Allana snubs supply concern with project

Canadian firm develops $642M mine in Ethiopia

VA NC Ou V e r • ash Corp., the C n di n developer of uS$642-million pot sh mine in ethiopi ,s ys predictions of glob l oversupply of the crop nutrient re overblown bec use competing projects re being put on hold.

World pot sh production cp city will rise 38% to 96.5 million metric tonnes by 2017, while dem nd will incre se 26% to 66 million tonness, ccording to Green M rkets, fertilizer industry inform - tion provider.

Supply forec sts include mines th t ren’t yet in production nd m y be shelved or c ncelled bec use of rising construction costs, s id F rh d Ab sov, Toronto-b sed All n ’s chief executive.

“On p per it seems like there is quite bit of supply coming on line,” Mr. Ab sov s id in M y 28 telephone interview from London. “In re lity only h ndful of them will hit production.”

So ring expenses re beginning to ex ct toll on proposed pot sh mines round the world. V le SA, the thirdl rgest mining comp ny, in M rch suspended its rio Color do project in Argentin fter the estim ted cost

lmost doubled to bout uS$11-billion. L st month, u.S. producer Mos ic Co. deferred cp city exp nsion in S sk tchew n nd JPMorg n Ch se & Co. n lysts s id BhP Billiton Ltd. is likely to shelve its J nsen pot sh project.

It’s only m tter of time before more developments, some with price t g of more th n uS$1-billion, re hobbled by complex geology, l ck of committed fin ncing, nd rising costs, s id Spencer Churchill, Toronto-b sed n lyst tP r digm C pit l Inc.

“All n is unique bec use it h s found l rge, high-gr de pot sh deposit th t is ne r-surf ce nd f ces fewer ch llenges

- th n the tr dition l greenfield projects,” Mr. Churchill, who h s buy r ting on All n , s id in M y 23 note.

All n posted net loss of $3.86-million nd no revenue in the qu rter ended J n. 31. It h d $28.6-million of c sh t the end of the period, ccording to d t compiled by Bloomberg.

Pot sh, form of pot ssium nd one of three essenti l crop nutrients, is pplied to pl nts to help them strengthen their root systems nd resist drought.

Mr. Ab sov isn’t lone in reg rding industry concerns

bout excess supply s ex gger ted, Peter Pr tt s, Toronto-b sed n lyst tC ntor Fitzger ld LP, s id M y 30 in telephone interview.

“We sh re the view,” s id Mr. Pr tt s, who r tes All n buy with $1.25 price t rget. “The fe rs come from the f ct th t there is overc p city, but there cert inly isn’t oversupply.”

J nsen, in S sk tchew n, is under review t Melbourneb sed BhP. The project m y eventu lly cost close to uS$15billion, B nk of Americ Merrill Lynch n lysts s id in June 4 note.

BhP chief executive Andrew M ckenzie, who is sl shing c pit l spending fter decline in commodity prices, s id June 6 th t pot sh “is gre t option but it’s just n option” nd th t

There is overcapacity, but there certainly isn’t oversupply

J nsen must meet cert teri if it’s to proceed.

Me nwhile, m jor producers such s Pot sh Corp. of S sk tchew n Inc. nd russi ’s OAO ur lk li, the world’s two biggest, “will not choose to r mp up their production to nywhere ne r full production bec use their bi s is lw ys price over volumes,” Mr. Pr tt ss id.

The pot sh industry is domin ted by producers in North Americ nd the former Soviet union th t together ccounted for 56% of supply l st ye r, ccording to Green M rkets, unit of Bloomberg LP, which is the p rent of Bloomberg News. ur lk li shipped 9.5 million tonnes in 2012 nd h d 11.5 million tonnes of c p city, the Green M rkets d t show.

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