Expecting its phosphate rock resources in northern Ontario to be “depleted” sometime in 2013, fertilizer and ag retail firm Agrium plans to turn to an overseas producer to make up the shortfall.
The Calgary company on Monday announced a “long-term rock supply agreement” with Moroccan phosphate producer OCP, which in 2009 held about a 25 per cent share of the world phosphate market.
Supplies from the Casablanca-based company are expected to begin moving to Agrium’s phosphate processing plant at Redwater, Alta., about 60 km northeast of Edmonton, in the second half of 2013, Agrium said.
While Agrium’s phosphate mine at Kapuskasing, Ont. provided an “excellent return on investment” since it opened, economically viable rock reserves at the mine are expected to be depleted soon, the company said.
The Kapuskasing mine was set up in the late 1990s to replace phosphate rock Agrium previously imported from Togo.
The agreement with OCP is expected to cover rock supply for a period up to 2020, at prices based on a formula that tracks finished product pricing and key published input costs.
Agrium expects to get “downside protection” from the deal in periods of low phosphate prices, while giving OCP an opportunity to benefit from the upside when phosphate prices are stronger.
Agrium “expects the move back to utilizing imported rock to be a seamless one,” company CEO Mike Wilson said in a release.
“This will allow us to maximize production of MAP at our Redwater facility in order to continue to meet the strong demand in our core markets,” while benefiting from “significant sulphur and ammonia cost advantages and in-market location” at the Alberta plant, he said.
The Redwater plant, which accounts for about half of Agrium’s phosphate production capability, uses about a million tonnes of phosphate rock per year and has P2O5 capacity of 345,000 tonnes.
Nearly all the plant’s output is upgraded to MAP, with MAP production capacity of 660,000 tonnes. Agrium’s other major phosphate plant is at Conda, Idaho, about 100 km east of Pocatello, with its own phosphate rock mine.
The supply deal with OCP, pending approval from Agrium’s board and other conditions, is expected to take effect before the end of this year.