Potash Politics

The valuable mineral could be a game-changer for Thailand but disputes over whether to mine it have become a test for the industry in the kingdom

"The northeast of the country is sitting on a fortune in potash, catapulting Thailand from nowhere in the potash reserves world league to number three behind Canada and Russia."

News that Anglo-Australian mining giant BHP Billiton is prepared to pay north of US$40 billion for control of Canada’s Potash Corp has thrust the unexciting but profitable mineral back into the limelight in Thailand.
The northeast of the country is sitting on a fortune in potash. Lying (not far) beneath the surface of the Korat plateau, the Udon potash deposit has some 1.4 billion metric tons - at today’s prices worth US$525 billion - catapulting Thailand from nowhere in the potash reserves world league to number three behind Canada and Russia
Everyone has known it was there for a generation but getting it out and to market has proven one of those Thai stories that so frustrate foreign moneymen with their Harvard business school cash flow models. Thailand maybe different, of course, although the potash saga is depressingly same-same - a familiar mix of politics and local interest (and even a whiff of sabotage) that has ensured that not one bag of the stuff has ever reached the market, despite tight global supply and soaring demand, particularly from nearby China.
Potash is the catch-all term for salts of potassium. The most useful compound, potassium chloride, or sylvinite, makes up the most part of the Udon deposit. Meanwhile another potassium salt, carnallite, is found both in Udon and to the west under Chaiyaphum.
Potash has a range of traditional uses from the manufacture of soaps, glass, ceramics and dyes, but its most common function is as a fertilizer - one of the three major plant and crop nutrients after nitrogen and phosphate. About 95 per cent of all potash production goes to agriculture.
Demand has risen sharply in recent years with China a big and important market. It is no less important to the Thai farmer but, despite sitting on tons of the stuff, all is currently imported.
There have been two major projects attempted. The first, the ASEAN Potash Mining Company, established by the 21st meeting of ASEAN economic ministers in 1989, holds the concession to mine the largely carnallite deposits of Chaiyaphum. The original idea was that all ASEAN nations of the time would chip in for developments costs for the benefit of farmers across the region. After a year and small pilot mine, as well as widespread community support, interest seems to have dwindled and funding dried up. It remains to this day on hold.
To the east, the Udon deposit - which is in fact two deposits: one to the south in the Korat basin and the Sakhon Nakhon basin to the north - is commercially much more attractive but has proved more difficult to access.

Which is frustrating for those involved as, in global mining terms, the higher grade sylvinite is all but lying on the surface. The deposit is about 350 metres underground, about a third of the average 1,000 metres of deposits in other countries such as Canada.

The world class Udon deposits first came to the attention of Asia Pacific Potash Corporation, then a subsidiary of Canada-based Asia Pacific Resources, in 1993 when it signed a survey and production agreement with the Department of Mineral Resources for what would have been the first large-scale underground mine in Thailand.
While exploration was promising, the project ground to a halt around 2003 as the company sought to test Thailand’s new Minerals Act that allowed mining below 100 metres without surface property owner’s consent - up from 350 metres laid down by the 1967 Act. To this day, a production licence has never been issued in the face of opposition from NGOs and local farmers.
By 2006, the Canadians, facing funding pressures, had had enough and sold out to Italian-Thai Development chairman Premchai Karnasutha for US$80 million. News of progress since then has been sparse and Khun Premchai tight-lipped, although industry insiders say work continues on the project.
But hostility to the project by NGOs remains formidable and the activists have made sure farmers have also remained vocal in their opposition to the project, leaving many in the mining industry bewildered.
“There are a range of technological solutions to rehabilitation,” says one. “The opposition just doesn’t make any sense. It is a perfect solution to providing funding for the northeast, the poorest part of the country, and benefits to farmers across Thailand who would not have to rely on imported fertilizer.”
The apparently inexplicable opposition to the project has led many in the industry to suspect spoiling tactics by competitors. Several senior Thai mining company executives pointed to the vast commercial advantages the Udon deposit would have to the more expensive to obtain and further to travel Canadian deposits.
“With our potash so near the surface and so close to China, there would be enormous price advantages,” said one who believes the NGOs were set up, if not funded, by competitors.
While none can provide a shred of evidence to support their suspicions, that such conspiracy theories have become so widespread across the industry, speaks to the level of bewilderment that such a valuable resources that would benefit the whole country can remain unutilised.
Some point to the ASEAN Potash project and the widespread support it receives from locals. This has played to the cynic many miners reveal when they view the inevitable opposition to their plans. “How can one area fully support the project while next door there is opposition. But then one is government-run with little money available for compensation and the other is a private concern and a big fat cow to be milked,” one suggests.
For its part, the anti-potash camp claims that the mine will cause salination on the surface and a range of other problems that must be addressed in a new Environmental Impact Assessment (EIA) that is now needed. The industry claims to have met all concerns and the area will be entirely rehabilitated. APPC says that salt emissions will be less than half Canadian standards
And so that is where the matter now stands.
But the implications for the project go far beyond the potash itself. The world’s greatest mining companies are watching the Udon potash project closely as a test case for whether there is a future in Thailand for international standard mining projects.
Whether one accepts skulduggery among the NGOs and commercial opponents of the Udon potash project or not, Thai politics has unquestionably not helped matters. Since ITD took over APPC in 2006, the political landscape in Thailand has not been what anyone would suggest as stable. Nor has there been a surfeit of politicians in that time willing to put the national interest first.
What is needed is perhaps suggested by the currently defunct Chaiyaphum project, which shows that local consensus and support can be reached if there is a will and national government backing. Set against that, only a satirist likely to suggest a visit by Prime Minister Abhisit Vejjajiva to Isaan, the heart of red-shirt country, to persuade north-easterners that the government was acting in their interests would go anything but badly.
So, until such time as a leader does emerge who can convince the protesters that they will not be disadvantaged, Thailand looks set to miss out on the billions in exports revenue while continuing to import 500,000 tons of potash a year at a cost of US$175 million. BRT

This article was first published in Business Report Thailand, Issue 1, October 2010