LONDON/BANGALORE Global mining company Rio Tinto and Russian fertilizer producer Acron OAO are moving ahead with the development of the Albany potash prospect in Saskatchewan, Canada, Acron said on Friday.
In its first disclosure of the size of the discovery, Acron said the project area contained 1.4 billion tonnes of inferred resources within the mining caverns at an average grade of 31 percent potassium chloride (KCl). The company put the recoverable amount at 329 million tonnes of KCl.
"The next steps for the project include continuation of the environmental assessment and the pre-feasibility study," Acron said in a statement.
Rio's rival BHP Billiton has invested in a larger potash project in Canada, the $14 billion Jansen development, but has pushed back production until at least 2020, looking for the right time to enter the currently oversupplied market..
BHP's Jansen has 5.3 billion tonnes of measured, or proven, resources with 25.7 percent potassium oxide and 1.3 billion tonnes of inferred, or assumed, resources.
“It’s interesting that Rio is moving forward with potash. It’s a commodity that they hadn’t previously had exposure to, while BHP has been pushing ahead with Jansen for some time,” Liberum analyst Richard Knights said.
“Jansen has been controversial because the potash market looks to be oversupplied in the medium term. At the current potash prices, Jansen isn’t obviously value-accretive for BHP so if Rio goes down a similar path with a project that has similar costs it might be controversial.”
Acron and Rio did not disclose the costs and planned capital expenditure for the Albany project.
The joint venture formed between Acron's Canadian subsidiary and Rio Tinto in December holds nine potash permits covering 586,000 acres (237,000 hectares) in the southern region of the district.
(Additional reporting by Sonali Paul in Sydney; Editing by Gopakumar Warrier and Dale Hudson)