INDUSTRIAL METALS, MINERALS & MINEABLE ENERGYINVESTMENT SUMMIT

IRONMONGERS’ HALL, CITY OF LONDON ● THURSDAY, 3 NOV 2011

www.ObjectiveCapitalConferences.com

Feed the world: the global fertiliser marketSteven Markey – CRU Strategies

31 Mount Pleasant, London. WC1X 0AD

Tel: +44 20 7903 2132Fax: +44 20 7833 4973

www.crugroup.com

CRU│Fertilizers

Steve Markey, CRU StrategiesObjective Capital

November 2011, London

Feed the World: The Global Fertilizer Market

CRU│Fertilizers

Introduction

NitrogenNitrogen OverviewImportant Trends

PhosphatePhosphate OverviewImportant Trends

PotashPotash OverviewImportant Trends

Fertilizer OutlookSupply & Demand

Key Points and Conclusions

OUTLINE

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Fertilizer sector is a combination of mining industries and chemical industries.

ABC’s of Fertilizer – Three Primary Plant Nutrients

N nitrogen a key component of amino acids which

make up plant proteins and chlorophyll

P phosphorus is important in fruiting,

flowering, and root development

K potassium improves crop quality and

increases nitrogen uptake

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Nitrogen Overview

Nutrient content is defined in terms of elemental N

Ammonia Capacity Urea Capacity

China 43%China 33%

USA 6%

Russia 7%

Nitrogen FertilizerConsumption

China 36%

India 9%India 7%

IndonesiaUkraine

Trinidad

Canada

The Gulf 8%The Gulf 10% India 12%

Egypt

IndonesiaRussia

USA 6%Russia 6%

Natural Gas is the primary feedstock typically representing 70-80% of ammonia production cost – 80% of N capacity uses natural gas as feedstock

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Nitrogen trends

Rising price of Russian gas – expect to see shutdowns in Ukraine and eastern Europe as gas market in Russia is liberalized. Ukraine urea exports to fall 35-40% by 2020.

More urea for export – regions with cheap natural gas continue to build urea for export business. 25 M tpa between now and 2015

13.7 M tpa in MENA

20052010201520200

50

100

150

200

250

22

23

24

25

26

27

28

29

30

DemandTrade% Trade

M Tonnes %

Urea: Nitrogen product of choice representing 60% of total N fertilizer use

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62% of identified recoverable phosphate rock reserves are in Morocco

Phosphate Overview

Nutrient content is defined in terms of P2O5 or BPL

Rock CapacityPhosphoric Acid

Capacity

China 30%

USA 20%Morocco 10%

Russia 6%

China 33%

USA 16%Morocco 13%

Russia

Phosphate FertilizerConsumption

Tunisia

BrazilChina 32%

India 17%USA 10%

Brazil 8%

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Phosphate Trends

Phosphate rock market stable at 10-15% of total production as established players continue to invest in downstream capacity offsetting new pure play mining entrants:

Legend and Minemakers – Australia Bayovar – Peru Sandpiper - Namibia

Advent of Ma’aden – massive integrated phosphate capacity in Saudi Arabia will weigh on prices as production is ramped up over the next several years.

5.3 m tonnes phosphate rock (Al-Jalamid) 3 m tonnes DAP

Decline of Florida – diminishing reserves and increasingly stringent environmental regulations will reduce production:

05

101520253035404550

Florida Other states

106

t pho

spha

te ro

ck ca

pacit

y

Source: USGS (2005)

DAP and MAP = 65% phosphate fertilizer

Others include• TSP• SSP

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9

BRAZIL

Aguia ResourcesMBAC FertilizersRedstone ResourcesRio Verde MineralsValeAmazon Mining HoldingCopper Range

AUSTRALIA

Arafura ResourcesKorab ResourcesKrucible Metals

MinemakersLegend

Oklo UraniumPhosphate Australia

Rum Jungle Resources

PERU

Cementos PacasmayoFocus VenturesGrowMax Agri CorpStonegate Agricom

IDAHO

Stonegate AgricomKAZAKHSTAN

EuroChemSunkar Resources

NAMIBIA

Minemakers / Union Resources

ROC / DRC / ANGOLA

Cominco ResourcesMinbos Resources

UGANDA

Nilefos Minerals

MALI

Great Quest MetalsOklo Uranium

TUNISIA

Numidia PhosphateSra Ouertane

FINLAND

Yara

ONTARIO

PhosCan Chemical Corp.

