* Project is thousands of kilometers from Saskatchewan
* Location would offer short shipping times to Brazil
* Potash Corp has working mine in same geological formation
By Rod Nickel
TORONTO, March 5 (Reuters) - Thousands of kilometers from Canada's potash-producing belt, Red Moon Potash Inc is drilling for the prized crop nutrient in Newfoundland, an Atlantic island known for fishing, remote vistas and the Gaelic-tinged accent of its inhabitants.
While mining majors and juniors have scoured the globe for commercial deposits of the nutrient that boosts crop yields, Red Moon found its ore almost by accident.
Its parent, Vulcan Minerals Inc, started drilling for oil on the island known as The Rock in 2004 and discovered potash early on.
"We didn't get distracted by it (as) we were fully engaged in petroleum exploration," said Patrick Laracy, president of both Red Moon and Vulcan, on the sidelines of the Prospectors & Developers Association of Canada (PDAC) mining convention in Toronto.
Potash prices spiked to record levels in 2008 and, while they have since pulled back sharply, investors see a bullish future for the nutrient as a booming global population strains the food supply. Potash is a key nutrient to boost production of crops like corn, wheat, rice and cotton.
Vulcan spun out Red Moon to allow it to focus on potash in 2011, and Red Moon went public last year. Red Moon is now raising C$6 million ($5.8 million) to conduct a full drilling program that will determine if it has a commercial potash deposit, with Vulcan likely providing much of the funds.
The western province of Saskatchewan is the world's richest potash source, with mines operated by Potash Corporation of Saskatchewan, Mosaic Co and Agrium Inc . But the landlocked province is far from port, and requires producers to ship their output by rail, mostly to the West Coast, before it's loaded on to ships.
Rail wouldn't be an issue in western Newfoundland, where Red Moon's discovery hole is four kilometers from a deep-water port. A second port is 20 kilometers away.
"The competitive advantage is the access to the ocean," Laracy said.
Potash Corp is currently expanding its mine in the neighboring province of New Brunswick. Now the only potash mine in Atlantic Canada, it is located in the Maritimes Basin, the same geological formation as Red Moon's deposit.
Potash Corp uses its New Brunswick mine to take advantage of a relatively short shipping distance to Brazil, a major importer. A Red Moon mine would also offer short links to South America, Europe and Africa, Laracy said.
The fact that Red Moon shares the basin with a producing potash mine gives Laracy hope that its deposit may also prove to be commercial. Early drilling results revealed high-grade potash, just below the level Potash Corp is mining in New Brunswick.
The biggest challenge is funding any eventual mine, since Red Moon currently has just C$650,000 in cash. Other more advanced potash projects in Saskatchewan, Brazil and Africa are already tapping investors.
Newfoundland - one half of the province of Newfoundland and Labrador - is fondly known for its distinct, friendly culture. The island has the most eastern point in North America.
The province currently has about a dozen producing mines, operated by companies such as Iron Ore Co of Canada, Vale SA , Labrador Iron Mines Holdings Inc and Anaconda Mining Inc.