JOHANNESBURG (miningweekly.com) – Plant nutrient minerals development company Kropz, which is developing the Elandsfontein phosphates mining and processing project in the Western Cape, has secured several offtake agreements ahead of production.

The cornerstone offtake agreement, for about a third of Kropz's production at market prices that will be negotiated yearly, is with Foskor, South Africa’s only vertically integrated producer of phosphate ore, phosphoric acid and granular fertiliser, in which the State-owned Industrial Development Corporation is the controlling shareholding.

“That works extremely well for both parties,” Kropz CEO Ian Harebottle told Mining Weekly Online.

The Port of Saldanha is 50 km from the developing Kropz operation, which has been delayed to undergo plant redesign.

Once production ramps up, Kropz will ship phosphates from the Port of Saldanha to Richards Bay, where the Foskor plant is located. This will be done at a transport cost lower than what it costs Foskor to transport material from its own mine in Phalaborwa to Richards Bay.

Besides being a rand hedge for Foskor, the low cadmium content of the Kropz ore will also provide Foskor with greater efficiency potential.

“So, I think it’s a win-win for them and us,” said Harebottle.

From a national viewpoint, the intra-South Africa phosphates trading also means that important fertiliser material will remain in South Africa, assisting the South African farmer.

South Africa is a substantial net importer of fertiliser, despite a large percentage of the South African economy being driven by agriculture, including small-scale farming, which is also a large supporter of the livelihoods of the people of Africa.

The fertiliser industry is recovering from a ten-year low, with delays in downstream fertiliser projects resulting until recently in a price-depressing oversupply of phosphate rock.

Kropz’s other offtake agreements already concluded involve marketing into the Americas and India through major trading companies.

“It’s already very clear that we’re not going to struggle to sell our rock, which is a nice position to be in,” he added.

Kropz, in finalising the design of its plant, is targeting lower initial output numbers, at which it will still be profitable, ahead of ramping up towards its capacity of between 1.2-million tons and 1.5-million tons.

PRICE PERFORMANCE

Plant construction is coinciding with a rebound in the phosphate price, which is expected to continue.

The market standard is export price from Morocco, which has risen from $75/t to just under $100/t as fertiliser markets stabilise.

“We said that fertiliser would recover and we are clearly seeing that rebound, so demand is there and pricing is clearly on the mend,” was Harebottle’s comment.

The company, which spent $120-million to bring the Elandsfontein project to 95% completion, expects to require $16-million more capital to cover plant augmentation.

Instead of ore beginning to go through the plant by the beginning of this year, that may now only happen in the second half of next year.

With much laboratory work completed, the company is now taking steps to put material through the plant as part of what Harebottle described as “a nice slow process”, which is also being emulated when it comes to raising additional funding.

“At the moment, we’re managing with the funding we have and we don’t want to rush,” he said.

Investment company empowerment partner African Rainbow Capital, chaired by mining magnate Patrice Motsepe, owns 25% of the developing Elandsfontein.