Bonanza in the Desert

In the shadowless reaches of the Spanish Sahara, some 40 miles from the Atlantic Coast, the dusty oasis of Bu-Craa swelters in the middle of a moonscape of endless dunes and burned-out scrub. It is an ancient cross roads for camel caravans and fierce des ert nomads in their swirling burnooses. For years, Spanish Foreign Legionnaires in their whitewashed forts knew Bu-Craa as a lonely corner of the end of the world.

It will be lonely no longer. Last week the Spanish government announced that at Bu-Craa, in partnership with the International Minerals & Chemical Corp. of Skokie, Ill., it will soon begin mining the world's richest phosphate deposits, delivering the raw material of chemical fertilizer to an expanding market all over the world.

Secrecy. Disclosure of Spain's contract with null marked the end of 21 years of secret and almost byzantine negotiations. For as soon as Spanish geologists found the rich phosphate vein back in 1963, Generalissimo Franco's ministers forbade publication of any hint of the discovery. They had good reason for their reticence. The political situation in northern Africa has long been touchy: both Morocco and Mauritania claim the Spanish Sahara. Occasionally, they have gone so far as to threaten to back up their claims with force. Moreover, Spain has been under mounting pressure in the U.N. to give up its African possessions. So there was little point in making the Sahara suddenly sound attractive.

Quietly and cautiously, the Spanish government set about looking for a partner--preferably a U.S. firm that could bring in both capital and technical know-how. In March 1965, bids were solicited from some 30 companies, including British, German and Japanese. Each competitor sought out representatives in Madrid with the best contacts and noblest titles that could be found.

Early in the game, all the competing U.S. firms got discreet assurances from Washington that there would be no objection to private U.S. capital participation in the project, despite the political risks involved.

Fighting the Giants. As weaker operators began to fall out during tortuous negotiations, a consortium consisting of Armour & Co., Continental Oil, and Loeb, Rhoades & Co., and headed by former Treasury Secretary Robert Anderson, soon emerged as the leading contender. Anderson was a steady visitor to Spain, even won an audience with Franco. Then, last November, Continental Oil pulled out of the Anderson consortium, and all its hopes were wrecked. A new group, including Gulf Oil, W.R. Grace, Texaco, and Standard Oil of Calif., entered the race with a combined bid. I.M.C. was left to fight it out with the quartet of giants. No one gave I.M.C. a chance.

Throughout the negotiations, the venture had been discussed as a joint Spanish-American undertaking, with 45% going to the U.S. partner. But last March, when Madrid decided to strengthen its bid for a link with the Common Market, it seemed a good idea for Spain to show itself as Europe-oriented by offering Common Market companies a piece of the Sahara bonanza. That piece, of course, was to come out of the American share. I.M.C. was first to guess what was going on. Boldly, it lowered its demand for 45% participation to 25% and won.

I.M.C. is a small outfit ($299 million net sales in 1966) compared to some of its competitors in Madrid, but it offered the most experienced fertilizer-producing and marketing network that was available. The firm has mined phosphates in Florida since the early 1900s, is a partner in a phosphate mine in Senegal, West Africa, has a large share of a $70 million Indian phosphate-fertilizer plant scheduled to begin production this summer. And, I.M.C. pointedly is building the world's largest phosphoric-acid plant in Antwerp. Combined with the company's other processing plants around the world, this was the sort of outlet Madrid wanted.

World Stake. "There are practical, economic and political problems to be resolved," says I.M.C. President Nelson C. White. But no such problems are likely to block the vast effort. Though a European partner has yet to be found, Madrid and I.M.C. are not worried about raising the $160 million needed as an initial investment. The long-term investment to bring production up from 3,000,000 tons of phosphate in 1970 to 10 to 12 million tons by 1976 could go as high as half a billion dollars. By that time the Sahara phosphate venture should be a going operation, generating a handsome profit to be plowed back into further expansion.

Experimental mining has begun at Bu-Craa, and a small village has been built by Spain for the first 500 workers. Desert roads have been cut and bids are being taken for a $30 million conveyor belt to carry ore to the sea. If all goes well, within a decade the lonely oasis could become the source of enough fertilizer to help feed 68 million people a year. Thus the whole world has a stake in the project's success.

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