied market.

“Now that Uralkali’s change in strategy has finally established a new floor price, suppliers can focus on strategies to increase global prices to increase global prices,” the report says. It will be a challenging task as the global market still faces over-supply. Brazil’s supply chain is full, and that is ahead of the next next big supply window, starting with sugar cane.

That said, Rabobank believes it is unlikely prices will increase significantly in the short term. Brazil is likely resist efforts to raise prices to $360/tonne and China is unlikely to be willing to pay more in the second half of 2014 when India is paying $322 through to March 2015.

As for phosphate, prices in India are capped at $480/tonne, potentially driving a rift in prices with the rest of the world. But the bank thinks producers could also struggle to secure volumes in markets other than India. “India is putting the global phosphate fertiliser market in a bearish mood for the months to come,” the report notes. Indian di-ammonium phosphate (DAP) prices are capped and a weakening rupee could potentially lower this cap further and make it even less affordable for Indian farmers to buy phosphate fertiliser. And with the prospect of an El Niño occurring, this increases the possibility of a disappointing monsoon, so putting further pressure on farming incomes.

And, to make matters worse, China is expected to step up phosphate and DAP exports, making it difficult for other phosphate producers to secure sales in the rest of Asia. With the domestic application season mostly finished in China, the demand for potash and phosphate fertilisers is weakening. After an export tariff adjustment, Chinese exports of nitrogen and phosphate fertilisers rose substantially — by 140% and 289% respectively, year on year.

And then there’s Brazil.

As Rabobank notes, even out season Brazil has a role to play in the global fertiliser arena. Potash producers are keen to secure volumes in that market. Strong increases in coffee prices and favourable soy bean prices supported a 9.9% increased demand for fertilisers in the first quarter. Fertiliser imports will continue to find support from soy bean prices, spurred on depleting stocks in the U.S.

Rabobank expects Brazilian imports of fertilisers to remain strong even though reported stockpiles are already high. Further increases in potash prices in Brazil potentially to $360/tonne will see potash producers using the South American agribusiness powerhouse to leverage higher prices in the Southeast Asian market. “Whether this will have a major effect on potash prices worldwide later in the year remains to be seen,” the bank notes. Africa’s fertilizer challenge

As my colleague Alessandro Bruno rightly pointed out yesterday (in his post on Allana Potash’s new initiative in Ethiopia), “Africa is surely one the most important markets for mineral fertilizers. Africa has the potential to increase the value of its annual agricultural output of $280 billion in 2010 to $500 billion by 2020 according to the African Development Bank”.

The key word is “potential”. Then there is the term “uphill battle” ― which is the situation facing Africa and fertilizer.

Back in January I reported on InvestorIntel that sub-Saharan Africa consumes about 750,000 tonnes a year. With the proper infrastructure, make that 6 million tonnes. Say that quickly, and it sounds perfectly feasible. Ah, but we’re talking about Africa ― and how many grand plans and great hopes have been dashed since the British Crown colony of Gold Coast in 1957 became Ghana and started the decolonization ball rolling.

Just how big a task was spelled out in a paper last year presented to International Fertiliser Society (as it was a British occasion, we’ll respect their spelling of “fertilizer”). The paper at the IFS conference at Windsor got scant attention at the time but the subject is worth a closer look on at least two counts. One, is the fact that African is host to several potash mining projects. Two, the continent needs the potash ― and phosphate, too, for that matter. Actually, the two points together raise a third one: that the developments of potash and phosphate on the continent, together with Africa’s very real food production problems, is at least making for a real, emerging issue.

Some projects are looking elsewhere for markets. Australia’s Elemental Minerals with its Congo potash is expected target the Brazilian market, while South Boulder Mines in Eritrea has tended to be focused on selling into India. Really, it has been Allana Potash that has set the African-potash-for-Africa story running, so it worth going back to the IFS paper as it contains some very useful information. We should also note the work done by the authors, Maria Wanzala from South Africa- based New Partnership for Africa’s Development and Rob Groot of the International Fertiliser Development Centre in Muscle Shoals, Alabama.

