Silver prices rising, and a shortage of 'the other white rock' looms
Silver prices have been surging recently. But even as silver prices climb, another white rock, phosphate, is becoming increasingly precious.
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When I ask myself what’s changed from 2008, my answer is not much.Skip to next paragraph
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In fact, the oil analogy is not a bad one. As with oil, phosphate production is concentrated. Whereas some 75% of the world’s oil reserves are in the hands of OPEC, about 90% of the world’s phosphate is in the hands of just five countries: Morocco, China, South Africa, Jordan and the US.
As with oil, more and more countries need to import it, and it is getting hard to find big, low-cost supplies. The US is the largest consumer of phosphate and has long been an importer. Mosaic is one of the big producers down in Florida, which is the main source of phosphate in the US. But Mosaic has had trouble lately expanding that mine. They’ve actually had to stop mining from their Fort Meade facility over permitting issues. The US ought to import for many years to come. Latin America imports even more. And Asia imports even more still. India, for example, doesn’t have any phosphate and will become a major importer in years ahead.
Hence, the world begins its scramble to find more sources of phosphate. We’ve already seen a flurry of activity among the fertilizer companies last year. For example, Vale (the big Brazilian fertilizer and iron ore company) picked up phosphate mines and processing facilities from Bunge and Fosfertil.
Mosaic took a 60% stake in a Peruvian phosphate project, Bayovar, with Vale the other partner. Vale bought Bayovar, an undeveloped phosphate deposit, for $300 million in 2005. The 2010 deal valued it at $1.1 billion.
Still, based on what we know today, there is no significant new supply coming until at least 2014. All of the above will make phosphate a hot commodity in the next few years.
Therefore, buy phosphate.
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