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* Project holds 500 mln tonnes of potash resource
* A quarter of resource seen as commercially viable
* Up to $1 bln stock sale planned to finance mine
By Sabrina Lorenzi
RIO DE JANEIRO, March 22 (Reuters) - A Brazilian fertilizer deposit owned by Canada's Brazil Potash Corp has potash reserves equal to at least 18 years of Brazil's potassium-fertilizer needs, a source with direct knowledge of the project told Reuters.
The mine project has total potassium reserves of about 500 million tonnes of which at least 125 million, or a quarter, is made up of at least 25 percent potassium chloride, a high-enough grade for commercial production, the source said. He added that the grade estimate was "conservative."
Toronto-based Brazil Potash, whose investors include Canadian merchant bank Forbes & Manhattan as well as Australian investors, hopes to begin production at the site near Autazes, Brazil in the state of Amazonas in 2017 or 2018, according to the source, who declined to be named because he is not authorized to speak to the press.
The Brazil Potash asset is one of several potential potash projects in a 400 kilometer (250 mile) potash belt south of the Amazon river. Brazil's mines and energy ministry believes the region could produce enough potash to eventually make Brazil one of the world's largest producers.
"If we had a plant we could supply the whole country with potash for 100 years," said Daniel Nava, mining secretary of Amazonas state.
The Brazil Potash project is expected to cost $2 billion to $3.5 billion to build and Brazil Potash hopes to sell as much as $1 billion of stock in its Brazil-based Potássio do Brasil operating unit in the next year to help finance construction, the source said.
Depending on financing, the mine, close to the Madeira River, a major Amazon tributary, could produce between 2 million to 4 million tonnes a year, the source said. Brazil Potash officials declined to make an official comment on the estimates.
Such a mine could make up for some of the supply from the $6 billion Rio Colorado potash mine project in neighboring Argentina, which was suspended earlier this month by Brazilian mining giant Vale SA. While environmental risks exist, the Amazon region's rivers offer ways to move potash cheaply to Brazil's farmers.
Brazil is the world's largest exporter of beef, coffee, orange juice and sugar and is expected to overtake the U.S. as No. 1 soybean exporter this year. It is highly dependent on fertilizer imports and is pushing local companies to develop mines at home or in neighboring countries.
Brazil's extensive soils are derived from mostly ancient geological formations and lack high levels of the three main plant nutrients: potassium, nitrogen and phosphorus.
Brazil uses about 7 million tonnes of potash a year to help make up for this nutrient deficit.
Top quality potash reserves are rare. Much of the world's supply comes from a handful of countries including Canada, Belarus and Jordan. Arriving in ports on Brazil's southeast coast, a large portion of Brazil's potash imports must be trucked 1,500 kilometers (930 miles) or more to fertilize fields in farming regions such as Mato Grosso state.
Brazil Potash and Potássio do Brasil, face hurdles before production can start at the site. These include electrical links, port and mine-waste facilities and environmental licenses to build the mine and processing plants.
River navigation improvements would also be necessary to transport the output downriver to ocean ports at Manaus or Belem, Brazil on the Amazon River or to move the potash up the Madeira River to highland farms in Brazil's Cerrado and Mato Grosso soy belt.