22 October 2012 12:02 [Source: ICIS news]
The deal is worth over $2bn (€1.5bn) and will ensure that China, which is one of the world’s largest potash importers, will have a steady flow of crop nutrient.
The move is part of the Chinese government’s strategy to reduce the country’s dependence on imports from major global suppliers such as North America-based Canpotex, and Belarusian Potash Company (BPC) which markets potash for Russian and Belarusian companies.
The purchase agreement signed with Prospect Global is bound to put pressure on suppliers to agree to lower prices. A contract is expected to be signed in early 2013.
"This agreement with Prospect Global has important long-term strategic benefits for Sichuan Chemical and also will make a significant contribution to the economic development of
The Sichuan-Prospect deal valuation reflects current market prices of about $475/tonne for a total of 5m tonnes, the company's statement said.
In the first half of 2012,
Under the agreement,
"This agreement is a major vote of confidence both in the long-term potential of our American West Potash site as a mineral resource and in Prospect Global's ability to create a state-of-the-art mining operation to capitalize on that potential," said Pat Avery, Chief Executive Officer of Prospect Global.
The agreement also provides an option for
Production at the American West site is expected to begin by late 2015 or early 2016, according to the company. The mine is expected to produce 2m tonnes of potash every year.
The Holbrook mine in
Prospect Global is listed on the Nasdaq exchange and has a market capitalisation of around $160m.
($1 = €0.77)
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