Anglo American’s high-stakes bet on a new way to feed the world

About 340 metres beneath the North York Moors in England, a huddle of miners are gathered in a cavern soaked with groundwater. A day earlier, they had used 100kg of explosives to blast through rock and access a tunnel leading to the coast.

That tunnel will eventually stretch for 37km, connecting a 1,600m shaft with a Teesside port. It will help convey output from the planned Woodsmith mine to export markets around the world.

The Woodsmith project will produce polyhalite, a fertiliser described as “gold dust” by Dave Cook, a 60-year-old former coal miner standing in the rubble next to a metallic yellow bucket that can carry nine people up and down the shaft.

“When the coal mines shut in the UK, we thought mining was over for us,” he says. “We’re going from warming the world to feeding the world.”

Cook’s faith in polyhalite has come from his employer, Anglo American — which is counting on the mineral to shake up an industry that it says has been stuck in stasis for decades, and help feed as many as 10bn people worldwide.

Tom McCulley, the no-nonsense Philadelphian who heads Anglo American’s crop nutrients business, says it will be a game-changer for farmers as they strive to produce food for a world that is expected to need 60 per cent more calories by 2050.

“We need to grow the same number of crops over the next 40 years that we have in the last 8,000 years. How the heck are we going to do that?” McCulley asks. “The world needs transformational thinking today.”

The FTSE 100 company, better known for mining iron ore, base metals, steelmaking coal, platinum group metals and diamonds, is also betting that its planned mine will diversify its revenues and green a portfolio currently dominated by emissions-intensive steelmaking materials.

Such a large project, with a relatively small surface footprint, could also help reinvigorate the mining industry in the UK after decades of decline in its traditional coal and tin sectors.

But not everyone is convinced. Anglo’s shares have fallen 31.4 per cent year to date, more than peers such as BHP and Rio Tinto, in part because of investor nerves about the giant project.

It is not just the $9bn projected construction cost for the mine, located near the picturesque seaside town of Whitby, that concerns them. The market for polyhalite is unproven in a sector where potash, produced in huge quantities in Canada, Russia and Belarus, is the dominant multi-nutrient mineral.

Critics argue that McCulley’s “transformational thinking” has become ungrounded from reality. They fail to see sufficient demand being created for millions of tonnes of a niche mineral currently produced by only one other company in the world.

Aerial view of Anglo American’s Woodsmith Mine in North Yorkshire, England

The future of Anglo could depend, in part, on whether farmers and distributors gravitate towards the granules that Woodsmith will one day produce and that company executives claim have almost magical properties. 

“Really it comes down to the market,” says Liam Fitzpatrick, an analyst at Deutsche Bank. “We could be sitting here in 2035 saying ‘what a great bit of business’ — but it feels like a big bet on an unproven product.”

The forgotten mineral

More than 250mn years ago, before dinosaurs inhabited the earth, melted ice sheets became pools of water in the Zechstein Sea that stretched from the east of Britain to what are now the Baltic states. As the water evaporated it left behind layers of salts: polyhalite literally means “many salts”.

The deposits were discovered in Yorkshire in the 1930s, and they run through Germany to northern Poland, but the mineral was largely ignored for decades. Anglo American believes that should change. 

Miners in Anglo American’s Woodsmith Mine

Polyhalite contains potassium — which makes crops strong and more resistant to extreme weather — as well as three other crop-boosting nutrients: sulphur, calcium and magnesium. Unlike rival products, it is low in chloride, a mineral that harms soil fertility and reduces yields of some crops. 

Anglo claims polyhalite, or what it calls “Poly4”, has other advantages over traditional fertilisers. Crops grown using it show yield increases of 3 to 5 per cent compared with those grown using current fertilisers. That could make a huge difference for farmers operating on thin margins.

“Crop production went up 50 per cent since 2000 and farmed land has only gone up 3 per cent [per capita]. To meet another 35 per cent increase [by 2050], we need to increase productivity even further,” says Vandita Pant, chief commercial officer at BHP, another mining company that has entered the fertiliser business. “The key becomes crop yields.”

