JOHANNESBURG (miningweekly.com) – Aim-listed exploration company African Potash announced on Friday that its fertiliser trade agreement with Southern Africa-based fertiliser producer Windmill has been terminated, owing to the drought currently affecting much of Southern Africa, which has had a marked impact on the fertiliser market, particularly the demand for urea in Zimbabwe.  

The miner originally inked an agreement with Windmill in December, after forming a long-term deal with South African investment company Beryl Holdings to collaborate on fertiliser operations in Southern and Eastern Africa.

Under this deal, Beryl’s main fertiliser trading activities would be restructured into a new company, which would be a wholly owned African Potash subsidiary.

Since African Potash’s deal termination with Windmill, Beryl Holdings had withdrawn the inventory held on consignment and no further sales or liabilities were expected to arise following the termination of the agreement.

"With the lateness and lack of rains in the region [as well as] the onset of drought and state of emergency in some nations, there have been delays with some trades. However, this has worked to reduce the number of competitors in the market and the need to develop agriculture in the region has only increased, which means that our partnership with African Potash has increased in strategic importance," said Beryl Holdings chairperson Neverl Kambasha.

Meanwhile, despite the Windmill deal falling through, African Potash on Thursday signed a participation agreement with Safyr Commodities, which is jointly owned by Kambasha and financial services group Safyr Group.

Safyr Commodities had, in turn, secured conditional sales agreements with one of Zambia's leading fertiliser distributors, Nyiombo Investments for 50-billion tons, in aggregate, of urea and NPK (the offtake).

Under the participation agreement, African Potash would be paid a fee of 25% of Safyr’s net income – up to a maximum of S$4-million.  This was defined as the net margin received by Safyr under the offtake before any associating financing costs were deducted.

Delivery was contracted to take place by July 31. Any fee paid to African Potash was subject to Safyr and Nyiombo successfully concluding delivery and payment in accordance with their sales agreement.