MOZAMBIQUE

Vale

IRAQ

Iraq State Company for Phosphate

QUEBEC

Arianne Resources

GUINEA-BISSAU

Resource Hunter Capital Corp.

Phosphate Exploration Activity

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Very few producers – production capacity concentrated in Canada, Russia, BelarusPoor overlap between areas of high production and areas of high demand leading to 80% of demand is met by imports

Potash Overview

Canada 36%

Russia 17%Belarus 14%

Nutrient content is defined in terms of K2O – fertilizer-grade MOP contains 60% K2O

KCl Capacity KCl DemandUSA 18%

Brazil 13%

China 16%

Germany

Israel

China

Jordan

India 12%

EU 10%

Indonesia &Malaysia 7%

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19%

16%

16%12%

10%

7%

4%

16%

80% of 2010 sales from 6 companies 2 JVs handle 65% of seaborne trade

KCl Sales 2010

QSL Potash Co., Ltd

40%

25%

35%

KCl Exports 2010

BPC includes IPC

Potash Overview

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Potash Trends

Arrival of mining conglomerates – higher potash prices have attracted mining majors into the sector.

BHP recently failed in a $40bn bid for PotashCorp., but are progressing a greenfield project in Saskatchewan.

BHP Billiton Vale Rio Tinto (In, out, back IN!)

Uralkali/Silvinit merger – two Russian companies brought together by Suleiman Kerimov. Creates world’s largest producer. Exports from new company and Belaruskali will be marketed co-operatively. Increases supplier pricing power.

New Players EuroChem – Gremiachinskoye 2.3 m 2013

Brownfield expansions

PCS building 7m tonnes new capacity – 42% of worldwide brownfield expansions 2009-2019Uralkali 4.5 m tonnes by 2019

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UNITED STATES

Transit HoldingsAmerican PotashUniversal Potash

Mesa UraniumDakota Salts (Sirius Minerals)

BUA (Ringbolt Ventures)Passport Metals

Red Metal

ARGENTINA

Allana PotashDajin ResourcesLithium Americas CorpMarifil Mines / Oxbow / SacharrumOrocobrePRC (Vale)Rincon Lithium Rondonia Minerals

BRAZIL

Amazon MiningAtacama Minerals

Brazil Potash Corp.Lara Exploration

PetrobrasPotash Atlantico

Redstone ResourcesRio Verde Minerals

Talon MetalsVale

ERITREA & ETHIOPIA

Allana PotashBHP Billiton

Ethiopian Potash CorpSainik / IFFCO

South Boulder Mines

AUSTRALIA

AusPotash (Sirius Minerals)Queensland Potash (Sirius Minerals)

Potash WestReward Minerals

South Boulder MinesEast Coast Minerals

THAILAND & LAOS

ASEAN Potash MiningAsia Pacific Potash (Ital-Thai)

Mingda ThailandSinoagri Mining

Sinohydro MiningViet-Lao Salt & Chemicals

Zhongliao MiningKaiyuan Potash

RUSSIA (URALS)

AcronEuroChem

CONGO

MagMineralsCongo Potash Co.

Elemental Minerals

NEWFOUNDLAND

Altius ResourcesVulcan Minerals

PERU

GrowMax Agri CorpSalmueras Sudamericanas

RUSSIA (SIBERIA)

Red Emperor Resources

KAZAKHSTAN

Fortis Mining / Ji’an Resources / WyotSatimola

TURKMENISTAN

Turkmenkhimiya

SASKATCHEWAN

Acron / AgracityBHP BillitonCanada Potash Corp.Devonian PotashEncanto PotashPotash OneKarnalyte ResourcesTri-River VenturesWestern PotashVale

MONGOLIA

General Mining Corp.

