Kropz is restructuring its Elandsfontein phosphate operation in South Africa after higher costs, weaker phosphate prices and a difficult production ramp-up left the business unable to reach profitability.

The Aim-listed company said the operation has come under increasing financial pressure over the past five months, with the conflict in the Middle East disrupting key inputs used in global fertilizer production and weakening demand for phosphate rock.

At the same time, higher fuel, chemical and freight costs have increased Elandsfontein’s operating expenses, putting further pressure on margins as the mine works to establish commercially sustainable production.

The restructuring will reduce the operation’s reliance on phosphate rock, or phosrock, sales. During the first five months of the financial year ending March 31, 2027, Elandsfontein produced 150,246 metric tons of phosrock and sold 149,907 metric tons.

Kropz shifts focus to nanophos

Kropz said no further phosrock production is currently planned, with revenue expected to come mainly from selling existing stock. The company will instead focus on developing its nanophos business, a natural soft-rock phosphate product used as a slow-release fertilizer.

The shift is expected to result in lower sales volumes than the historical phosrock business but could give Elandsfontein a lower-cost operating model. Kropz said nanophos sales have so far been limited by production and material-handling constraints.

Management plans to increase investment in developing the nanophos customer base, with revenue expected to improve in the coming months, subject to seasonal demand and successful market expansion.

Phosphate production could return

Kropz said phosrock production could restart once market conditions normalize, subject to board approval.

The company also sees nanophos as having the potential to become a significant contributor to South Africa’s phosphate market and serve the needs of local farming communities.

“The restructuring and operational downsizing process will be challenging,” CEO Louis Loubser said, adding that the decision was necessary after several years of financial pressure at Elandsfontein.

The restructuring will affect employees, their families and other stakeholders. Kropz said it will issue the required notices under South Africa’s Mineral and Petroleum Resources Development Act to the Minister of Mineral Resources and Petroleum.

Kropz is an Africa-focused phosphate exploration and development company whose Elandsfontein project is central to its South African operations. The company said it will continue providing updates on material developments.