Rio set for potash push – by Matt Chambers (The Australian – March 24, 2014)

http://www.theaustralian.com.au/business

Rio Tinto could start building a Canadian potash project within three years, according to its joint venture partner, as the big miner chases a fertiliser push by BHP Billiton to position itself at the forefront of a global food boom.

There is also growing speculation Rio will make a bigger plunge into the sector through an acquisition or joint venture of neighbouring junior Western Potash, or even by joining BHP.

Last week, Rio revealed it had made a “tier-one” potash discovery at its KP405 lease near Regina, in Saskatchewan’s Elk Point Basin. This is the basin where BHP is spending $US3.8 billion ($4.2bn) sinking big mine shafts and building associated infrastructure about 200km to the north to be ready for expected growth in global demand for the crop fertiliser.

Rio’s Russian partner, Acron, has called the find “massive” and, based on a Rio report, capable of supporting a long-life, low-cost potash mine. Still, KP405 is lower grade, has been proved up to a fraction of the certainty and is less than a third the size of the resource BHP is targeting. It is also nearly twice as deep, meaning mining methods will be different and probably more expensive.

While Rio has not hosed down industry buzz generated about the project last week by its “tier-one” declaration, it will not give its view on KP405’s potential.

The excitement, and what is seen as an ambitious timetable, is being looked at with bemusement within BHP, where a decade of proving up its Jansen deposit into potentially the world’s biggest potash producer still has it three or more years away from production.

While there is no shortage of potash at the moment, BHP’s multi-billion-dollar move into the sector is based on expectations that demand will steadily outgrow supply by the next decade as more people around the globe become richer and demand better-quality food. The potassium in potash is one of three important plant nutrients, along with phosphorous and nitrogen. At a time when arable land is becoming constrained, its quality of increasing crop yields is expected to become highly valued.

Rio’s virtual silence about its push into potash is in contrast to BHP’s, which left no one in any doubt about its commitment when it made a $US40bn bid for Potash Corporation of Saskatchewan in 2010.

When this bid failed to clear the Canadian government, BHP ramped up work on its Jansen project, 140km east of Saskatoon.

So far BHP has already committed itself to spending $US3.8bn to access a 1km-deep deposit capable of supporting the world’s biggest potash operation, before a definite board decision to mine has been made.

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