Potash: The Edible Gold Attracts Big Players to Saskatchewan
COMMENTARY—ProspectingJournal.com—Despite the naysayers, you can indeed eat gold—just try some potash. Hailed as the “pink gold,” potash is the common name for the various mined and manufactured salts that contain potassium in water-soluble form, which is a natural component of fertilizer. Taken out of the ground in (usually) nice pink chunks, potash helps to increase crop yields, and is now one of the few realistic ways to feed the growing world population. Like the precious yellow metal, which grabs the spotlight in times of economic turmoil, potash has become a topic of intense debate and even national security (BHP and Potash Corp. anyone?) as the emerging economies work tirelessly to eat.
And Saskatchewan, that quiet province that could, has continually reasserted itself as Canada’s—and now perhaps the world’s—hot-bed for potash exploration and production. After BHP’s failed bid for Canada’s Potash Corp., a move that Tony Clement and the Canadian government blocked under the grounds of national security, Rio Tinto has thrown its weight at the region’s potential. The mining giant has entered a joint venture with Russian fertilizer producer North Atlantic Potash, a subsidiary of Russia’s JSC Acron, which holds extensive exploration permits in Saskatchewan. With drilling on nine blocks covering 241,000 hectares to start this autumn, Rio is footing the bill with a goal to have an operating mine five to six years into the future. Touted as the “next big mine,” all eyes are on the drill results.
But it doesn’t stop at Rio. BHP, still the biggest landholder in Saskatchewan’s potash belt, is pushing for its Jansen mine to be in production by 2015, which is set to be the world’s biggest potash mine at eight million tonnes annually. Germany’s K+S Ground, Europe’s biggest salt and fertilizer producer, will also proceed with a $434 million takeover of Vancouver’s Potash One, whose main asset is a large deposit in Saskatchewan; and K+S is also investing $2.5 billion to develop its Legacy Project, which is also expected to begin producing in 2015. China’s Yancoal Canada Resources Co. Ltd has purchased eight potash exploration sites near Regina for $110 million. Mining giant Vale is rumoured to be considering building a $3 billion new potash mine in Saskatchewan in 2013 between White City and Kronau. And finally Potash Corp [POT – TSX], the world’s largest potash producer, has seen a resurgence in interest after Credit Suisse Group AG recently increased its estimates for nutrient prices on “robust” grain demand.
With all eyes on the giants, attention should also be paid to the junior and mid-tier exploration and production companies, whose ongoing efforts present potential blue-sky benefits for shareholders. Encanto Potash Corp [EPO – TSX.V] is currently exploring for potash in five southeastern Saskatchewan prospects, working with local First Nations communities. Focusing within a radius of 80 km, EPO’s properties lie in the heart of the province’s potash country and should put the company on the radar of any investors who are looking for an affordable entry point into the potash market. Western Potash [WPX – TSX] is currently engaged in its goal to build Canada’s most efficient potash solution mine and is working toward the completion of a positive Feasibility Study at its Milestone Project in Saskatchewan.
Thus, the race for potash exploration is on. Saskatchewan posted solid GDP growth of 2.8 % in 2011, second only to Alberta, and is said to likely lead the nation with 2.9% in 2012—thanks largely to Potash. Potash production was also up year over year in the first half of 2011 and is expected to remain strong in the years ahead, unless of course this Great Depression 2 stuff comes true (then it’s anyone’s guess). As the ongoing global financial crisis disillusions loss-taking investors, many are now hoping to park their money in companies that produce a valuable product, one that is needed despite a best or worst-case world scenario. Food is a good bet. So then, is Potash.
Disclaimer: The host does not currently hold any shares of any of the companies mentioned in the video. However, some members of Cordova Media Inc. which owns ProspectingJournal.com, may or may not have interests in one or more of the companies mentioned at the time of publication. Staff members from the Prospecting Journal reserve the right to acquire interests in any of the companies mentioned after 36 hours have elapsed upon initial publication of this video. Encanto Potash is a sponsor of ProspectingJournal.com.