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Back in 2010 BHP Billiton Ltd (BHP) made news for its attempts to broaden its already diverse base of resource assets by acquiring Canada’s Potash Corporation (TSX:POT), the world’s leading producer of potash at that time.  
BHP was eager to get a foothold in an agricultural sector exploding with demand for more and better food around the world, but most notably in countries with growing middle class populations like India and China. When the takeover bid failed, BHP made a massive investment to develop its own potash project in Canada – the Jansen Project in the province of Saskatchewan.
Potash is the commonly accepted term describing essential nutrients in potassium.  The term originated in the pre-industrial area when potassium was created by soaking plant ashes in pots of water.  Potassium is one of the three most important ingredients in agricultural fertilisers, along with nitrogen and phosphorus.  Plant growth extracts these chemical elements from the soil, guaranteeing a never-ending cycle of use.  Historically nitrogen has been considered the most important element, but potassium or potash is more important than ever, given the diminishing supply of suitable agricultural soil.  This means going forward agriculture needs to increase both the quantity and quality of crop yields, which is one of the functions of potassium.
As is the case with many commodities experiencing near vertical growth in demand, minors both large and small frequently abandon operations with other natural resources to rush in to the hot item.  The inevitable over supply leads to declining prices for the commodity, despite the increasing demand.
This is exactly what happened to potassium prices.  Shareholders of the powerhouse stock of Canada’s Potash Corporation suffered as a result.  The following price movement chart from the US financial website CNBC tells the tale. 

If you are a regular follower of ASX financial news you probably already know by early August of 2016 the Sydney Morning Herald was reporting BHP was considering “mothballing” Jansen by 2020 if fertilizer prices did not improve.  By the end of August, The Australian was reporting BHP was looking for a buyer for the Jansen Project, which went nowhere in light of the proposed merger between Canadian potash giants Potash Corporation and Agrium (TSX: AGU).  BHP continues to work on two mine shafts at the Project, with no forecasted date for the start of actual production.
Market experts tell us potash prices could improve slightly in 2017, but also report continued oversupply conditions with demand rising about 2.3% per year.  Given the less than blissful outlook, why would anyone consider investing in one of many ASX junior miners in search of potash production as anything more than a punt?
There are diversified ASX companies like Orocobre (ORE) that have potash assets but they are diversified in other resources.  There are slightly less than a dozen junior miners who have abandoned other pursuits to focus on potash, and in a surprise to some, a few are performing quite well.
Regular followers of the state of Aussie agricultural production are well aware of a surprising fact.  Despite our reputation as the burgeoning “breadbasket of Asia” we currently have no domestic production of potash for use in fertilisers.  The last domestic production was in 1952 and the Bureau of Resource and Energy Economics state Australia currently imports all its potash requirements.
The following table includes junior potash exploration miners with a chance to become our first domestic potash producer.  Given all these companies are in various phases of pre-production exploration, debt is a critical issue.  We have included a few balance sheet measures, all as of the most recent quarter (MRQ).

In early 2014 a gold miner operating under the name Global Resources Corporation applied for two potash exploration licences in the Pilbara Region of Western Australia.  Exploration results at the time revealed the region had the potential of becoming a major potash source for higher-priced sulphate of potash (SOP). 
As is the case with many commodities, not all potash is the same.  In addition to SOP there is muriate of potash (MOP).   MOP is the form most commonly used and the one subject to oversupply conditions plaguing the price.  Unlike MOP, SOP contains no chloride making it the better choice for higher-value crops.  Additional benefits of SOP include making plants more drought and freeze resistance and less susceptible to insects and disease.
MOP is a naturally occurring mineral but SOP must be chemically produced with one method harvesting salt mixtures from natural salt lake brines to produce SOP.  Due to its use with crops like fruits, nuts, coffee, and tea, SOP is in greater demand than MOP.
Since it first ventured into the SOP arena Global Resources changed its name to Agrimin Limited (AMN) and sold off its other assets to focus exclusively on its 100% owned Lake Mackay Project in Western Australia. The company claims a scoping study shows Mackay holds “the world’s largest known Mineral Resources of brine-hosted SOP.” 
Investors were buoyed by the 28 March announcement the company had secured the services of a Danish solar power company for the heating process in the production of SOP, a substantial cost saving over using natural gas.  The following day investors’ mood soured as Agrimin announced a capital raise to fund project feasibility studies and the stock price began to drop from around $0.56 to the current $0.43.  Here’s the price movement chart. 

Danakali Limited (DNK) has a potash project in Eritrea, East Africa, called the Colluli Potash Project. The Project is a 50/50 Joint Venture between Danakali and the Eritrean National Mining Company (ENAMCO).  
The JV has been drilling at Colluli since 2010 identifying 1 billion tonnes of potassium bearing salts suitable for potash production.  The resource is suitable to produce both MOP and SOP and a third form of potash – sulphate of potash magnesia (SOP-M or potassium magnesium sulphate), a specialized fertiliser for soils deficient in magnesium.  Danakali announced positive results for SOP from a 2015 definitive feasibility study (DFS).  The company is now in the process of securing mining licences, sources of funding, and offtake (contracts to purchase future production) agreements.  Kallium Lakes Limited (KLL) may be the first to reach production of SOP here in Australia at its Beyondie Potash Project in Western Australia.  The company has 15 exploration licences in place and has already conducted successful pump testing.  Kallium already has been through the regulatory approval process with the WA Department of Mines and Petroleum, the WA Department of Environmental Regulation and the WA Department of Water.
The project is near infrastructure required for processing and transport, including roads and rail, gas, and port facilities for anticipated exporting.  A production base camp has been completed. The company has land agreements with local native peoples and a host of studies ranging from capital costs to metallurgy and brine extraction and processing.
Although the Beyondie Project is the company’s flagship project, Kallium Lakes has another Joint Venture with minority partner BC Iron Limited (BCI), the Carnegie Project. 
Australian Potash Limited (APC) is the third ASX company with a flagship project to develop SOP from local salt lake brine.  The APC entry is the Lake Wells Potash Project.  On 23 March the company submitted results of a scoping study to the ASX reportedly projecting a SOP rate of production of 150,000 tonnes per annum over the first five years of operation followed by an annual production rate of 300,000 tonnes over the remaining 20 years of mine life.  Investor reaction was subdued but accelerated before coming back down to earth.  Here is a three-month price movement chart for APC.

Australian Potash is embarking on additional studies as well as building solar evaporation ponds to be used for feasibility studies later in the year.
While these stocks might seem like punters’ specials to some, a case can be made for the potential for SOP production in Australia.
First, only 15% of current global production of SOP comes from the less costly process of evaporation from salt lakes. A 2013 study from federal agency Geoscience Australia highlighted the potential use of our substantial system of salt lakes for extracting lithium and borates, but most notably for a more cost effective source of potash supplies for Australian agriculture.  
In essence, this is that rarest of rare circumstances in the modern world – an untapped market.  Given the higher cost of extraction from traditional mines dominating world production, exporting of locally produced SOP in the future is likely.

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