Other claimed advantages for polyhalite are that the nutrients are released gradually and that their uptake, relative to the amount of fertiliser spread, is better than existing products. It is said to enhance crops’ intake of nitrogen and phosphorus, while making fruits and vegetables such as kiwis and potatoes grow in more regular sizes that are easier to sell.

Grains of Poly4, Anglo American’s flagship product made from polyhalite, coming off a conveyor

“I don’t want to call it a silver bullet but it’s as good as known today,” says Anglo’s McCulley.

Backing his claims are 1,800 trials with agronomists and farmers. A network of agricultural commodity distributors, including US giant Archer Daniel Midlands and Brazil’s Cibra, have binding supply agreements with Anglo and are building future business plans around Poly4. “As much as I can produce, they’re going to take,” says McCulley. 

Simon Borthwick, head of fertilisers at Cefetra, a UK agricultural supplier running Poly4 trials in 60 farms across the UK and Ireland that has agreed to distribute Poly4 in Europe, says so far the results look “promising”.  

But publicly available data are yet to be seen, says Peter Emmrich, a fellow at the Norwich Institute for Sustainable Development. “I don’t think I can say anything about how good this is compared to alternatives given how little data and independent papers there are,” he says.

Roger Sylvester-Bradley, who leads on crop performance research at ADAS, an independent agricultural consultancy that has carried out experiments on behalf of Anglo American, agrees. “The jury is out,” he says, adding that polyhalite could be “mildly” but “not hugely” helpful. 

Other concerns are more fundamental. To survive, commercial crops need — in descending order of importance — three main macronutrients: nitrogen, phosphorous and potassium, often abbreviated to NPK after their periodic table symbols.

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So it is a major shortcoming that polyhalite contains no nitrogen or phosphorous and only 14 per cent potassium. Potash, the incumbent fertiliser mineral, contains 60 per cent, meaning farmers would have to use four times as much polyhalite to match the potassium coverage of potash. Polyhalite’s four nutrients come together in a single package, a potential downside for marketing given different soils need varying quantities, although it can be blended with other fertilisers.

Anglo is primarily aiming to disrupt the vast potash market, which accounts for a fifth of the 180mn tonnes of nutrient content sold each year. The giant Saskatchewan basin in Canada, the resource base for incumbent leaders Nutrien and Mosaic, along with two other deposits in Russia and Belarus, account for about 70 per cent of world potash production.

Consultants categorise polyhalite as one of about 10 potassium magnesium speciality fertilisers, with a combined current annual market of about 3mn tonnes of product and a lot less in nutrient terms. The Woodsmith mine is set to ramp up to 5mn tonnes per year by the end of the decade and go to 13mn tonnes a couple of years thereafter, depending on market demand. The risk of oversupply is clear. 

“It’s not disruptive,” quips Pant from BHP. “It’s a very niche market which needs to be grown.”

Feedstock for growth

For the world’s largest mining companies, fertilisers might not seem the most obvious place to direct capital given the rocketing demand predictions for metals involved in the transition to clean energy and electric vehicles, such as copper, nickel and lithium.

But Russia’s invasion of Ukraine last year showed their importance. Prices of wheat, grains and vegetables all rose rapidly, and fertilisers were central to the turmoil. Western sanctions against Russia and Belarus — which produce 40 per cent of the world’s potash — cut supplies of potassium, while increases in the price of gas, a key feedstock for nitrogen fertiliser, also had a severe impact.

In the longer term, population growth will require yet more food production in a world where, according to the UN’s Food and Agriculture Organization, more than 735mn people already do not have enough to eat. 

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The global population is forecast to rise to 9.8bn by 2050 and a larger portion of those people will demand a richer diet. “Not a single country” has developed without increasing the proportion of animal protein in diets, says Alzbeta Klein, who heads the International Fertilizer Association. “You will need more grains, oilseeds, soy and corn to feed those animals.”

At the same time, soil health is deteriorating as a result of over-farming and climate change. A third of the world’s soils are already degraded, according to UN agency data, and available arable land could be halved by 2050.