One fact alone is startling: over the past 50 years, cereal productivity for Sub-Saharan Africa (or SSA) has stagnated at 1 tonne per hectare compared to more than 4 tonnes/hectare in developed countries. Now about 27% of Africa’s population is chronically undernourished. The authors of the paper say the low agricultural productivity is “largely due” to the limited use of mineral fertilizers. Average fertilizer use on the continent is 8kg/hectare compared with the global average of 107kg/ha. And even within SSA there are vast disparities: Six countries (out of 44) account for up to 70% of SSA’s fertilizer consumption, those being Nigeria, Tanzania, Ethiopia, Zimbabwe, Sudan and Kenya.

Nearly 40% of the fertilizer used goes to give nutrients to maize crops, followed by other cereals such as wheat barley. Fruits, vegetables and sugar cane take up 15% of the fertilizer used.

Between 1961 and 2011 productivity per hectare increased 2.9 times but in SSA the figure was 1.65 times.

It’s not that Africa is short of the raw materials. North Africa (Morocco, Tunisia, Algeria and Egypt) has substantial resources of phosphate rock. Egypt, Morocco and Tunisia account for 88% of Africa’s fertilizer production, most of which is exported.Yet in all of Africa there is as yet no potash production.

Wanzala and Groot see the Republic of Congo and Ethiopia as the only SSA countries with commercially viable potash deposits (although Eritrea might quibble with that). For phosphate, the main SSA contenders are Tanzania, Togo and Senegal, although there are hopeful signs for Mozambique and offshore Namibia.

SSA farmers face cost problems. Freight rates to most SSA ports are high, while limited port capacity dictates the use of small vessels, typically ones of about 15,000 tonnes. Ports are congested, waits of up to 10 days for berthing are common, and port bagging equipment is inefficient and often inaccurate.

Largo defies economic gravity and leads the pack towards vanadium production

While others in the Vanadium space have talked about what they would do, Largo Resources (TSXV: LGO) has crept up on them (and the market) and is looking to commence production of Vanadium from its 100%-owned Maracas mine in the next week or so. The property totals 28,587 hectares and is located in the State of Bahia in Brazil. The project is roughly 250 km southwest of Salvador (capital of Bahia) and 813 km northeast of Brasilia (capital of Brazil).

Vanadium – Going from Strength to Strength

Specialty metals suffer, in many cases, from being either combined with other metals in small quantities to gain relevance or have stand-alone usages that seem obscure or humdrum. In the case of Vanadium the market is large but the sources are many, with recycling (the miner’s worst enemy) being a major source. It is also a by-product of the petroleum industry, which is very novel. The main use (for the moment, is steel and the fate of that industry dictates how Vanadium demand evolves and thus prices also. Several major new uses promise to make Vanadium more sexy than it has hitherto been and that is why we want to focus at this point upon the small group of up and coming miners in the space.

Strategically Speaking

As the bulk of Vanadium production is concentrated in China, Russia and South Africa, where supply disruptions (particularly energy- & labour-related in South Africa) have occurred (and with rising tensions with Russia and variably tensions with China). One cannot be entirely sanguine about Vanadium’s future accessibility. Those three countries account for around 90% of global supplies. Despite this, the recent British Geological Survey Risk List on Criticality of Supply ranked it a lowly 33 out of 45 metals.

On interesting possibility to speculate upon is a situation where China flips from being a net exporter (and sometime price spoiler) to being a net importer. This scenario could come about due to the Chinese shifting to using a higher percentage of Vanadium in their steel production.

Speaking of US access to Vanadium the USGS commented, “While domestic resources and secondary recovery are adequate to supply a large portion of domestic needs, a substantial part of U.S. demand is currently met by foreign material”.

The Mine and its Complex

Largo claims the deposit has the highest grade vanadium resource in the world and that is positioned to be the lowest cost producer in the vanadium market. Geologically speaking the entire strike length of the Maracas deposit is rich in vanadium, hosting many deposits of Vanadium-rich titaniferous magnetite mineralization particularly at Gulcari A and other smaller deposits such as Gulcari B, Nova Amparo and Sao Jose.

The NI 43-101 resource estimate outlined in the PEA of March 2013 was:

Mineral Reserve: 13.1 million tonnes @ 1.34% V2O5 (P&P) Mineral Resource: 24.6 million tonnes @ 1.11% V2O5 (M&I) 30.4 million tonnes @ 0.83% V2O5 (Inferred)

The project has good access by road from Salvador via 405km of paved secondary road from the main costal highway in Bahia, with a direct project access road about 50 km west of the town of Maracas (population of approximately 25,000).

