* Project led by Ma'aden offers MOS second geographical
* Analyst sees solid strategic move
* Shares down slightly in New York
By Rod Nickel
March 19 U.S. fertilizer producer Mosaic Co
plans to invest up to $1 billion in a joint venture to
produce phosphate in Saudi Arabia, giving the Minnesota-based
company a road into India and other growing Asian markets.
The $7 billion project, including a mine and chemical
complexes to make phosphate fertilizer, will be 60 percent owned
by Saudi Arabian mining and metals company Ma'aden. Mosaic will
own 25 percent and petrochemical company Saudi Basic Industries
Corp JSC (SABIC) will hold 15 percent.
Fertilizer companies have rapidly expanded production
capacity for the two other main crop nutrients, nitrogen and
potash, to cash in on increased food demand as Asia's population
Phosphate capacity has not increased as quickly, said Mosaic
Chief Executive Jim Prokopanko.
"The only way we're going to increase the food supply is
with more technology, principally crop nutrients applied to
fields around the world," Prokopanko said in an interview.
"This (project shows) our belief that phosphate has been
Mosaic shares were down 0.44 percent in late-morning trading
in New York at $61.66.
Prokopanko said that the project, serving India and other
Asian markets, will complement Mosaic's phosphate production in
Florida and Louisiana, which supplies North America and Latin
Mosaic's closest competitors in the global phosphate sector
are Russia's PhosAgro OAO and Morocco's state-run
phosphate monopoly OCP. Mosaic is the world's largest producer
of finished phosphate products, and the second-largest rock
phosphate producer after OCP.
"We think it's a solid move strategically for the company,"
said analyst Jeffrey Stafford of Morningstar.
Along with diversifying Mosaic's phosphate sources, the
Saudi Arabia mine should produce relatively low cost supplies
due to the project's integrated nature, Stafford said. It will
use low-cost natural gas to produce ammonia, which is a key
ingredient in making diammonium phosphate (DAP) and monoammonium
The joint venture would tie up as much as $1 billion for
Mosaic over four years, with two other major capital projects
still awaiting board approval.
Its board of directors is expected to decide this year on
whether to spend $2 billion to $3 billion to further expand
potash production in the Western Canadian province of
Saskatchewan. Mosaic is also considering building an ammonia
fertilizer plant in Louisiana for about $1 billion.
"We have a lot of financial flexibility," said Chief
Financial Officer Larry Stranghoener, citing cash and unused
debt capacity. "We see plenty of firepower to take advantage of
good opportunities and still have plenty of flexibility for
returning capital to shareholders."
Stranghoener stressed that Mosaic has not made final
decisions to proceed with the potash and ammonia projects.
Stafford said Mosaic's commitment to the phosphate project
is unlikely to affect its pending decisions on potash and
The Wa'ad Al Shammal phosphate project in northern Saudi
Arabia would produce 3.5 million tonnes of finished product
annually, including phosphate, animal feed and other products,
starting in late 2016.
Mosaic's role will be to help design, build and operate the
project, in exchange for one quarter of the project's
production. That volume would amount to at least 750,000 tonnes
of phosphate annually, an increase of about 8 percent on
Mosaic's current output.
The three companies expect to sign a definitive agreement in
the first half of 2013.