April 15, 2013

Large Potassium Deposit Said to be Discovered in Brazilian Amazon

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Grain production in Brazil continues to surge higher as farmers take advantage of strong commodity prices to expand their production. Most of the agricultural expansion is occurring in central Brazil where the native soils are low in fertility especially phosphorus and potassium. Since Brazil produces very little of its own phosphorus and potassium, it needs to import approximately 70% of its fertilizer needs including 90% of the potassium used in the country. The need to import large quantities of fertilizers has added to the chronic congestion experienced at Brazil's southern ports.

A recent announcement of a large potassium deposit may allow Brazil to eventually eliminate the need to import this vital plant nutrient. Within ten years, Brazil may not import any potassium if an initial discovery of a potassium deposit in the Amazon Region is confirmed. The discovery was announced by a company called Potassio do Brasil, which is a subsidiary of the Toronto based Brazil Potash Corp. The CEO of Potassio do Brasil, Heilo Diniz, stated that this is the largest potassium deposit in the country. The only currently active potassium mine in Brazil is in the northeastern state of Sergipe where Vale has leased the Taquari-Vassouras mine from Petrobras. Diniz feels the new discovery could be three times larger than the mine operated by Vale.

Potassio do Brasil estimates that the new mine could produce 2 million tons of potassium chlorate per year. The company estimates that the cost of extraction of the potassium is US$ 85 per ton and that the transportation costs to move it around the country would be only a fraction of what it costs to import potassium into southern Brazil and then transport it into the interior of the country where it is needed.

The company has already invested R$ 110 million on exploration and plans to spend another R$ 100 million this year. The company expects to complete all the necessary research by July of 2014 when it will submit petitions for operating licenses. The company will borrow from the National Bank of Economic Development (BNDES) 70% of the estimated US$ 2 billion cost required to open the mine with the remainder coming from an initial public offering. In addition to supplying the potassium needs of Brazilian farmers, the company also has plans to eventually export potassium via the Amazon River.

The Brazilian government had set a goal of becoming fertilizer self-sufficient by the year 2020, but up until now, nitrogen had been the only fertilizer produced in large quantities in Brazil. If Potassio do Brasil is correct in their initial assessment, it would help Brazil get closer to achieving its goal.