The Maracas mine employs an open-pit mining process. The process is that ore from the mine will be crushed, milled, and sent through a magnetic separator to create a concentrate. The resulting concentrate is exceptionally high at 3.4% V2O5. This concentrate will then be processed into Vanadium Pentoxide. The company likes to stress that it is utilizing industry proven equipment and processes to produce vanadium – there are no new technologies or processes being utilized at the Maracas plant. This is possibly to deflect comparison with the troubled Windimurra mine of Atlantic Ltd in Western Australia.

Average annual production at Maracas is estimated at 11,400 tonnes of V2O5 equivalent over a lengthy 29 year mine life. The company sustains that there remains good potential for the expansion of resources and production rates at the complex.

In all all the road to production has not been a long one with Largo beginning initial construction activities at the site in June of 2012 and all systems at the project were in the commissioning stage by Q1 of 2014. Progress on the project has been coming thick and fast: Kiln commissioning – March 2014 Deammoniator commissioning – Mar 2014 AMV precipitation commissioning – Mar 2014 Leaching commissioning – Feb 2014 Milling and beneficiation commissioning – Feb 2014 Approx 20,000 tonne stockpile of crushed ore accumulated – Feb 2014 Crushing commissioned – Oct 2013 Electrical power line commissioned – Oct 2013 Water treatment plant commissioned – Oct 2013

All infrastructure and equipment is in place and commissioning is underway at the project site. As at a week ago construction of the project was 99.8% complete, with only the installation of auxiliary items still underway. First vanadium production is anticipated following the completion of commissioning and warm-up of the kiln.

Largo has contracted a take-or-pay off-take agreement with Glencore for 100% of its vanadium material for six years which will take effect at the commencement of production in 2014.

Usage

The first large scale industrial use of vanadium in steels was found in the chassis of the Ford Model T, inspired by French race cars. Vanadium steel allowed for reduced weight while simultaneously increasing tensile strength.

At the moment, Vanadium is used mainly as an alloy in a wide range of specialty steels and titanium alloys to provide greater strength, toughness, and wear-resistance.

New Applications – Worth Mentioning

The current state of the bulk of Vanadium demand is well-known with its strict correlation with steel consumption. New uses are potential X factor for the Vanadium space. While aerospace has been growing organically and increasing its share of the usage of the metal the area with the best potential for a quantum leap is in battery applications.

Chief amongst these is the Vanadium Redox (and redox flow) battery (VRB), which is a type of rechargeable flow battery that employs Vanadium ions in different oxidation states to store chemical potential energy. The present form (with sulfuric acid electrolytes) was patented by the University of New South Wales in Australia in 1986 where scientists carried out the first known successful demonstration and commercial development of the all-vanadium redox flow battery employing vanadium in a solution of sulfuric acid in each half in the 1980s. Although the use of vanadium in batteries had been suggested back in the 1970s by a number of scientists including some at NASA.

There are currently a number of suppliers and developers of these battery systems including Ashlawn Energy in the United States, Renewable Energy Dynamics (RED-T) in Ireland, Cellstrom GmbH in Austria, Cellennium in Thailand, and Prudent Energy in the United States and China. The vanadium redox battery results from over 25 years of research, development, testing and evaluation in Australia, Europe, North America and elsewhere.

The image that follows gives a good idea of one of the more practical applications of such batteries. In this case the solar panels collect energy during the day and store it in the battery for release during the period when the solar panels cannot access sunlight.

A vanadium redox battery consists of an assembly of power cells in which two vanadium-based electrolytes are separated by a proton exchange membrane. The battery exploits the ability of vanadium to exist in solution in four different oxidation states, and uses this property to make a battery that has just one electroactive element instead of two.

The main advantages of the vanadium redox battery are that it can offer almost unlimited capacity simply by using larger and larger storage tanks, it can be left completely discharged for long periods with no ill effects, it can be recharged simply by replacing the electrolyte if no power source is available to charge it, and if the electrolytes are accidentally mixed the battery suffers no permanent damage. The VRB has also been shown to have the least ecological impact of all energy storage technologies.

