Vale’s departure from Argentina opens door for Verde Potash
Shares in the Toronto-listed company rose 12 per cent on the day of Vale’s announcement.
By Samantha Pearson in São Paulo
For Cristiano Veloso, Vale’s decision to abandon its potash project in Argentina was the best news he had heard in years.
Since 2008 his company, Verde Potash, has been developing its own $2.3bn potassium venture in Brazil’s southeastern state of Minas Gerais. With Vale’s Rio Colorado mine out the picture, Verde Potash can look forward to an even more captive market, he says.
Shares in the Toronto-listed company rose 12 per cent on the day of Vale’s announcement.
Mr Veloso had been assessing various projects since founding the miner in 2005 but it was not until the global food crisis of 2007-2008 that he set his sights on potassium.
The price of the mineral, one of three nutrients essential for plant growth, jumped 10-fold during the crisis – an expensive wake-up call for Brazil, which had been relying on imports for more than 90 per cent of its vast potassium needs. The country has since vowed to become self-sufficient in all fertilisers by 2020. By that point Brazil’s annual potassium consumption is expected to rise to 13m tonnes from 8m currently.
Verde Potash’s mine, Cerrado Verde, will help achieve that goal – production is set to start as early as 2015 and reach 3m tonnes per year.
Its location will also cut logistical costs and the amount of mineral lost to dust during transit, says Mr Veloso.
However, while Cerrado Verde may not be as remote as Russia’s mines or face the political problems of Argentina, it does present technical challenges.
Conventional potash deposits are relatively rare in Brazil so in the case of Verde Potash, it must extract the mineral from potassium silicate rock. After shareholders’ initial optimism in March, the company announced this month a delay in the mine’s bankable feasibility study, which could set production back by at least a year. The shares have since halved in value.
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