China inks 10-year potash supply deal with U.S. miner
North American prices at the Port of Vancouver, the main Canadian port for potash exports, hovered under $500 per tonne in September, according to market data released by Potash Corp last week.
China paid $470 per tonne under previous contracts with Canpotex and wants to pay less in future contracts, according to Lazard Capital Markets analyst Edlain Rodriguez.
The Holbrook mine is expected to produce 2 million tonnes of potash annually when online, and China will take at least 500,000 tonnes of potash each year for ten years.
China, which produces some potash domestically but not enough to meet demand, has been buying more than 1 million tonnes of potash each year from Canpotex. It has signed supply deals in the past with producers in Belarus for roughly 500,000 tonnes.
In the contract with Prospect, China has the option to buy more potash, and the company is negotiating with other potential buyers for the remaining potash that will be produced, Archer said.
Prospect plans to hire roughly 700 workers to run the 90,000 acre site in eastern Arizona.
Unlike most potash mines, Prospect's Holbrook mine is relatively close to the surface with reserves roughly 800 feet to 2,000 feet deep.
The mine also is located in the warm Arizona climate, whereas most other potash reserves are in cooler climates in Canada or Russia. Given that Prospect has yet to open the mine, it's not clear what its cost per tonne to produce will be, though the company will have to do less digging.
For instance, Mosaic's Esterhazy mine in Saskatchewan, the world's largest potash mine, is roughly 3,700 feet deep.
Mosaic had to freeze an underground lake and drill through the ice just to reach its potash reserves.
"What we do have at Prospect, which is most important, is the geology," said Archer.