The main disadvantages with vanadium redox technology are a relatively poor energy-to-volume ratio, and the system complexity in comparison with standard storage batteries.

Sources – Primary and otherwise

The dynamics of the Vanadium supply chain are very interesting. In some ways we might compare the metal’s supply chain to that of Lead, where the chief source is recycling. Much of the current Western supply is sourced primarily from steel scrap, then mining followed by secondary sources (which are also recycling in nature).

Vanadium occurs naturally in about 65 different minerals and in fossil fuel deposits and is the 17th most common element in the earth’s crust. The important thing to note is that, beyond recycling from steel slag) the sources of Vanadium are either mineral deposits or, rather uniquely, as an oil by-product.

Vanadium occurs in deposits of phosphate rock, titaniferous magnetite, and uraniferous sandstone and siltstone, in which it usually constitutes less than 2% of the host rock. Significant amounts are also present in bauxite and carboniferous materials, such as coal, crude oil, oil shale, and tar sands. Amongst the major deposits are the titaniferrous magnetites of China, Russia, South Africa, Western Australia and New Zealand, as well as the oil-related deposits of Venezuela, Alberta (Canada), the Middle East and Queensland (Australia), in addition to ore and clay deposits in the USA.

Current Production

The table above shows the state of production according to Vanitec, a Vanadium producer/user association. The USGS in its latest survey on the metal said that world resources of vanadium exceed 63 million tons.

Pricing and Trends

Metals sector reflation, supply disruptions and above-trend demand growth pushed ferro-vanadium prices up from an annual average of US$7.73 per kg in 2002 to US$61.94 in 2008. The financial crisis and recession of 2008 and 2009 severely weakened global steel production and demand; in response to this vanadium prices fell to a monthly low of US$18.96 in May 2009. Since then, as global steel demand and output recovered, ferrovanadium prices have rebounded to over $30 in 2013, easing back again to around $25 per kg for most of the last year.

Vanadium demand in the West stands to benefit from the emerging recovery and restocking efforts in the steel sector, however we would not discount a retreat in demand in China as steel consumption there is trending off. In addition to the cyclical economic shifts currently taking place, high- strength, low-weight metallurgical products are increasingly being demanded, as development projects require superior material performance in non-ideal environments. Increased utilization of alloyed steels and titanium alloys will likely have a bullish effect on the vanadium market over the coming decade. In addition, China uses comparatively low amounts of vanadium per tonne of steel produced and will need to dramatically increase its use of vanadium to match the steel quality of regions such as North America and Western Europe.

In a recent report, the metals consultancy, CPM Group, suggested that vanadium producers are likely to be operating at notably higher utilization rates through to 2019 to meet demand. This resulted in a conclusion that “if producer discipline remains intact, however, new projects will be needed to meet demand over the 10-year outlook”.

Largo’s Tungsten Asset

We originally came to know Largo via its Tungsten manifestation rather than its Vanadium activity. However its Tungsten effort, also in Brazil, was only a tailings reprocessing plan (though substantial) with its Currais Novos property having Indicated Resources of 3.46 million tonnes grading 0.12% WO3 and 1.74% F, containing 7.2 million pounds of WO3. Its Inferred Resource has been estimated to be 810,000 tonnes grading 0.093% WO3 and 1.44% F containing 1.3 million pounds of WO3. These tailings were deposited during the processing of ore from the Barra Verde and Boca de Laje tungsten-molybdenum mines. While this was scheduled to start sending out Tungsten from July 2011, this has not as yet been achieved. Largo is targeting production of 2.3 million lbs of

WO3 and 675,000 lbs of Mo p.a. when operating at full capacity. The company claims a cash cost of less than $59 per MTU, which is very attractive indeed. It is also estimating cash flow of over $1mn per month from the project. The company managed to get the plant completed in December 2011 but then mothballed it in October 2012 due to a prolonged drought (which has not abated) restricting water available for the reprocessing plant. It remains on care and maintenance till the situation eases.

Conclusion

Largo has achieved the near impossible in moving forward to production a project in a specialty metal during a protracted and brutal financing environment. Fortunately its project is coming on line at a time when V prices are stable and Western demand for industrial minerals has the best outlook since the slump began in 2008.

