Courtesy of UBS, the NEGI deal appears to have alleviated a lot of pressure on Incitec Pivot:
Gas deal reduces Phosphate Hill cash cost to c.A$410/t. Incitec has announced that today’s gas deal will reduce total gas cost by c.A$55m; implying a material reduction in gas cost of A$5.00-5.50GJ. We see this reducing Phosphate Hill cash cost to A$410/t, from the present c.A$435/t assuming Incitec can maintain its 950ktpa production run rate. Phosphate Hill currently utilises c.11Pj of gas as of FY15 but will likely reduce given the record production achieved in FY15 of 1050kt versus nameplate of 950ktpa. With spot A$:US$ currently at 70c, this puts Incitec Pivot’s cash cost of c.US$290/t in the second quartile of global phosphate producers compared to the targeted bottom of the third quartile.
I’m guessing but that sounds like a deal done at around $4-5mmBtu which is about where I’ve been ruminating that gas prices will end up. Good news.