ALBERTA

Grizzly DiscoveriesCanasia IndustriesCloudbreak ResourcesFirst LithiumPacific Potash Corp.Softrock MineralsSidon ResourcesUniversal Potash

MANITOBA

BHP BillitonWestern Potash

UNITED KINGDOM

York Potash (Sirius Minerals)

BOLIVIA

Comibol

Potash Exploration Activity

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World Fertilizer Demand

Global aggregate application ratio for N:P:K =

1.0 : 0.37 : 0.26

This suggests growth rates for P, and particularly K, should outperform N.

Fivefold growth in half a century

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Fertilizer Demand

N P K0

10

20

30

40

50

N P K0

5

10

15

20

N P K02468

10

N P K0

5

10

15

20

N P K02468

10

Brazil

USA EU

India

China

million tonnes nutrient

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.0

25.0

50.0

75.0

100.0

125.0

150.0

175.0

200.0

urea DAP/MAP MOP

mill

ion

t/y As P2O5

Fertilizer Demand Forecast

+3.2% CAGR

+4.6% CAGR

+2.7% CAGR

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Short-term Demand Drivers

Crop prices – international crop prices have a big effect on fertilizer demand and prices

Fertilizer prices – P&K Holiday without immediate effect on yields

Tactical buying – consumers are less likely to build inventory (more risk averse post 2008) creating more market volatility and higher prices will stretch financing capacity

Jan

01Ju

l 01

Jan

02Ju

l 02

Jan

03Ju

l 03

Jan

04Ju

l 04

Jan

05Ju

l 05

Jan

06Ju

l 06

Jan

07Ju

l 07

Jan

08Ju

l 08

Jan

09Ju

l 09

Jan

10Ju

l 10

Jan

11Ju

l 11

050

100150200250300350400450

Wheat, Corn, Soya Urea, DAP, K2O

Index of grain and fertilizer prices – 2006=100

Current Price vs AverageBenchmark 1990-2005

Urea 390%DAP 343%MOP 550%

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19901992

19941996

19982000

20022004

20062008

20102012

20142016

20182020

10%

15%

20%

25%

30%

35%Historical (USDA)Forecast (FAPRI)

Shading indicates StU "danger zone"

Maize global stocks to use ratio

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Long-term demand driversRising population + Falling arable land per capita Need to raise crop yields

Fertilizer is widely under-applied and inefficiently applied in developing economies poor yieldsBetter nutrient balance – ratio of N : P&K is too high in many developing countries

USA China Brazil India0

20

40

60

80

100

120Corn Rice Soybeans

yiel

d (in

dexe

d to

USA

)

Crop Yields

Data: FAO

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Meat & Biofuels are Significant Drivers

020406080

100120140160180

ProductionConsumption

Bln

Litr

es

Biofuels: the food/feed/fuel debate – many governments have set biofuel targets, but bio-fuels are today only significant in USA (corn), Brazil (sugar cane) and Germany (rapeseed).

Future is dependent on political factors, oil prices, technology developments (“2nd gen biofuels”). Modest direct impact on fertilizer demand, more potential to affect crop prices.

0

50

100

150

200

250

300Global Livestock and Poultry

ConsumptionPoultryPorkBeef

Dem

and

(M to

nnes

)

Changing diets – more protein (1kg meat requires 3-10kg grain), more premium products like fruit

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Key Nitrogen Conclusions• Chinese exports and trade policy remain a significant

wild card for urea trade

• Government decisions have major consequences (China export tariff, Russia-Ukraine gas prices, Indonesia export moratorium)

• Substantial volume of new capacity to come on-stream, following investments made during the boom years of 2007-8

• Evolving energy prices (and production costs) remain fundamental!

• Shale gas production has changed North America

20012003

20052007

20090.01.02.03.04.05.06.07.08.0

China Urea Exports

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Key Phosphate Conclusions

• Major rock producers are all looking at downstream integration projects

• Full impact of Ma’aden is yet to be felt by the market

• Some early warning signs of demand destruction in India

• What is the long term solution to the Florida rock problem ?

