A West Perth-based company will be banking on the strong fundamentals of the latest hot commodity, phosphate, as it launches its $10 million initial public offering.
A West Perth-based company will be banking on the strong fundamentals of the latest hot commodity, phosphate, as it launches its $10 million initial public offering.
Phosphate Australia Ltd, formed in January this year, is the latest entity to join the list of established resource companies taking another look at a commodity that has surged in popularity in recent months.
Phosphate Australia non-executive chairman Jim Richards said although planning of the float had been under way for some time, strong fundamentals in the commodity had sped up its plans.
"The phosphate boom happened quite quickly, actually; it came out of nowhere and it caught a lot of people by surprise and I guess we moved very quickly at the time," Mr Richards said.
The commodity, part of a group of inputs for the manufacture of fertilisers, was thrust onto the global stage earlier this year when the world's largest exporting nation, Morocco, increased prices to around the current asking price of $400 per tonne.
Before that, prices were hovering around the $42/t mark for the past six years.
The surge in price is driven by several factors, including limited availability of agricultural land, increasing use of land for production of biofuels, and a growing world population.
At the centre of Phosphate Australia's suite of assets is the Highland Plains project, located in Australia's largest phosphate deposit region, the Cambrian Georgina Basin, which straddles the Northern Territory and Queensland border.
Mr Richards said the phosphate project was originally discovered and explored in the late 1960s by Australian Geophysical, and contained a historic estimate of 82.6 million tonnes of phosphate grading 20 per cent.
"It was a very interesting deposit, but it was not progressed at that time because of prices and circumstances globally," he said.
However, with demand forecast to outstrip supply over the next decade, Phosphate Australia has come along at the right time.
Last week, Heron Resources Ltd and Golden Cross Resources Ltd enjoyed healthy share price boosts following announcements concerning the commodity.
West Perth-based Heron released initial phosphate results from the company's Langey Crossing project, located about 40 kilometres south of Derby.
The company is already conducting a market assessment of the project's phosphate and said initial contact with prospective buyers had been positive. Heron managing director Mathew Longworth said that, once applications for the tenements had been granted, the company would expedite exploration and test work.
"The project is at an early stage but the initial signs are positive. We will now prioritise exploration and evaluation of this project," he said.
Meanwhile, Golden Cross executed an agreement with the Joe Gutnick-led Legend International Holdings Inc, which will earn up to 80 per cent of the phosphate mineral rights by spending $3 million on exploration and development on the former's Mt Isa project.
Phosphate Australia plans to spend $2.3 million on first-year exploration costs across its five phosphate projects and $520,000 on its uranium and iron interests.
The company expects to list on July 4.
