Potash stock guide: how the Pilbara could help feed the world

The Pilbara region of Western Australia is best known for iron ore — and in more recent times gold and lithium.

But a group of pioneering ASX companies reckon it also has the potential to be a major hub for potash — a mineral salt that’s critical in plant, animal and human life.

There are some 30 ASX-listed companies active in potash, but it is not a well-understood industry.

Over the past year, 16 of 28 potash-related stocks tracked by Stockhead have made gains of 4 per cent to 263 per cent. (Though on a six-month basis the prices are more subdued. See table below).

>> Scroll down for a list of ASX stocks with exposure to potash, courtesy of leading ASX data provider MakCorp

Potash comes from salts that contain potassium in water soluble form. It is used as a fertiliser.

There are two commonly used fertilisers – muriate of potash (MOP) and sulphate of potash (SOP).

MOP is the most common (around 90 per cent of the world’s potash) and is used on a variety of crops. However, the more chloride-sensitive crops like avocados, coffee beans and cocoa require SOP – which fetches $US270 per tonne more than MOP.

The global potash market is estimated to be around 75 million tonnes.

Demand is set to increase as the global population grows to around 8 billion by 2023.

Greg Cochran, the boss of Pilbara potash explorer Reward Minerals (ASX:RWD) told Stockhead an extra 100,000 to 150,000 tonnes of potash will be required each year.

Right now Australia imports all its potash from Canada, the Middle East and Europe. Australia’s MOP and SOP consumption is around 250,000 tonnes each year.

China and big plantation-focused countries in southeast Asia – like Malaysia and Indonesia – are expected to be the key contributors to demand growth.

The potash market is perhaps one of the most stable compared to other commodities, with the price difference between MOP and SOP remaining close to $US270 per tonne for the past three years.

Pilbara could rival world’s largest potash exporter

Reward Minerals' Lake Disappointment sulphate of potash project. — Reward Minerals’ Lake Disappointment sulphate of potash project.

Reward believes the Pilbara could become the next Saskatchewan – a region in Canada that is currently the world’s largest exporter of potash.

Canada produced 12 million tonnes of potash last year and the bulk of that came from Saskatchewan.

Mr Cochran said director Michael Ruane saw the potential of the Pilbara early on.

“Mick saw it first, where he said: ‘this has the potential to be the next Saskatchewan’,” Mr Cochran said.

“That’s the potash potential of this broader region in which we operate up here [the Pilbara], and with the climatic conditions it’s ideal and it’s a lot closer than Saskatchewan is to Vancouver.”

Saskatchewan is nearly 1700km from Vancouver.

By comparison, Reward’s Lake Disappointment project is less than 900km from Port Hedland – which is where the company is planning to ship its SOP product from.

“I’m not talking just about Lake Disappointment, but other projects further inland, and we’ve got some really good insights into the geological potential that we as a company have learnt over the last 12 years,” Mr Cochran said.

“In fact, when we talk to government ministers that’s part of the conversation. There’s a dream there, this vision is big.”

A recent pre-feasibility study indicated Reward’s Lake Disappointment project will produce 9 million tonnes of SOP over a 27-year life.

One of the evaporation ponds at Reward Minerals' Lake Disappointment project. — One of the evaporation ponds at Reward Minerals’ Lake Disappointment project.

Reward says it will be one of the world’s largest and longest-life brine SOP projects.

The who’s who of potash

Australia does not currently produce any of its own potash, but the bulk of the production will eventually come from WA.

>> Scroll down for a list of ASX stocks with exposure to potash, courtesy of leading ASX data provider MakCorp.

Kalium Lakes (ASX:KLL) this week announced it has increased the measured and indicated resources for its flagship Beyondie SOP project in WA by 150 per cent.

This is expected to translate into a “substantial increase” in ore reserves, which is also due for an update this month, managing director Brett Hazelden told investors earlier this week.

Kalium’s share price has jumped 31 per cent to 46.5c since this time last year.

The Beyondie project currently has enough in reserves to mine 75,000 tonnes each year for more than 23 years.

Kalium is the closest to production, having already been granted the necessary mining licence and received approval for its mining proposal and mine closure plan.

The company expects to be able to start early construction works this year.

