Ma’aden, Mosaic, Sabic Plan $7 Billion Phosphate Venture

Saudi Arabian Mining Co., Mosaic Co. and Saudi Basic Industries Corp. agreed to form a $7 billion joint venture to mine phosphate rock and process it into fertilizer.

Saudi Arabian Mining, also known as Ma’aden, will hold a 60 percent stake in the venture, Plymouth, Minnesota-based Mosaic said today in a statement. Mosaic, the world’s largest producer of phosphate fertilizers, will have a 25 percent interest and Sabic 15 percent.

The Wa’ad Al Shammal Phosphate Project will be built at Wa’ad Al Shammal Minerals Industrial City in northern Saudi Arabia, Mosaic said. Processing facilities at Ras Al Khair Minerals Industrial City on the east coast will be expanded. The two locations will be linked by an existing railway, Ma’aden said in a statement. The project will have a capacity of about 3.5 million tons a year and start in late 2016.

Global demand for phosphorous, a nutrient essential for photosynthesis in plants, is growing by about 1.5 million tons a year, Mosaic Chief Financial Officer Larry Stranghoener said today in a phone interview. The company says the world will require increasing quantities of fertilizers to meet the needs of a population that’s growing and eating more protein.

“We remain firm believers in the food story,” Chief Executive Officer Jim Prokopanko said in the same interview. “We are going to have a world-scale plant with secure supplies of raw materials as close as you can be to the growing Asian markets.”

Florida Mines

Mosaic currently mines in Florida, where Prokopanko says it’s operating at maximum capacity. The company will invest about $1 billion in the Saudi project, funded over four years starting this year, and market about 25 percent of the output.

Mosaic shipped 11.8 million tons of phosphates in 2011, according to data compiled by Bloomberg. In January it forecast phosphate sales in the fiscal quarter ended Feb. 28 would be 2.5 million to 2.8 million tons at an average selling price for diammonium phosphate at $485 to $515 a ton. Mosaic is scheduled to report its earnings on March 28.

Diammonium phosphate, the tradeable form of phosphate, was at $530 a ton today in the U.S. Midwest, according to data from Green Markets, a fertilizer-industry information service. The price has climbed 5 percent in the past 12 months.

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