TORONTO (Reuters) - Athabasca Potash has nearly completed a key study on its proposed Burr potash mine in Saskatchewan and is likely to decide on the project’s future soon, a top official at the Canadian company said.
The relative outperformance of potash prices during a market boom and a subsequent bust over the past year has generated strong investor interest in potash, a crop nutrient.
Athabasca’s Burr project is one of a few well-advanced potash exploration projects in the world, making it one of the only potential new sources of the commodity.
For that reason, it is attracting the acquisition interest of established miners as well as companies in India and China that are seeking to secure supplies and cut their reliance on the existing coterie of producers.
“The key here is not whether we are going to find someone, or not, because we are going to find someone,” said Executive Chairman Dawn Zhou in an interview with Reuters late on Tuesday. “It’s more about valuation and project financing. We want to find the best value for our shareholders.”
“We have a number of capable companies that are in discussions with us and we expect a result in the near future,” she added.
The company is about to complete a pre-feasibility study on the project, a step that will determine the best approach to exploit the deposit.
Based on the company’s most recent estimate, analysts expect that the project to result in a mine producing 2 million tonnes annually for 50 to 70 years. But the project is best suited to expensive conventional shaft mining and will entail billions of dollars in capital expenditure to develop.
In light of the costs, Athabasca earlier this year opted to explore its strategic alternatives. It initially considered joint ventures and other forms of direct participation to develop and finance Burr. Later it decided to consider potential mergers or an acquisition of all or a portion of the company itself.
Zhou said the company is in talks with a number of companies that can handle a project of the size and scale of Burr, located near Potash Corp’s Lanigan mine.
While Burr is unlikely to attract the interest of world’s largest producer, Potash Corp of Saskatchewan, some believe the project may interest Germany’s K+S, whose potash assets are aging.
Earlier this week, Norbert Steiner, chief executive of K+S, told Reuters that he was looking to expand his potash business and scouting for new greenfield operations.
Zhou declined to comment on whether Athabasca had held talks with K+S, but she spoke generally about the kind of company that might step forward.
“Some potash mining companies have less resources and they would like to continue in this business, so they are logically looking for better resources,” she said.
The large potash requirements of India and China have also attracted companies in Asia to look at the project, said Zhou, who confirmed Indian media reports that it has held talks with India’s MMTC and Rashtriya Chemicals & Fertilizers.
“In India we are also talking with other companies too,” said Zhou, but declined to name any of the other interested parties.
Last month, U.S. Awasthi the head of India’s largest fertilizer distributor Indian Farmers Fertiliser Co-operative Ltd, or IFFCO, said it was looking at setting up potash joint ventures in some countries, including Canada.
Although Athabasca’s stock has risen more that 450 percent year-to-date, Zhou believes that the company still is undervalued based on the quality of its Burr asset.
Zhou said the company still has funds in its coffers and sees no requirement for raising additional capital through an equity issue at this time.
“The focus right now is to have the project financing spoken for,” said Zhou, adding that the company was looking at all available avenues and considering all offers.
“Most companies that approach us say, you know there aren’t many companies in the world that can handle a project this size,” said Zhou. “I say yes, you are right. However, there are fewer projects this good than the companies that can handle them.”
Reporting by Euan Rocha; editing by Frank McGurty