Kalium is also in a joint venture with BCI Minerals (ASX:BCI) on the Carnegie potash project, which is located about 220km east-north-east of Wiluna.

BCI diversified into salt, SOP and gold following the steep drop in iron ore price.

The company, which was once known as BC Iron, has witnessed a 15.6 per cent drop in its share price over the past year and is trading around 13.5c.

BCI is now selling off its Pilbara iron ore projects after it sunk to a $16.9 million loss in FY18.

The company can earn up to a 50 per cent interest in the Carnegie project by sole-funding exploration and development expenditure across several stages.

The Carnegie project lies directly north of Salt Lake Potash’s (ASX:SO4) Lake Wells project and Australian Potash’s (ASX:APC) project, which is also named Lake Wells.

Salt Lake also has another project near Wiluna called Lake Way.

Meanwhile, Agrimin (ASX:AMN) has a project called Lake Mckay that lies to the northeast of Reward’s Lake Disappointment project.

Over the past 12 months, Agrimin’s share price has spiked over 60 per cent to 81c.

Lake Mackay is the largest known SOP-bearing salt lake in Australia. A PFS estimates it can produce 426,000 tonnes each year over 20 years.

Agrimin is currently undertaking a definitive feasibility study.

Here’s a table of ASX stocks with exposure to potash, courtesy of leading ASX data provider MakCorp.

Swipe or scroll to reveal full table. Click headings to sort

ASX code	Company	12-month price change	6-month price change	Price Sep 5 (intraday)	Market Cap ($)
ARE	ARGONAUT RES	2.625	0.318181818182	0.029	45.1M
FYI	FYI RESOURCES	1.36111111111	-0.260869565217	0.085	15.8M
SFX	SHEFFIELD RES	1.24418604651	0.408759124088	0.965	219.8M
CXM	CENTREX METALS	0.642857142857	-0.206896551724	0.115	36.3M
AMN	AGRIMIN	0.60396039604	-0.0470588235294	0.81	135.7M
GSC	GLOBAL GEO	0.560975609756	-0.272727272727	0.32	440.8M
PIO	PIONEER RES	0.333333333333	-0.2	0.02	27.6M
KLL	KALIUM LAKES	0.30985915493	0.148148148148	0.465	79.0M
GXY	GALAXY RESOURCES	0.26354679803	-0.139261744966	2.565	1.1B
ADN	ANDROMEDA METALS	0.2	-0.142857142857	0.006	6.5M
BHP	BHP BILLITON	0.184105720492	0.123497080041	32.705	169.1B
DNK	DANAKALI	0.153846153846	0.0344827586207	0.75	208.7M
ORE	OROCOBRE	0.0964681075382	-0.267605633803	4.16	1.1B
AIV	ACTIVEX	0.0588235294118	0.125	0.18	31.9M
SO4	SALT LAKE POTASH	0.0444444444444	0.0217391304348	0.47	82.3M
RWD	REWARD MINERALS	-0.148936170213	-0.377431906615	0.16	25.3M
BCI	BCI MINERALS	-0.15625	-0.181818181818	0.135	53.7M
PWN	PARKWAY MINERALS	-0.272727272727	-0.272727272727	0.008	4.8M
APC	AUSTRALIAN POTASH	-0.292929292929	-0.247311827957	0.07	21.1M
HFR	HIGHFIELD RES	-0.363636363636	-0.270833333333	0.7	232.3M
RDM	RED METAL	-0.394736842105	-0.148148148148	0.115	25.2M
VRM	VERDANT MINERALS	-0.433333333333	-0.413793103448	0.017	17.7M
KP2	KORE POTASH	-0.446666666667	-0.144329896907	0.083	71.3M
EMH	EUROPEAN METALS	-0.493421052632	-0.125	0.385	51.6M
DAV	DAVENPORT RES	-0.546666666667	-0.252747252747	0.068	9.5M
INF	INFINITY LITHIUM	-0.6	-0.481481481481	0.07	13.3M
KPC	KAZAKHSTAN POTASH	-0.653846153846	-0.590909090909	0.009	12.0M
GPP	GREENPOWER	-0.733333333333	-0.733333333333	0.004	5.8M

Stockhead is proud to use MakCorp as a provider of great value, accurate and reliable data on ASX-listed mining stocks. For more information head to MakCorp’s website.