SA Minerals In Demand, Globally

South Africa’s mineral resources are continually recognised as outstanding on global markets, whether it’s metals, coal, or phosphates. Foskor mines phosphoric rock which is used to make acids and fertilisers, and without the dominant player (Russia) trading freely, Foskor has been able to reinforce its position as a leading international partner. There is more to come from this historic, proudly South African business.

On South Africa’s east coast, at Richards Bay, valuable and sometimes hard to find minerals and commodities are loaded to vessels heading off around the world. This export activity keeps the world turning, and reinforces South Africa’s importance as a global mineral resources powerhouse. Simply, without the excellence of what hides in the earth in South Africa, economies would not advance the way they do.

Whether it’s precious metals, battery minerals, or diamonds, the country is famed for what it can pull from the ground. But at Richards Bay, one the key products moving is phosphate. Coming from the local Foskor processing facility, after being railed from Phalaborwa in Limpopo on the fringe of the Kruger National Park. In Phalaborwa, a vast reserve of phosphate rock is cut from the earth in a mass mining operation that has been active since 1953. 70 years since it was commissioned, the mine is expected to hold more than 1.5 billion tons. If accurate, that would keep the mine active for the best part of the next century based on current annual target production.

Unlike the metals and coal that the country exports, phosphoric rock is not used in manufacturing or energy. Agriculture, food production, and the chemical industry is the end goal, with phosphoric rock processed into phosphorus, typically using sulphuric acid and ammonia as catalysts. It is added to a combination of other materials to make world-class fertiliser that is spread over crops to ensure healthy growth. Phosphorus helps plants to use and store energy and assists in the process of photosynthesis, alongside potassium and nitrogen. For farmers with wide open fields and productive lands, fertilisers made with South African materials add that extra magic that brings strong and healthy crops to fruition.

By producing phosphoric rock at scale, South Africa joins major economies including China, USA, Russia, Egypt, Australia, and Saudi Arabia as those with top phosphate reserves. In Africa, Morocco, Western Sahara, Senegal, and Algeria are also recognised phosphate countries, but South Africa has a long-standing and proven route to market with fundamentals in place to ensure quality and volume.

MARKET OPPORTUNITY

When Russia invaded Ukraine in February 2022, the price of fertiliser soared. With Russia a key exporter but exiled from global markets, supply diminished quickly. Prices had already been high following the Covid-19 chaos, supply chain breakdowns, and a spike in energy input costs. While agricultural products were exempt from some restrictions, the reputational issue of trading with Russia and the cost of navigating the complicated banking process required to deal with the country made fertiliser a product driving demand-pull inflation. This placed South Africa and Foskor in a somewhat fortunate position. The company, which is majority owned by the state-owned Industrial Development Corporation (IDC), had been through a number of years of challenge around production and efficiency, but with prices at a peak, there was an opportunity.

Foskor quickly went about completing orders for major clients in Europe, Asia, Latin America, the Middle East, at home in South Africa and across the SADC region. The company can produce 2.4 million tons of phosphate rock each year, and the product is highly rated, often regarded as some of the purest in the industry. It reassured customers of its stability, and reminded that, despite uncertainty around the rail line operated by Transnet between Phalaborwa and Richards Bay, Foskor could fulfil.

The IDC was delighted with the upturn in Foskor’s fortunes and its more than 1500 people were praised for their contribution. Ebrahim Patel, South Africa’s Minister of Trade, Industry and Competition said: “As part of improving institutional capability, the IDC has focused on the turnaround of struggling subsidiaries – progress has been made with Foskor, which has moved from being a drain on the Corporation’s balance-sheet, to a net profit position, contributing to IDC Group’s income.

“In support of our export strategy, additional exports of about R40.7 billion will be generated by IDC-supported companies, for committed funding in the year under review,” he added, speaking of the organisations achievements in the year ending 31 March 2023

IDC CEO TP Nchocho was also happy, commenting: “With support, our subsidiary Foskor turned its fortunes around to deliver a net profit of more than R700 million.”

FRESH FUTURE?

Isaac Malevu demonstrated clearly the success that Foskor was realising. “Foskor’s revenue increased by 64.8% during the period due to increased sales volumes and commodity prices, and an overall improved operating environment… [The company], with improved profits of R2.8 billion, managed to turn around a loss of R541 million in 2021/22 through cost efficiencies and a marked recovery of impairments on financial assets,” he said.

Previously, the IDC had been clear when stating that it could not realistically remain as a major shareholder in Foskor and that private investment should be sought to allow the company to thrive. The IDC wants to dilute its shareholding or sell Foskor to allow capital to flow into the business. The strong performance this year has made any transaction more sustainable. Now, a JSE listing is being discussed and while nothing is finalised without board approval, there is hope that fresh equity could be attracted.

For Foskor people, there is hope that a fresh period of strong and positive business could return the brand to a proudly South African icon. In 2020, the company was lauded as a Top Employer, recognised by the Top Employers Institute of the Netherlands, which certifies people practices within forward-thinking organisation globally. At the time, the company was said to have exceptional employee conditions with a nurturing and developmental culture which allows talent to thrive. Recently, the company was working with the National Union of Mineworkers (NUM) to restore employee confidence and bring a consultative approach to strategic planning for the future.

With an opportunity to cement itself on the international stage, Foskor remains busy as its people work hard to take advantage of the prospects in the market. One certainty that remains whatever the case, South African minerals are some of the best in the world, and global markets need high quality, reliable supply more than ever before.