Zuari Steps up Backward Integration
In a major step forward in backward integration, Zuari Agro Chemicals Limited, through its Singapore based joint venture with Mitsubishi Corporation of Japan, MCA Phosphates Pte. Ltd., has agreed 30% equity stake in Fosfatos del Pacifico (Fospac), of Peru for a considetration of USD 46.12 million.
In a major step forward in backward integration, towards fulfilling its fertilizer raw material requirements, Zuari’s Singapore based Joint Venture with Mitsubishi Corporation of Japan, MCA Phosphates Pte Ltd has acquired 30% equity stake in Fosfatos del Pacifico (d), of Peru for a consideration of USD 46.12 Million. Fospac is a subsidiary of Cementos Pacasmayo S.A.A (Pacasmayo), company listed in Lima Stock Exchange. Additionally, the Zuari- Mitsubishi combine have entered into an Off-Take Agreement with Fospac to purchase the entire production of concentrated rock phosphate after meeting local demand, if any, for a minimum term of 20 years.
The Fospac mines project, located 30Kms from Pacific Ocean in the Bayovar area, in the province of Pieura, has an estimated rock phosphate deposit of 540 million tonnes with an average P2O5 content of 18.5% before beneficiation. The project is expected to have an initial production capacity of 2.5 million metric tonnes per year of concentrated rock phosphate of 29.5% P2O5. The project is expected to commence production in 2015.
India is severely deficient in fertilizer mineral assets and the above alliances will substantially mitigate the supply side risk of Zuari in the long term. The contracted rock phosphate quantity from Peru will largely meet the requirement for 1 million tonnes DAP and Zuari in addition to its existing fertilizer capacity, will set up a 1 million tonne integrated phosphatic fertilizer facility in a coastal location in India. At present, Zuari together with its associate company, Paradeep Phosphates Ltd., manufactures around 2 million tonnes of DAP and imports an additional 1 million tonnes of DAP to close the demand - supply gap in its marketing territories.