Athabasca to explore possible sale of co, shares soar

TORONTO (Reuters) - Athabasca Potash (API.TO), said on Thursday it is exploring a possible sale of all or part of the company, sending its shares soaring 42 percent.

Saskatoon, Saskatchewan-based Athabasca said in March it had sufficient funds to complete a pre-feasibility study of its Burr project in Saskatchewan, but was seeking a strategic alliance to develop the project further.

Analysts estimate that a new potash project that produces about 2 million tonnes annually, can take 5 to 7 years to construct and cost about $2.5 billion (1.5 billion pounds), a prohibitively high cost for an junior exploration company.

"The company has expanded the scope of transactions it is considering from joint ventures and other forms of direct participation...to include potential mergers or potential acquisitions of all or a portion of the company or its business," it said.

Athabasca shares rose 42 percent C$5.80 in early trade on the Toronto Stock Exchange on speculation that the announcement could prompt a bidding war.

Global interest in potash, a key crop nutrient, has risen sharply in the last couple of years, as a very small group controls about 75 percent of global supplies of potash and its price has until recently remained stubbornly high.

Possible bidders for Athabasca could include mining giant BHP Billiton (BHP.AX) (BLT.L), which has been looking to expand into the potash arena and has proposed building the Jansen mine in Canada's western province of Saskatchewan.

Analysts now expect BHP to seek more acquisitions after sealing an iron ore venture with Rio Tinto (RIO.AX) (RIO.L).

Brazilian mining giant Vale (VALE5.SA) is also reportedly looking to expand its presence in the fertilizer sector and has been linked with a bid for Mosaic (MOS.N).

China, the world's largest potash importer, has been steadily acquiring natural resource assets across the globe, as valuations have plummeted amid the economic downturn. Analysts believe China may also want to secure potash assets to avoid being held hostage by exorbitant pricing demands.

Germany's K+S (SDFG.DE), one of the world's largest suppliers, has also expressed interest in expanding its potash assets, and fertilizer producers in Russia and India have also been scouting for assets.

Analysts believe Saskatchewan's three established potash miners -- Potash Corp (POT.TO), Mosaic and Agrium Inc (AGU.TO) may also want to expand their own portfolio of potash assets.

Athabasca has retained CIBC World Markets and Genuity Capital Markets as financial advisors and has formed a committee to look at the proposals.

The company has said many parties have shown interest in the project and it has signed confidentiality agreements with some of them, providing them data that will let them conduct due diligence on the Burr Project, which has a measured and indicated mineral resource of 425 million tonnes.

Athabasca said it does not expect to make any further announcements regarding its strategic review process unless and until a definitive agreement is reached.

(Additional reporting by Ashutosh Joshi in Bangalore; editing by Janet Guttsman)