It’s a fertile market for these growing concerns

THE global energy crisis means the cost of synthetic fertiliser has soared, creating opportunities for at least two Asx-listed minnows.

When they devour their daily bread, most folk are unaware that food production depends on the gas used to produce fertiliser ‘ingredients’ of urea and ammonia.

For Fertoz (ASX:FTZ), heady prices have improved the economics of its niche natural fertiliser business in US and Canada, where it has access to some of North America’s biggest rock phosphate resources.

But the company has struggled to gain traction.

One problem is scale – or the lack thereof. Previous management targeted upping output from 5000 tonnes to 15,000t a year but a new target is 300,000t (by 2026).

This company’s December quarter report shows initial orders of 18,000 tonnes, with the company on track for fullyear output of 40,000t. An offtake agreement will deliver a further 120,000t over five years.

The benefit of the Fertoz raw material is it only needs to be crushed to powder. A key disadvantage is that the product takes up to one and a half years to be effective in the soil, compared with three months for synthetics.

This makes it unsuitable for high-value fast growing crops such as corn, but it’s fine for legumes. And at $US220 ($310) a tonne, it is four or five times cheaper than the synthetic stuff.

Fertoz raised $5m in a placement last September, but with the 2022-’23 year forecast to be cash flow positive the company should be able to put the begging bowl away.

Meanwhile, Neurizer (ASX:NRZ) plans to become the only domestic local urea producer, replacing Incitec Pivot’s Gibson Island plant that has just closed for want of a long-term gas contract.

Neurizer’s plans centre on the old Leigh Creek coal mine, 550km from Adelaide, where the company will deploy underground coal gasification (UCG) to produce gas. It expects to produce the gas for around $1 per gigajoule – a fraction of the price paid by east coast gas users. Unlike explosive ammonia, urea is stable: gardeners can buy it at Bunnings. When added to water, urea forms the diesel additive Adblue, which was in critical short supply in 2021.

But first Neurizer needs to come up with around $2.5bn and discussions are in train with one or more funders.

Last July the company inked a $1.5bn offtake agreement with Korea’s Daelim, which will purchase 500,000 tonnes.

Neurizer chief Phil Stavely describes Queensland’s unfortunate UCG legacy – including the failure of Peter Bond’s Linc Energy – as a “head breeze” rather than a headwind.

“The further we develop, the less relevant what they were doing. We have moved the technology along,” Staveley says. While a producing Leigh Creek project would be worth more than $6bn on today’s pricing, the market values Neurizer at a mere $100m.

This story does not constitute financial product advice. Consider obtaining independent advice before making any financial decisions.