Phosphate is an essential component of global food production, with almost 90% of all production going to the agricultural sector.
As well as being a base ingredient in most fertilizers around the world, the mineral is also used as a food preservative, to supplement animal feed, and in products such as lithium iron phosphate batteries.
As the world’s population continues to grow, the demand for phosphate will only increase. While this trend may make phosphate a very attractive investment, it is not something one should dive into without research.
What makes phosphate so important?
Besides nitrogen and potassium, phosphorus – the chemical element contained in phosphate – is an essential nutrient for plants. In addition to stimulating root development and general growth, it plays a vital role in allowing plants to capture and convert energy from the sun. Without it, plants can experience severe growth retardation or even death.
In other words, phosphate is essential in all forms of agriculture, from animal feed to fruits and vegetables. This is where the problem lies. The demand for phosphorus is increasing at such a rate that the world has started to experiencing fertilizer shortages.
Part of the problem is global overdependence on acid-based chemical fertilizers. Due to industrial agriculture and over-exploitation, critical agricultural land is increasingly set aside. This means that without fertilizer it is difficult, if not impossible, to grow anything there.
According to the International Fertilizer Association, about 73% of the world’s soils lack phosphorus.
It’s not hard to see what could happen to the global food supply chain if the phosphate market were disrupted. We have already experienced disruptions during the pandemic, which have led to soaring food prices and widespread shortages. If the current global phosphate market is any indication, we could be much worse.
Example: at the end of 2022, we experienced the third major phosphate fertilizer price spike in 50 yearsaccording to researchers from the UK Phosphorus transformation strategy.
An unstable global market
As things stand, the global phosphate supply is extremely vulnerable to disruption.
This is mainly due to the fact that approximately 85% of the world’s remaining high-grade rock phosphate is concentrated in just five countries. China is by far the largest of them, producing about 85 million metric tons (MT) of phosphate in 2022. Morocco, which notably contains about 70% of known phosphate reserves, was in second place with 40 million from MT.
If ever the phosphate supply of either of these countries were significantly disrupted, the results could be catastrophic. Since the Chinese government is used to leveraging its resources as a political tool, this could happen sooner rather than later. The global climate, after all, is not exactly what one would call geopolitically stable.
It’s not just a lack of supply that’s the problem either. Phosphate use and production is not exactly sustainable. Chemical runoff from acid-based liquid phosphate fertilizers is a common concern, as it toxics groundwater and can poison wildlife.
Right now, the phosphate market needs two things. First, a more sustainable means of production, refining and agricultural application. Second, mining companies striving to discover and develop new, more environmentally friendly phosphate resources.
The good news is that a few companies are well on their way to achieving both of these goals, thanks to a process known as remineralization and the use of raw rock phosphate.
Understanding the different phosphate deposits
Phosphate rock, colloquially known as phosphorite, occurs in many different forms. It’s actually a generic term for several different apatite-based mineral groups. The minerals themselves take the form of sedimentary or igneous deposits, the latter accounting for around 80% of the world’s phosphate production.
The traditional process for making acid-based fertilizers involves dissolving phosphate rock in nitric or sulfuric acid. Diammonium phosphate (DAP) and monoammonium phosphate (MAP) are created by reacting ammonia and phosphoric acid, which forms a slurry which is then solidified to produce a granular fertilizer.
However, there is growing evidence that the use of certain types of crushed raw rock phosphate (granulated phosphate rock) can also be used for remineralize and revitalize the soil. More importantly, it can potentially achieve this without any of the dangerous side effects of traditional acid-based chemical fertilizers.
About 95% of all known phosphate ores suitable for acid-based fertilizers contain impurities like uranium, thorium, and cadmium that can harm plant growth and potentially prove toxic to humans. Crude phosphate ore which is suitable for direct application is incredibly rare. It’s that remaining 5% of clean rock phosphate that has the potential to change the game.
Top Phosphate Mining and Exploration Companies to Watch
Given the importance of phosphate production to the global food supply, it’s no surprise that there are several stocks to consider as an investment in space – we’ve included some of the most promising here. -below.
Arianne Phosphate (TSXV:DAN), for example, is a phosphate company with a development-stage phosphate project located in Quebec. She is currently collaborating with the Environmental and Biotechnology Research Group at Cégep Rivière-de-Loup to develop a new breed of acid-based fertilizer that uses the company’s phosphate concentrate combined with organic waste. It is also exploring the potential to supply high quality materials to the energy sector.
Australian company Avenira (ASX: AEV) owns and operates the Wonarah phosphate project, one of the largest known phosphate deposits in Australia. Wonarah hosts measured resources of 64.9 million MT at 22.4% phosphorus pentoxide. As with Arianne, Avenira plans to supply acid-based phosphate to the battery market.
Mosaic (NYSE:MOS), meanwhile, has the distinction of being one of the world’s largest producers and marketers of concentrated acid-based phosphate and potash crop nutrients. The company maintains phosphate operations in Florida and Louisiana as well as South America. Its stock has benefited greatly from rising phosphate prices and demand.
Nevada Organic Phosphate (CSE:NOP) is arguably one of the most unique of these companies. Its flagship project, Murdock Mountain, hosts one of the 5% clean rock phosphate resources. The most remarkable thing about this resource is that it contains no harmful impurities – it is environmentally friendly and perfectly suited for direct application as a granular rock phosphate fertilizer. The company is focused on producing the only organic raw rock phosphate certified as eligible for organic farming, initially targeting the nearly US$6 billion organic food market in the United States.
Takeaway for investors
Although the phosphate market is an incredibly attractive investment target, not all phosphate mining and exploration companies are created equal. Consider not only current market trends and conditions, but also other aspects of each company’s value proposition, including sustainability efforts and business partnerships. More importantly, one must understand, at least in broad strokes, the state and nature of world phosphate production.
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