October 19, 2009 / 7:57 PM / 9 years ago

RPT-UPDATE 2-Chinese companies exploring for potash in Canada

(Repeats without changes)

* Zhongchuan has tested Saskatchewan site for past year

* Mine developers seek overseas investors, partners

* China a top buyer, Canada a key producer of potash (Adds details)

By Rod Nickel

WINNIPEG, Manitoba, Oct 19 (Reuters) - China’s Zhongchuan International Mining Corp is exploring for potash in Canada’s mineral-rich Saskatchewan province as optimism about long-term demand for the crop nutrient attracts more foreign investment.

The Saskatchewan government granted the Chinese mining firm exploration rights in September 2008, government spokesman Bob Ellis said on Monday.

The company’s Canadian subsidiary, Canada Jiuyi, is drilling and conducting seismic tests on a 96 square kilometre (37 square mile) site southeast of the city of Saskatoon, Ellis said. If developed, the site could produce 3 million tonnes of potash annually, the official Xinhua news agency said on Monday.

“It certainly says a lot about what people see as a highly valuable resource and commodity that we have here in Saskatchewan,” Ellis said. “The industry is optimistic about its long-term prospects.”

Under the terms of its agreement, Zhongchuan has up to four more years to explore for potash, but can also apply for extensions.

The company does not own the land, which has not been mined before.

If Zhongchuan decides it wants to develop the site into a mine, it would need further government approvals.

One other Chinese company, Taiji Resources Ltd, has active exploration rights in Saskatchewan, Ellis said, adding he didn’t have details about how much work that company has undertaken.

Major producers Potash Corp of Saskatchewan POT.TO, Mosaic Co (MOS.N) and Agrium Inc AGU.TO are among the active potash miners in Saskatchewan and all are expanding. Australian miner BHP Billiton (BHP.AX) is in the early stages of planning its own potash mine in the Western Canadian province, which is a major world source of the fertilizer.

Prohibitive mine-building costs have forced a handful of potash exploration companies to look for overseas investors, or strategic players that are interested in partnering in their projects.

Juniors such as Athabasca Potash API.TO, Potash One KCL.TO and Western Potash WPX.V have all been reported to be engaged in talks with Chinese and Indian companies that are eager to secure potash supplies due to growing demand for fertilizer in those two big markets. [ID:nN12150545]

Demand for potash is expected to rebound gradually in coming months as economic conditions improve and farmers, who have been holding off expensive fertilizer purchases, resume applications to boost crop yields.

China is the world’s largest buyer of potash, an essential mineral needed for plant growth, along with nitrogen and phosphate. It traditionally signs an annual supply agreement with Canpotex, the offshore marketing agency for Saskatchewan’s biggest potash producers, but has not yet agreed on terms for this year.

China imported 3.18 million tonnes of mineral and chemical fertilizer, with a total value of $1.637 billion, in the first eight months of this year, according to Chinese customs data. The data did not include a specific figure for potash.

The country used 7.633 million tonnes of potash in 2007, more than 65 percent of which came from imports, the Xinhua agency report said.

Zhongchuan is a mining conglomerate involved in copper, gold and other metals. It is part of Jiuyi Group, an investment holding company based in Beijing.

For a recent package of stories about potash, please click on [ID:nN22340110].

$1=$1.03 Canadian Additional reporting by Euan Rocha and Beijing newsroom; editing by Peter Galloway

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