New miner wants in on the global potash club
That view is being tested as Canpotex, which is controlled by Mosaic, Potash Corp and Agrium Inc., negotiates a supply deal with India. Most analysts expect that contract price to be lower than its predecessor.
Scratching the Surface
Prospect is the largest of three companies developing a potash reserve in Holbrook, Arizona, an arid, flat scruff of land in the state's northeast corner.
Passport Potash Inc. and privately held Hunt Consolidated Inc are exploring other parts of the reserve, though Prospect is farthest along in terms of development and funding.
Despite a BNSF train depot and several large tourist attractions — a meteorite exploded over Holbrook 100 years ago, attracting rock collectors —the town's unemployment rate is 13.5 percent. Mining promises to change that.
Arizona's potash deposit was quietly forgotten after a small geological expedition uncovered it in the 1960s. The deposit started to get more attention in 2008, as potash prices started to climb high enough to justify the more than $1 billion needed to develop a mine.
To exploit the land, Avery and other executives initially drew in BlackRock and other high-profile debt and equity investors. The group bought a publicly listed shell company to allow them to quickly become a listed company in June 2012 without going through the normal process of an initial public offering.
Several stock offerings since the firm became listed have diluted shares and pushed Prospect's stock down 40 percent in the past six months. More capital may be needed, a step that could further dent the share price.
"We are talking to other groups about more equity stakes to help us get started on drilling," Avery said.
Apollo is finalizing a $100 million debt financing deal, and BlackRock is the company's third-largest stockholder, with more than 5 million shares.
Top shareholders, many of whom invested before the firm went public, have said they believe the company is a long-term investment that will radically alter the fertilizer market.
If fully developed, Holbrook's fertilizer deposit would nearly double annual U.S. production of potash, one of the most-important nutrients that farmers apply to boost harvests.
Russia and Canada have the world's largest potash reserves, each with more than 3 billion tonnes compared with 130 million tonnes in the United States. The grade of Holbrook's potash deposit, at 11 percent to 13 percent, is roughly half the industry average.
But Prospect's production costs will be lower than those of its rivals because of milder weather and less digging required to reach the deposits, boosting margins.