Vanadium is one of those metals that, up until now, has been dependent upon the fortunes of another (i.e. the steel complex) for its momentum. And that driver has not served it well with most Western economies never being able to regain their momentum post-2008. Steel will eventually recover but China may have gone off the boil then so we find it hard to muster up price scenarios for Vanadium that are substantially higher than where they are currently. The swing factor is the great unknown of usage by new battery applications. This remains such an unknown that to make an investment decision based upon the “might be” of that factor would be daring indeed. We take consolation in the fact that Vanadium’s price has been so stable over the last year giving it a good base to move up from as Western economies’ economic recovery picks up momentum.

Largo’s market cap is currently $290mn with annual average cashflow estimated at $89mn and an OPEX of $2.10 per lb (including iron ore by-product credits). With the average price of V2O5 being over $6 over the last five years, the potential for sizeable margins is fairly obvious. In light of the scant pipeline of new products the potential for new applications demanding more product and even more basic factors like the Chinese adding more vanadium to their steel formulas the prospect for a price crash in V is not very likely. As the pure-play Vanadium production story in the North American markets Largo has carved itself out a fairly unique position. South America is the 2nd largest destination for Chinese direct foreign investment

Trade and foreign direct investment (FDI) relations between China and Latin America and the Caribbean are growing in the past 15 years by a factor of 25 according to the Economic Commission for Latin America and the Caribbean (ECLAC). The majority of Chinese FDI is directed towards the banking sectors of the Cayman Islands and the British Virgin Islands, but Chinese companies have increasingly been targeting the Latin American natural resource and industrial sector. China has targeted several countries but Brazil and Argentina, which are rich in land, as well as mineral resources, are among the countries to experience the largest trade increase. U3O8 Corp (TSXV: UWE | OTCQX: UWEFF), a Canadian company developing uranium, phosphate and vanadium deposits in Colombia and Argentina could benefit from this rising phenomenon.

In the past nine years, China has invested about US$ 10 billion in Argentina. Estimates suggest that China could become the main importer of South American goods (Brazil, Chile, and Peru) by 2030, surpassing the United States. The region is preparing for the shift through infrastructure projects that will facilitate trade with China: largely, this means more ports and links to ports. The Chubut province in Argentina will likely build a railway linking it to Chilean ports, reducing distances to ports in China. It so happens, that U3O8 Corp (TSXV: UWE) is developing a uranium/vanadium project in the Laguna Salada district, in the Chubut province of Argentina.

Uranium is another resource that China needs and in this respect the combination of China’s rapidly increasing investment and trade flow with South America, particularly in energy and agriculture, could benefit U3O8 Corp, which is nearing the production stage at its low-cost uranium deposit. U3O8 Corp. is active in the uranium space in Argentina because the country has adopted policies that favor the development of nuclear energy and resources. Argentina’s has an advanced nuclear industry that started in the 1950’s. Argentina has even developed unique modular reactors – the first of which is being built now. U3O8 Corp also owns the Berlin deposit in Colombia which is close to production stage with resources in uranium, vanadium, phosphate and rare earths. Therefore, U3O8 Corp is in a position to both supply Argentina’s growing nuclear appetite (which includes a nuclear powered shipping fleet) and take advantage of growing Latin American trade opportunities with China with which Argentina has a nuclear co-operation agreement.

Chinese investors are drawn to Latin America as they search for new markets; they want to establish production facilities in the region to help Chinese enterprises reduce trade conflicts (Many Latin American countries have adopted anti- dumping measures against products made in China) because they find it more difficult to do the same in the so-called fully developed countries. Moreover, Latin America is eager to give China access to energy and natural resources. Naturally, given the size of its economy and population, China sees Brazil as the big ‘prize’ location and the vast majority of Chinese investment has targeted its natural resources, particularly oil and gas. China has also taken advantage of the vacuum left by the absence of North American players in Venezuela to engage that country’s electricity, construction, food, technology and even satellites sectors. China maintains important economic relations with other countries such as Mexico, Chile, Peru, Ecuador and Cuba. In fact, while Brazil may be the main target now, historically, Peru has been the largest Latin American recipient of Chinese investment in the mining sector.

