Source: South Harz Potash.
Market Herald logo


Be the first with the news that moves the market

With the world’s population estimated to grow by 30% by 2050, further decreasing the availability of arable land, the demand for potash to maintain soil productivity and a thriving food supply is nothing short of vital.

Potash refers to the potassium-rich minerals commonly found in agricultural fertilizer. When paired with nitrogen and phosphorous, it facilitates optimum water use, carbon dioxide uptake, as well as pest and drought resistance, resulting in better crop yields in terms of size, shape, colour and taste.

The global potash market is led by four major players – Canada, Russia, Belarus and China – which accounted for 31, 18, 17 and 14% of global production in 2020, respectively.

Canada, Russia and Belarus are the top suppliers of muriate of potash (MOP), or potassium chloride (60% K2O equivalent), which is applicable to a wide range of essential crops, including rice and wheat, and represents a global market of 70Mt per year. China is the top provider of sulphate of potash, or potassium sulphate (52% K2O equivalent), which serves more niche crops like tobacco and avocado and represents a global market of 7Mt per year.

Russia and Belarus are currently under indirect and direct international sanctions due to their involvement in the invasion of Ukraine. This includes the E.U.’s outright ban on Belarusian potassium chloride, effective March 2, 2022, cutting off the equivalent of 20% of the bloc’s potash imports in 2020.

The ban has contributed to an over 100% rise in the contractual price of potassium chloride from US$221/t in January 2022 to US$562.50/t in July 2022 with spot prices exceeding US$1000/t, which has put a strain on farmers, already reeling from skyrocketing energy prices, and exacerbated COVID-related inflationary pressures from crops to table.

While Russian potash, representing 30% of E.U. imports in 2020, does not fall directly under sanctions, it remains at risk of significant logistical challenges and potential export restrictions contingent on how the Ukrainian conflict progresses.

Increased production from Nutrien, Canada’s top potash producer, is likely to meet E.U. shortfalls over 2022. That said, uncertainties remain due to the Ukrainian conflict, its effect on potash supply, and increased costs related to re-routing supply chains.

This state of affairs has placed the spotlight on E.U.-based potash companies to ramp up production, secure a domestic supply, reduce Russian and Belarusian dependency, and ensure European food security as its population continues to grow.

Source: South Harz Potash.

One such company, South Harz Potash (ASX:SHP) (OTCPK:DAVNF), holds the potential to expedite E.U. potash independence through its MOP-optimized mining projects in Thüringia in central Germany. Its three perpetual mining licenses and two exploration licenses contain a JORC mineral resource of 568Mt K2O (35Mt indicated and 533Mt inferred) over 659km2, an area as large as Perth, representing Western Europe’s most significant potash resource.

Considering E.U. sourcing of 5-6Mt K2O per year from 2010-2020 – including an average of 1Mt/y (60% of imports) from Russia and Belarus combined from 2017-2020 – South Harz is well-positioned to supply the bloc for generations to come through locally-sourced production. The company could also play a pivotal role in keeping up with global MOP demand, which is expected to grow to 91Mt by 2036, according to Argus Potash Analytics.

South Harz’s licenses benefit from data from over 300 historical drill holes, proximal infrastructure, and a shallow starting depth, which presents capital and operating cost advantages.

The licenses are also unencumbered by royalties or rents, offering optionality in the form of joint venture or offtake partnerships to reduce financing costs.

Tying South Harz’s catalysts together, Thüringia has been producing potash since the late 19th century, meaning the company benefits from a supportive regional government and a long history of skilled labour within Europe’s largest economy. Let’s now take a closer look at recent development work.

After defining four potential project areas across its licenses, South Harz identified Ohmgebirge (42Mt K2O inferred) as an ideal starting point thanks to its high-quality minerology, existing mine workings, and large voids for tailings disposal to minimize production impact.

A recent scoping study further substantiates Ohmgebirge as a world-class potash project. Supposing MOP production of 1Mt/y and a price of US$385/t FOB Hamburg, the underground mining operation would offer:

  • A K2O head grade of 13.5% and ore throughput of 4.5Mt/y
  • A post-tax NPV of US$1.279 billion (8%) with a payback period of 3.6 years
  • Low expected capital intensity of US$620/t vs. US$1,000-$1,500/t for global peers
  • An IRR of 26.6%

Ongoing pre-feasibility work is slated for completion by Q4 2023 and includes an optional phased approach (0.5Mt + 0.5Mt) to accommodate market demand. The company then intends to complete a definitive feasibility study by Q2 2024, followed by first production estimated for June 2027.

Successful development at Ohmgebirge would set the stage for additional mines on South Harz’s most prospective licenses, including Muhlausen–Nohra South (290Mt K2O), Muhlausen–Nohra North (164Mt K2O), and Ebeleben (69Mt K2O), potentially eliminating the E.U.’s dependence on potash imports over time amidst rising demand.

According to Argus, European MOP demand will reach 8.6Mt in 2022 (7.3Mt ex-Belarus) and grow to 9.6Mt by 2036, with only 4Mt estimated to be available through domestic supply. This places South Harz on a trajectory to establish itself as an anchor to the E.U.’s food supply against future geopolitical tensions. And with a share price hampered by hawkish monetary policy, now may be the perfect time for investors to analyze the company’s fundamentals before the world catches on to its generational growth opportunity.


Potash: Impact assessment for supply security (European Commission, 2022).

For more information, visit

FULL DISCLOSURE: This is a paid article produced by The Market Herald.

More From The Market Herald

" @ the Bell: TSX plunges as oil drops

Canada’s main stock index closed out the week in the red on Friday in a broad decline.

" As the market falls, investors turn to tech stocks

Canadians received news from Statistics Canada this week that inflation dropped to 7.0 per cent in August.
The Market Herald Video

" Dundee Corporation (TSX:DC.A) closes privatization of Big River Gold

Dundee (DC.A) has closed its privatization of Big River Gold with Aura Minerals.

" The Market Herald’s Weekly Cannabis Report – Sept 23, 2022

Cannara Biotech (TSXV:LOVE) has entered British Columbia’s marketplace and has launched its first two premium products in the vape and accessory categories.