The sanctions implemented against Russia and Belarus in connection with the war against Ukraine have caused many nations to reconsider their supply chains.
Potash, a key mineral in agriculture, is one of many resources impacted by this shakeup. Until recently, Russia and Belarus together accounted for 40 percent of global potash exports.
There is now a global push to reduce reliance on unstable and questionable jurisdictions such as these two countries. This creates both significant growth and considerable investment opportunity for investors interested in potash production, and one potential player investors might not be aware of is the African country of Gabon.
Understanding the importance of potash
Potash is essentially a catch-all term for any potassium-containing salt, though potassium chloride, also known as muriate of potash (MOP) is by far its most common form. Potash may also be mined from potassium sulfate, often called sulfate of potash (SOP).
Potash is one of the most crucial mineral resources in agriculture and is among the most widely used fertilizers alongside phosphate. This is primarily because potassium is essential to plant health, impacting water retention, root growth and photosynthesis. According to the Potash Development Association, a shortage of available potash can be devastating to crops, leading to significantly reduced yield and quality.
Volatile global climate
The International Food Policy Research Institute (IFPRI) has noted disruptions to the global fertilizer market as a result of the war in Ukraine. Food costs and fertilizer prices have both skyrocketed, reaching record-high levels in 2022. To make matters worse, this occurred when fertilizer prices had already reached historic levels due to pandemic-related supply issues.
The economic sanctions against Ukraine’s aggressors have not had as much of a direct impact on global potash supply as one might expect. With the exception of the European Union, the majority of sanctions related to the war make allowances for potash and other agricultural products. Despite this, however, many countries still chose to cut off potash imports from Russia and Belarus, which the IFPRI notes is largely due to a combination of restrictive banking regulations, high insurance costs and the possibility of becoming ensnared in a new crop of sanctions.
In addition to socio-political factors, interruptions to the natural gas and coal supply chains have also made an impact as both are crucial energy sources in fertilizer production. The problem was further amplified by the fact that roughly three quarters of countries import at least half their fertilizer.
Likely eyeing the volatile global climate, many countries have also begun reigning in potash exports, either overtly banning trade or introducing a series of increasingly strict export restrictions.
As is often the case, smaller and more impoverished nations bear the brunt of market instability. This is especially true in Africa, which has been struggling to secure an adequate supply of the mineral resource for years. Current market conditions have brought this long-standing problem to a head and may ultimately destroy the African agricultural sector, rendering farming families in many countries unable to survive.
Gabon: A potential source of potash
A country located on the west coast of Africa along the equator, Gabon is already one of the largest global producers of manganese, and it also hosts potash reserves likely in excess of 10 billion MT. Much of this mineral wealth is concentrated in several highly promising deposits along Gabon’s coast. By leveraging the infrastructure already in place from the country’s manganese production, mining and exploration companies have the potential to establish an incredibly efficient and cost-effective domestic source of potash, which could even ultimately make the country a major player in the global potash market.
Developing a stable African supply of potash could also be instrumental in improving the region’s struggling agricultural sector. Farming communities and families will have easy access to critical fertilizers that allow them to increase their yield, which could be a significant step towards addressing Africa’s widespread food insecurity.
The country’s proximity to Brazil, the second largest importer of potash fertilizers and located directly across the Atlantic Ocean, makes Gabon ripe for strategic potash resource development.
Gabon is also known as one of Africa’s best mining jurisdictions, with favorable regulations, a skilled workforce and a relatively stable economy. Surprisingly, although there are several organizations exploring and developing projects for other resources, Gabon’s potash resources are both underutilized and underexplored. At the time of writing, there is only one major mining company with plans for potash development in Gabon.
Vancouver-based Millennial Potash (TSXV:MLP) recently signed an agreement to earn up to 100 percent of the Banio potash project. Millennial Potash’s leadership team is not new to potash project development. The company’s chairman of the board, Farhad Abasov, was instrumental in the development and successful exits through acquisition of two potash projects in Africa and North America, Allana Potash and Potash One respectively.
With potash-rich horizons extending to depths of 230 to 520 meters, the Banio project spans 1,238 square kilometers on Gabon’s southwest coast. Situated just north of the Republic of Congo — a region known for hosting significant potash deposits — Banio exists in close proximity to several projects, including the historic Holle mine, the Mengo project and the Sintoukola project.
These all exist within a region known as the West Africa Potash Basin, which spans from Africa’s western coast to its center. Because there’s already infrastructure on-site, drilling at Banio is currently underway. Millennial Potash expects to complete a preliminary economic assessment by the end of 2024.
The war in Ukraine has had a significant impact on multiple global supply chains, potash among them. Although some countries have been able to weather the market instability relatively unscathed, smaller nations, particularly those that were already struggling, have experienced considerable difficulty. There are few regions in which this is more pronounced than Africa.
Gabon is among several African nations that may represent a solution to this problem. Its rich coastal potash deposits make it an ideal target for sustainable potash production. Although the sector is still relatively inactive, it is nevertheless brimming with potential. Knowing this, investors would do well to keep Gabon on their radar.
This INNSpired article is sponsored by Millennial Potash (TSXV:MLP). This INNSpired article provides information which was sourced by the Investing News Network (INN) and approved by Millennial Potash in order to help investors learn more about the company. Millennial Potash is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Millennial Potash and seek advice from a qualified investment advisor.