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Crop nutrients have double potential of coal being exited – Anglo

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Crop nutrients have double potential of coal being exited – Anglo

Photo by Anglo American
Anglo American's Woodsmith polyhalite mining shaft under construction.
Photo by Anglo American
Anglo American developing a crop nutrient project.
Photo by Anglo American
Anglo American underground rail tunnel at Woodsmith crop nutrient project.
Photo by Anglo American
Mark Cutifani

3rd August 2020

By: Martin Creamer
Creamer Media Editor

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JOHANNESBURG (miningweekly.com) – Covid-19 notwithstanding, diversified mining company Anglo American will this year be spending the $300-million that it forecast on the Woodsmith polyhalite project in the UK, which gives it entry into the crop nutrients business at a time when fertilising is being hailed a godsend to ease global food security fears.

On entering crop-nutrient mining and exiting thermal coal mining, Anglo CEO Mark Cutifani told analysts during a virtual conference: “I think it’s important to remember that as we transition out of thermal coal, we’re building the crop nutrients business, which probably has got double the potential contribution it can make to the business. We think that’s a pretty good swop.”

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The mine is being constructed some three kilometres south of Whitby, beneath the North York Moors National Park, in North Yorkshire, England.

The polyhalite has a compliant 88.8%-grade 290-million-ton reserve, a 2.69-billion-ton resource, and is a four-nutrient fertiliser, Mining Weekly can report.

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The Poly4 trademarked Woodsmith product, which can reportedly be used as a cost-effective alternative to traditional potassium-bearing minerals products, is earmarked for integration into Anglo’s mine-to-market capabilities.

Bought from the London-listed Sirius Minerals for $0.7-billion, it is targeting an initial 10-million tons a year from two shafts being sunk to 1 600 m depth.

The orebody, which is 50 m thick in parts, averages 25 m in thickness, and lends itself to bulk underground mining. The operation is calculated to have the potential to operate at a 50%-plus earnings margin.

Mined material will be belt conveyed along a 37 km tunnel to Teeside, for shipping to countries including Brazil, China, and the US. The slide that Anglo displayed during last week’s half-year presentation of results showed that 8 km of tunnelling, from Wilton to Lockwood Beck, has been completed so far.

On Covid-19, Cutifani told analysts during the company's virtual first-half results presentation: “We were able to get back to work relatively quickly, implemented our social distancing rules, and we’ve been something like 30% or 40% above on productivity in the underground operation, by changing and reconfiguring. We’re not quite at that level above our plan, but we’re on track to deliver the planned works for the year, that is the $300-million.

“As we look at the business, and we look at the market potential, we’re happier today than we were on the day that we bought the asset, on the basis of what we’ve done. Yes, there’ll be some technical adjustment, but they’re at the margin.

“We think generally, the team has got the configuration right and from our point of view, the market and the interest we’ve had from the market for the product has really been positive, particularly when you think about the new world, in terms of fertilisers, and what we’ll have to see in agriculture in the smarter use of fertilisers. The products we’ll be producing are certainly made to order for that new world. So, we’re very happy with where we are on Woodsmith,” Cutifani told analysts.

The publication World Fertilizer reported at the weekend the workforce on the Woodsmith project had increased from 600 in May to nearly 1 000 by the end of July, with more expected in the coming months.

Anglo crop nutrients business external affairs director Gareth Edmunds was quoted by the publication as saying: “After a brief pause at the beginning of the outbreak, we’ve been able to continue construction under new enhanced operating procedures based on, and in some areas exceeding, government guidelines. It’s important for the area that this project gets built and that we continue to deliver the jobs and opportunities for local businesses that are needed now more than ever.”

EXIT FROM THERMAL COAL

Anglo reduced its thermal coal footprint by 55% in 2015/16, when it sold assets that it did not calculate could make a material contribution to the company in the longer term. Currently, thermal coal, which represents 5% of earnings across the business, is set to fall below this earnings percentage over time, on the basis of price forecasts.

“So, we’re well on the way,” said Cutifani, who expects to be out of the thermal coal business within two to three years.

“From our point of view, that’s a good place to be. But at the same time, we’ve got to acknowledge that they are and remain low-cost, competitive assets, probably with a relatively shorter mine life than the balance of our assets across the portfolio, but a good pack of assets with a likely demerger within the next couple of years. We think that’s the right decision,” he added.

‘ABSOLUTELY THRILLED’

In response to UK journalist questions on Woodsmith during last week’s half-year results virtual media conference in which Mining Weekly participated, Cutifani said: “We’re absolutely thrilled with the purchase and very happy with the position we have.

“We think that over time, particularly with climate change, in all likelihood, the agricultural  sector, in terms of land use, will have to shrink to some degree, and we’re going to have to see more carbon sinks being developed,” he added.

Wikipedia describes a carbon sink as any reservoir, natural or otherwise, that absorbs more carbon than it releases, and thereby lowers the concentration of carbon dioxide from the atmosphere. Globally, the two most important carbon sinks are vegetation and the ocean, it adds.

“We think the use of fertilisers then becomes far more targeted as more science is applied and we think polyhalite is a product that plays into the market, particularly with the four-nutrient structure, low salt and the granular form.

“So, we think we’re in a good place right across all of our portfolio sectors. In terms of bulks, we certainly expect the recycling of steel to play a major role in the industry and we think iron-ore prices will be impacted by 2025.

“So, those that are relying on iron-ore revenue, in 2025, it will start to look a lot skinnier. The good news is that we’ve got very high iron-ore quality, which we think plays well into the new technologies, the new hydrogen technologies, as well as very high quality met coal.

“So, in time, we’re advantaged by the changes that we see from a climate change perspective, from a circular economy perspective, and certainly in terms of the broader grade approaches and the focus on the growing middle class,” Cutifani said.

Anglo produces diamonds, copper, platinum-group metals (PGMs), nickel, manganese, crop nutrients, iron-ore, metallurgical coal and thermal coal. In PGMs, it has reported a broadening of applications in support of hydrogen in particular.

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