In March of this year, Chinese investment has intensified further as large conglomerates have been targeting the Latin American agricultural sector. Chinese state-owned COFCO, a huge conglomerate responsible for essentially feeding millions of Chinese citizens, has taken over Noble, the largest private trading company (energy, metals and agricultural products) in Asia. One of the most important factors motivating this transaction is the fact that Noble has many investments in Brazil and Argentina, which has now given COFCO, control of Noble’s South American warehouses of sugar, cereals and oil seeds (as well as cotton, coffee and cocoa from Africa or Asia).

This is merely the beginning. Beijing has given up subsidizing Chinese agriculture by using fixed procurement mechanisms for such staples as rice, soy or cotton as in the past. Moreover, Chinese soil has been degrading rapidly and this will make China ever more addicted to other countries for food. The Chinese are already the largest importer of soybeans in the world and becoming the largest importers of corn to feed their livestock, and for the past three years they have been net importers of rice. China consumes 20% of global food supply, but has only 9% of the world’s acreage under cultivation.

China, therefore, needs to find alternative lands to secure food supplies. In this regard, Brazil, offers 500 million acres of arable land and it is the world’s third largest market for fertilizer for which demand is increasing. Currently, Brazil has to import about half of its phosphate needs and South American phosphate and potash producers will be in a position to benefit from China’s agricultural ‘invasion’. Fertilizer use in Brazil has risen by 70% over the past 15 years and the government is very keen on stimulating phosphates and potash mining, which could presumably include an increase of royalties for mining companies. Brazil produces many fertilizer intensive crops – soya, maize and sugar cane (some 80% of total agricultural output) – that are necessary for food production and for biofuel, which is an important alternative fuel in South America. These crops respond very well to phosphate based fertilizer. Brazilian soil needs external nutrients in the form of mineral fertilizers.

Here is a quicklink to our latest interview with Richard Spencer of U3O8 Corp.:

Grafoid bench strength deepens with the addition of strategic advisor Thomas H. Cruikshank

Grafoid Inc., part of Focus Graphite (‘Focus’, TSXV: FMS | OTCQX: FCSMF) has appointed Mr. Thomas H. Cruikshank, the former Chairman and CEO of Halliburton, as Strategic Advisor. This the third major strategic announcement to come out of Grafoid in less than a month after they announced forming a partnership with Mitsui Co. – one of the largest and influential Japanese trading houses – and signing an agreement with Altamat to adopt its proprietary 3D printing technology.

As a CEO of Halliburton, Mr. Cruikshank would have had to manage large infrastructure, foreign operations, logistics, long-range planning, considerable political risk among other things. He would also have had access to the world’s most influential ‘corridors of power’, being in a position to build a priceless rolodex of contacts worldwide Not surprisingly, after joining the Board of Lehman Brothers, Mr. Cruikshank was replaced by Dick Cheney, as CEO of Halliburton. Cheney had served as Secretary of Defense in the George H. Bush White House from 1989 to 1993 – and would go on to serve as US Vice- President from 2001-2009. The characteristics of managing Halliburton were ideal for someone who had managed the Pentagon. If the partnership with Mitsui will be invaluable in opening doors for Grafoid’s graphene products, Mr. Cruikshank will surely be able to open the door to top North American industry players. Meanwhile, Mitsui offers unrivaled distribution networks, which support the sales of Japanese products and services around the world. Mitsui will likely use its channels and network to introduce graphene to Japanese battery manufacturers like Hitachi or Panasonic as well as automotive groups like Toyota or Nissan.

Grafoid has an expanding and pioneering array of graphene developments backed by ventures and intellectual property rights, bringing graphene ever closer to commercial reality such as its MesoGraf™ series. Grafoid and its parent Focus Graphite have also been involved in advanced applications for lithium iron phosphate (LiFeP) battery materials in partnership with Hydro-Québec and the development of graphene- based repayment cancer therapies in partnership with Calevia Inc.

