With the global population predicted to reach 9 billion by 2050, the world is facing mounting demand for food, which will place further pressure on growers to have high yielding and nutrient-rich crops.
Adding to the problem is an expected reduction in arable land per person.
In 1960, arable land was 4,500 square metres per person, and this had pared back to 2,400sq m per person by 2005.
It is predicted that by 2025, arable land per person will shrink to just 1,800sq m.
As arable land per capita diminishes and the global population continues rising, pressure will be placed on squeezing more from what land remains available.
To boost yield and produce nutrient-rich crops, growers are anticipated to lean on adding even more macronutrients than they currently do.
Critical plant nutrients
Plants need numerous critical nutrients to grow with the three key macronutrients comprising potassium, nitrogen and phosphate in addition to the essentials water, oxygen, carbon dioxide and sunlight.
Other important nutrients include magnesium, calcium and sulphur, while micronutrients copper, molybdenum, chlorine, iron, zinc and boron are also needed.
Potassium is required to boost a plant’s durability and resistance to drought, disease, weeds, parasites and cold weather.
According to potash explorer Davenport Resources (ASX: DAV), the soil in many countries around the world is potassium deficient.
Because it is a key source of potassium, growers add potash fertilisers to their crops to remedy any deficiencies in the soil.
Meanwhile, macronutrient phosphate is required for adequate root development and photosynthesis, while nitrogen promotes protein formation and helps determine a plant’s growth, vigour, colour and yield.
Types of potash fertilisers
The most common potassium fertiliser is muriate of potash (MOP). It is supplied as a powder or granule for fertiliser manufacturing or direct application.
MOP accounts for about 86% of the potassium fertiliser market with about 65-68 million tonnes produced each year.
It contains 60% potassium oxide with the remainder made up of chloride and sodium.
Sulphate of potash (SOP) accounts for 10% of the world’s potassium fertiliser. SOP is primarily used for speciality crops including fruit, vegetables, nuts, berries, beans, cocoa and potatoes, and in arid areas where chlorides would be detrimental to the crops.
This form of potassium fertiliser comprises 50% potassium oxide and 17.5% sulphur.
According to Davenport, limited supplies of SOP is a rising issue.
Another fertiliser is called potassium nitrate which contains 44% potassium oxide and 13% nitrogen. This fertiliser accounts for 2% of the world’s potassium fertiliser market and is used on crops that are sensitive to chloride and require additional nitrogen.
Also accounting for 2% of the global market is sulphate of potash magnesia which is made up of 25% potassium oxide, 10% magnesium oxide and 16% sulphur. This fertiliser is reserved for high-value crops.
Other potash uses
Although the primary market for potash is fertiliser which consumes 95% of global production, there are other smaller end-uses.
Small quantities of the product are used to manufacture potassium-bearing chemicals that are incorporated in detergents, ceramics, and pharmaceuticals.
Potash is also used as a water conditioner and as an alternative to de-icing salt. Additionally, it is essential to humans and is needed for growth and maintenance of tissues, muscles, organs and the heart.
Potash market and outlook
In 2018, global potash production exceeded 68Mt, with Canada accounting for more than a third of global output.
Canada is also the world’s largest potash exporting nation – shipping 21.9Mt in 2018, which was about 41% of total global potash exports.
The second highest potash producing nation was Belarus, followed by Russia, China, Israel, Germany and the rest of the world.
Davenport predicts global demand for MOP will grow steadily to 88Mt by 2033 – driven by an increasing population and changing dietary demands – particularly in the developing nations.
As a result of the tight market, it is forecast that current potash prices will prevail and continue to slowly rise over the next decade.
At present, the spot potassium chloride (MOP) price, fob, out of Vancouver is US$202 per tonne (A$285/t) – down 23% on US$265/t (A$375/t), which it commanded a year ago and most of 2019.
Despite the COVID-19 induced dip, it is still expected the potash price, along with market demand, will continue growing.
Davenport’s German potash projects
To take advantage of this expected growth, Davenport is accelerating its South Harz potash projects, which encompass two exploration licences and three perpetual mining licences covering 659sq km in central Germany’s South Harz potash basin.
The basin has been mined for potash since the 1890s, with about 181.7Mt of potash produced from the area.
Davenport noted its licence areas surround former potash mines and have access to water, gas and rail.
The company’s global JORC inferred resources exceed 5.3 billion tonnes at 10.8% potassium oxide. This includes 1.85Bt of the sought-after Sylvinite mineral containing 13.2% potassium oxide.
Fast-track to production
Davenport’s Mulhausen-Keula-Küllstedt project hosts the largest resource of 2.7Bt of ore for 290Mt of contained potassium oxide.
At this project, the company is looking to develop a large, long-life, conventional underground operation.
Over at the Ohmgebirge project, a 325Mt resource has been calculated. However, this resource is at a shallower depth, and Davenport intends to fast-track this into production to bring in early cash flow.
Confirmatory drilling and a feasibility study at Ohmgebirge is due to begin shortly to confirm its “rapid” start-up potential.
Davenport’s other advanced projects include Nohra-Elende with a 1.7Bt resource, Ebeleben with a 577Mt estimate and Gräfentonna, which has an exploration target of 2.7-3.4Bt.
With three perpetual mining licences already in place, Davenport plans to be in production by 2025.
In addition to its vast MOP resources, Davenport has recently announced the discovery of a huge resource containing the mineral kieserite, a form of magnesium sulphate.
This can be sold directly, used as an additive to create potash-magnesia fertilisers, or converted to the premium product SOP. Davenport therefore has the potential to produce a diverse basket of value-added fertiliser products in addition to MOP alone.
Davenport is regarded as a tier one company as it has very large, potentially long-life resources and its projects are situated in a safe jurisdiction within easy reach of its agricultural and industrial customers. It also has flexibility in terms of project implementation owing to its perpetual, royalty-free mining licences and claims to be able to sustain a positive cash flow even at the bottom of the commodity cycle.
Potash has uniquely different drivers compared to other mineral products for which there is no natural substitute.