Potash One talking to China, India, Brazil on share in Saskatchewan project

TORONTO (miningweekly.com) – Vancouver-based junior Potash One, which hopes to build the first new Canadian potash mine in almost three decades, has begun confidential talks with State-owned enterprises in three key markets for the fertiliser ingredient: China, India and Brazil, president and CEO Paul Matysek said on Monday.

The company's Legacy project, in Saskatchewan is currently in prefeasibility stage, and the firm expects to have the study completed by April or May this year, Matysek said in an interview on the sidelines of the Prospectors and Developers Association of Canada convention.

The project is in an attractive zip code, located just next door to Mosaic's Belle Plaine mine, which is the biggest potash solution operation in the world.

The Legacy project currently has an indicated resource of 36,8-million tons, plus 360,4-million tons in the inferred category.

However, Potash One will publish new drilling results within the next week or two, followed by an updated resource statement, which Matysek is hoping will indicate support for a 2-million-tons-a-year mine, with a life-of-mine of more than 50 years.

As is the case for many juniors, however, at the end of the day, it all comes down to financing.

If the company settled for a smaller, 800 000-t/y operation, which may cost between C$600-million and C$800-million, Potash One would likely be able to finance the mine on its own, through a combination of debt and equity.

However, a larger operation – and Matysek is using back-of-the-matchbox numbers of as high as 2,4-million tons, could cost a cool C$1,6-billion, which is well out of the reach of a junior with a market capitalisation of C$100-million.

That is where a strategic partner would come in.

The firm has confidential agreements and is exchanging data with “two or three” State-owned firms in each of its target countries, and Matysek recently returned from visits to both China and India.

He would consider selling a stake from 10% to 20% of the company to a partner, plus up to 40% of the project, as well as concluding a “competitive” offtake agreement.

Both production and distribution of potash is relatively tightly held, with the top ten miners of the crop nutrient controlling around 95% of global capacity.

Potash One has until the third quarter of 2010 to finalise any strategic agreements, as it will need to settle on the final scope of the project for feasibility work, Matysek said.

Meanwhile, a prefeasibility study on the Legacy project is scheduled for completion by mid-year, which will be followed by a full feasibility study and, if the firm is able to source financing, production could start-up in late 2013 or early 2014.

Potash One will submit its environmental-impact study to Canadian authorities by the end of this year, and would then expect to obtain permitting approval for the mine in the third quarter of 2010.

The company is fully funded through to feasibility stage, after it announced in January it would merge with cashed-up compatriot Potash North.