MesoGraf™ (‘MesoGraf’) represents nothing short of the first platform for the industrialization and commercialization of graphene. MesoGraf bridges the gap between the growing bodies of graphene research with actual commercialization of the material, essentially making the science available to the market. Until very recently, graphene has been prohibitively expensive for industrial use. Graphene is composed of only one layer of carbon atoms which must be isolated and then arranged in a honeycomb structure, which is the key to its high strength. For years since the discovery of graphene in 2004, laboratories have been trying to come up with an economically viable method to produce the material. Many have claimed ‘revolutionary’ discoveries to bring this material into a mass production cycle but little has actually developed. MesoGraf, however, is much closer to becoming the elusive mass production graphene that so many have been trying to achieve.

MesoGraf was developed by Dr. Loh Kian Ping and Grafoid co- founder Dr. Gordon Chiu. The main difference between MesoGraf and all other attempts at developing a graphene material is that MesoGraf is finally able to offer the scalability that is needed to bring the material’s potential to the market. A scalable graphene material implies that it can be made to address a large increase in users and applications without undue effort. Scalability has been the ‘weak link’ in graphene until now. MesoGraf will be derived using natural flake graphite ore from Focus’s Lac Knife deposit in Quebec in a patented one-step process. Even this process is ‘scalable’ because, it can use any graphite ore with 10% or higher purity according to Focus.

Graphene will make its way in many electronic devices such as smartphones, tablets, connected devices, batteries or flexible displays . But it will also be used in the manufacturing of extremely durable structures in the civil engineering, aerospace and automotive sectors.

Medallion Resources: On a direct course to rare earth production

April 7, 2014 — Don Lay, President of Medallion Resources (‘Medallion’, TSXV: MDL | OTCQX: MLLOF) speaks to Tracy Weslosky, Editor-in-Chief and Publisher of InvestorIntel, about Medallion’s unique position in the rare earths sector. Medallion is not an exploration play and is unique in that it is focused on “getting to production quickly and Dr. Bird, whom I am partnered with, is really the brains behind this. He believes that the best way to get to a significant rare earth production in the short term is by exploiting by-product resources from rare earths.”

Medallion’s resource, in that respect is monazite, which is a rare earth rich phosphate found in great quantity as the by- product of other types of mining such as heavy mineral sands. Medallion plans to treat monazite from mineral sands, derived from other sources in order to avoid traditional mining development.

The challenge for Medallion is in where to process the resource rather than where to find it. While most miners prefer to process next to their mine, from Medallion’s perspective, the resource comes from a variety of suppliers, so “we’re looking to process separately, and we’ve chosen Oman in the Middle East as the site for that.” Many of the oil rich Gulf States are looking for ways to diversify their economies as oil supplies run out. The Middle East wants to diversify its industrial base: “and they don’t take the word ‘industry’ as a negative….Oman happens to be the country that we thought was best suited. It’s on the Indian Ocean, around the Straits of Hormuz, geopolitically away from some of the more sensitive areas there. Also, Oman is building a new industrial city called Dokum, which “we thought was just a terrific place to start a rare earth value chain, starting with rare earth extraction from monazite.” Medallion’s main partner in Oman is the Takamul Investment Company (‘Takamul’) a subsidiary of the State owned Oman Oil Company, which has been very active in the metals, petrochemicals, and downstream minerals sectors especially in the area of Duqm. Medallion has signed a memorandum of understanding (MOU) with Takamul, in a 60/40 split (Medallion/Takamul) for the project. Takamul has already started investing, “the next significant step will be to get a larger full feasibility and environmental impact studies for the proposed plant.”

In 2014, apart from the aforementioned studies, Medallion aims to secure the key long term feedstock agreements, an essential for the Company. Don says, he hopes to secure five and ten year agreements for supply of the monazite: “and thereafter, we will be in a position to start having discussions with potential strategic partners such as off-takers and those types of things, of course assuming that the feasibility study turns out as expected.” Don also stressed that the project’s economics are very attractive and that it’s important recognize that even in China, known for supplying 95-96% of the world’s rare earths, some 50% of production, comes from by-products.

Medallion has avoided some of the biggest risks of the mining space altogether with no need to prove the quality of its minerals’ grade or to undertake scoping studies, cushioning the cost of exploration preliminaries that absorb so much of today’s limited project finance availability. project finance availability.

Disclaimer: Medallion Resources is an advertorial member of InvestorIntel. For more information, contact [email protected].