For Klein, “the only answer” is to “sustainably intensify whatever we are producing on the land today”. In some parts of the world such as sub-Saharan Africa, that means more fertilisers. In India, many believe nitrogen and phosphate are being overused, while potash use needs boosting.

In Europe and the Americas, where farming is far more mechanised, it means using less fertiliser in a more targeted way, says Alvaro Lario, president of the UN’s International Fund for Agricultural Development.

Farming is also being upended by efforts to reduce its environmental impact — the sector is responsible for a quarter of all greenhouse gas emissions. Borthwick at Cefetra predicts that polyhalite “will be one of the key factors that farmers can use to try and reduce their carbon footprint”.  

Meanwhile the EU is pushing farmers to cut pesticide and fertiliser use, and double organic production, while global food companies talk of regenerative agriculture that prioritises soil health. 

Anglo American says polyhalite will respond to those needs. Once dug out of the ground it just needs to be turned into granules. There is no waste and no chemical processing, helping it to qualify for the higher value organic market. 

An Anglo American employee inspects a blade of grass in a crop field

“We see the logic,” says Tim Cheyne, head of fertilisers at research group Argus. “Polyhalite could be the key to unlocking access to the organic market but there’s no case study at this scale to refer back to.”

Yet critics point out that polyhalite fails to solve the real environmental problem in agriculture: nitrogen-based fertilisers produced from natural gas that contribute 5 per cent of global greenhouse gas emissions, according to a recent Cambridge university study.

Do the sums add up?

Two questions dogged Woodsmith’s previous owner, the junior miner Sirius Minerals: how to finance such a large project and whether there would be any buyers for its output.

Anglo American’s £400mn rescue of Sirius in 2020 dispelled the first of those. The mining company has already built 26km of tunnels and sunk one shaft down to 630 metres. Although the costs remain unclear and a final investment decision is not due until next year, it is close to certainty that Woodsmith will come into production this decade.

Whether it is delivered on time and at budget is another matter. Anglo booked a $1.7bn writedown on the project last year and expects to spend $1bn a year to bring it into first production by 2027. The engineering will get more challenging next year, when the shaft boring machines hit hard, water-bearing Sherwood sandstone. 

But the other question remains: will all the effort be worth it? Using the market values of polyhalite’s constituent nutrients, Anglo reckons each tonne will be worth $170. It expects a reasonable $20 premium for beneficial properties such as improving yields. Add on organic and sustainability benefits, and Anglo thinks the price could reach $380 per tonne.

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ICL Boulby is the only company in the world currently mining polyhalite, at a site about 25km from Woodsmith. The Israel-based company said that the current price for a tonne delivered to farms in the UK was £200 ($248). Howard Clark, sales and logistics director at ICL Boulby, adds that “you can get $260 for this product, but you can’t get it everywhere”.

ICL is producing just less than 1mn tonnes of polyhalite a year and selling slightly less than that. The firm aims to increase this to about 3mn tonnes in the next decade or so, but Clark says growth is “very slow”.

A key obstacle for customers is the low potassium content, and simply piling more of the product on to the soil risks over-application of sulphur, Clark adds. “[As of] today we haven’t found” a 13mn-tonne market for polyhalite, he says. 

In October, BHP sanctioned a massive, $5bn expansion of its Jansen potash mine in Canada, taking annual production to 8.5mn tonnes and creating a risk of oversupply in a rival market. 

Lower potash prices would provide some relief for farmers and consumers, after Russia’s invasion of Ukraine caused food prices to spike worldwide. But for Anglo, a cheaper rival mineral could be calamitous.

At $190 per tonne of polyhalite, RBC estimates the value of Woodsmith at just $1.7bn. But at $350 a tonne, that jumps to almost $13bn. 

“It’s the biggest divergence in potential value that I’ve ever seen,” says Tyler Broda, global co-head of metals and mining research at RBC. “If the [polyhalite] price is at the low end of expectations, the value created for shareholders is limited.”

“But if they can achieve higher prices, then this would be one of the best mines in the world.”