• How many new projects will get financing in today’s environment?

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Key Potash Conclusions

• Potash demand is recovering worldwide but some buyer resistance is still occurring (India)

• Producers continue to push the price envelope but slower pace may avoid severe demand destruction seen in 2008

• Future ownership of Belaruskali will have significant market impact

• Multitude of brownfield and prospective greenfield projects will likely test pricing stability in 2-3 years

31 Mount Pleasant, London. WC1X 0AD

Tel: +44 20 7903 2132Fax: +44 20 7833 4973

www.crugroup.com

CRU│Fertilizers

Steve MarkeyCRU Strategiesthe consulting arm of CRU Fertilizers (formerly British Sulphur Consultants)

Thank you for listening

TEN-YEAR OUTLOOK SERVICES

+44 20 7903 2127 steve.markey@crugroup.com www.crugroup.com

Available from CRU Fertilizers...

AmmoniaUreaPhosphate RockPhosphoric Acid, DAP, MAP & TSPPotassium ChlorideSulphurSulphuric Acid

Nitrogen fertilizersPotassium chloridePhosphate Rock (coming March 2011)

COST SERVICESAvailable from CRU Strategies...

Market Decisions (e.g. pre-feasibility and BFS)Negotiation SupportValuationStrategy DevelopmentPerformance Improvement

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Supplemental Slides

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Phosphoric acid

Sulphuric acidDi-ammonium phosphate (DAP)

(or other fossil fuels)

Potassium salts

Phosphate rock

Natural gas

Sulphur

Ammonia

Urea 60% NITROGEN

FERTILIZERS

DAP & MAP 65% PHOSPHA

TE FERTILIZERS

Fertilizer OverviewRaw materials

Potassium sulphate (SOP)

Potassium chloride (MOP)

Potassium nitrate (NOP)

Mono-ammonium phosphate (MAP)

Single superphosphate (SSP)

Triple superphosphate (TSP)

Urea

Ammonium nitrate (AN)

Ammonium sulphate (AS)

Urea Ammonium Nitrate (UAN)

Potassium chloride

Intermediates Fertilizers

MOP 90%

POTASHFERTILIZERS

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New Export Urea Capacity (‘000 t/y)

* Based on surplus Ammonia already produced at Al Jubail

Start-up Plant Country Urea

EASTERN HEMISPHERE

Q4 2011 Qafco V Qatar 1,270

2011NPC – Shiraz Iran 1,075

2014 Safco V Saudi Arabia 1,073*

2013 Fertil II UAE (Abu Dhabi) 1,155

Q4 2012 Qafco VI Qatar 1,270

2015NPC – Golestan Iran 1,075

2015NPC – Lordegan Iran 1,075

2015NPC – Zanjan Iran 1,075

2014 Perdaman Australia 2,000

2013 Matix Fertilizers and Chemicals India 1,300

Mid 2014 PT Pupuk Kaltim V Indonesia 1,155

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New Export Urea Capacity (‘000 t/y) – continued

Start-up Plant Country Urea

WESTERN HEMISPHERE

Nov/Dec 2011 Sorfert Algeria 1,138

Mid 2012 EAgrium / MOPCO Egypt 1,270

2012 Pequiven – Puerto Moron Venezuela 726

2015 Tatgazinvest Russia 677

2012 JSC Cherepovets Russia 495

Mid 2013 Algeria Oman Fertilizer Company Algeria 2,310

2013/14 Pequiven – Jose Venezuela 1,452

2014 Pequiven – Puerto Nutrias Venezuela 726

2013? CF/Pluspetrol DOESN’T LOOK LIKE IT IS GOING AHEAD

Peru 1,073

2014 Olam Int/ Tata Chemicals/ gov of Gabon JV

Gabon 1,271

Mid 2014 or 2015 Petrobras, Tres Lagoas Brazil 1,188

2014 Tierra Del Fuego Power & Chemical Co. Argentina 800

Mid 2015 Cuvenpeq Cuba 726

Total 26,302