Rio Tinto, Russians to begin work at massive Canadian potash deposit by 2017

Potash is expected to boom as income in emerging economies continues to improve.

Only a week after Rio Tinto (LON:RIO) revealed it has been sitting on a world-class potash deposit in Canada’s Saskatchewan, its Russian-owned joint venture partner, North Atlantic Potash, has hinted they are ready to start building the project within three years.

The KP405 discovery, located close to where rival BHP Billiton (NYSE:BHP) is building its $3.8 billion Jansen mine, is said to have enough of the fertilizer ingredient to sustain a mine for decades, reports The Australian.

Based on North Atlantic’s last report, KP405 has an inferred resource of 1.4 billion tonnes of potash with an average grade of 31% KCl. The company believes that based on a solution mining operation, it can recover roughly 329 million tonnes of KCl at the wellhead from the resource defined within the northern area of KP405.

Rio's incursion into potash has been fraught with some false starts. In 2009, Rio sold its potash properties in Canada and Brazil to Vale (NYSE:VALE), the Brazilian mining giant, only to jump back into Canadian potash in 2011 with the joint venture with JSC Acron, North Atlantic’s parent company.

While a United Nations report expects the world's population to surpass 9 billion people by 2050 (we are around 7.2 billion today), potash is expected to boom as income in emerging economies continues to improve.

Potash prices, however, are no so hot these days. The fertilizer ingredient has been trading at roughly $300 per tonne.

BHP recently committed to spending an additional $2.6 billion on Jansen over the next few years, just to gain access to the deposit, but it hasn’t made a decision on when to start building the mine. The reason, say experts, is that potash producers need prices as close as $500 per tonne as possible, so they can cover construction costs.