Centrex’s high-quality phosphate puts it in prime position to fill supply gap
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Special Report: With one of only two phosphate mines in Australia due to close in the next few years and growing demand for fertiliser on the rise, there is a need for quality players to help fill the gap.
Centrex Metals (ASX:CXM) is one player heading towards production that could help Australia step up its share of the phosphate market.
Phosphate rock is mainly used in the production of phosphate fertilisers for agriculture.
Right now Australia produces phosphate in Queensland and on Christmas Island, which sits between Western Australia and Indonesia and is an external Australian territory.
However, CI Resources (ASX:CII) has been told by the Australian government that it can’t have access to an extra 130 hectares of unallocated Crown land on Christmas Island to extend its mining operations from the mid-2020s to the early 2030s.
This means the mine won’t be able to continue past the mid-2020s.
At the same time, demand for fertiliser is increasing because of the rising global population, as well as improving average living standards and dietary habits.
“The population centre is growing in the Asia Pacific region, but the arable land area is not increasing,” Centrex CEO Simon Slesarewich told Stockhead.
“Therefore, we need to get more out of that arable land and that means good, clean fertiliser is required.”
Phosphate rock demand has been steadily rising at a rate of 2 per cent each year in the five years to 2017 to 203 million tonnes thanks to increased demand from Latin America and Russia.
Independent market researcher Integer Research forecasts that by the time Centrex’s Ardmore project in Northern Queensland reaches commercial production in 2021, phosphate rock demand will have increased by 9 million tonnes.
But it won’t stop there.
Demand is expected to increase a further 25 million tonnes by 2025 and 40 million tonnes by 2030.
Meanwhile, a contributing factor to the expected shortfall in supply is China’s deteriorating rock quality and supply, according to business intelligence firm CRU Group.
On top of that, most of China’s phosphate rock is inland, which makes it more expensive to transport to markets.
China dominates global demand, accounting for 40 per cent, followed by the US (15 per cent), Morocco (8 per cent), Russia (5 per cent), India (4 per cent) and Brazil (3 per cent).
But China’s tight supply-demand balance is likely to see the Asian behemoth increase its phosphate imports and not its exports.
In comparison to the majority of global supply, Ardmore’s phosphate ore has a high average grade of 34-35 per cent of P2O5— giving it a competitive advantage over rivals.
Typically speaking, phosphate rock has grades of between 27 per cent and 34 per cent depending on the end use.
But not only is Centrex’s base phosphate high-grade, it also contains low levels of cadmium — which is increasingly coming under the microscope from regulators around the world.
Because phosphate is largely used in fertilisers and cadmium is toxic, there is the potential for cadmium to be present in crops — which isn’t good for anybody.
A lot of the world’s phosphate supply comes from the Western Sahara region, which besides having a high cadmium content is also facing human rights conflict and geopolitical tensions.
Centrex’s Ardmore mine is located just 90km away from a major railway and is also supported by existing roads.
At full production the project will produce 800,000 wet tonnes each year for an initial 10 years.
And the company is continuing further talks with other potential long-term offtake customers regarding taking trial shipments.
Centrex plans to start trial mining this year, which will pave the way for final offtake deals and project funding next year.