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Mosaic Entering $7B Phosphate JV

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The Mosaic Company (MOS - Free Report) has landed an agreement with mining company Ma'aden and leading petrochemicals maker Saudi Basic Industries Corporation (SABIC), pursuant to which, the companies plan to form a joint venture to develop phosphate production facilities in Saudi Arabia.

Mosaic, which is among the biggest fertilizer companies in the planet along with Agrium , CF Industries (CF - Free Report) and Potash , plans to invest up to $1 billion in the roughly $7 billion project to be built in the northern region of Saudi Arabia at Wa'ad Al Shammal Minerals Industrial City.

The planned “Wa'ad Al Shammal Phosphate Project” will include further expansion of processing facilities in Ras Al Khair Minerals Industrial City. The project will benefit from the availability of major raw materials, which are available locally from sources within Saudi Arabia.

Mosaic will hold a 25% interest in the joint venture with Ma'aden and SABIC owning 60% and 15%, respectively. The companies are expected to enter into a definitive shareholders' agreement during first-half 2013.

The joint venture will develop a mine and chemical complexes to be used for producing phosphate fertilizers, animal feed, food grade purified phosphoric acid and sodium tripolyphosphate for sale to customers globally. The facilities have been projected to have a production capacity of around 3.5 million tons of finished product annually. Operations are expected to begin in late 2016.

Per the agreement, Mosaic will offer its expertise for the design, construction and operations of the new facilities. In connection with its equity interest, the company will market roughly 25% of the production of the joint venture.

The joint venture will usher in significant opportunity for Mosaic, allowing it to diversify its phosphate sources and expand access to major agricultural countries. The cost-effective project, which complements Mosaic’s phosphate business in Fla. and La., will offer it logistical benefits and enable it to ship phosphates to key markets.
Mosaic currently carries a short-term (1 to 3 months) Zacks Rank #3 (Hold).

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