rio potash asset right next to bhp, page-2

Rio unveils big potash find near BHP mine

MATT CHAMBERS THE AUSTRALIAN MARCH 18, 2014 12:00AM

RIO Tinto has declared it is sitting on a big potash deposit in Saskatchewan in the same basin where its rival BHP Billiton is spending $US3.8 billion ($4.2bn) just to be ready to mine the fertiliser ingredient when global food demand warrants it.

In its annual report, Rio described the KP405 potash discovery as the eighth "tier-one" discovery in the past decade by its exploration group.

"Drilling results indicate encouraging potash grade and thickness," Rio said.

"Higher nutritional standards, population growth and limited arable land make potash a critical factor in maintaining global food security."

Rio's Russian partner, Acron, has been more animated, saying there is the potential for a long-life, low-cost mine at the "massive" KP405 deposit.

BHP chief Andrew Mackenzie describes potash as a potential "fifth pillar" of BHP's commodities business, indicating the potential he thinks the company has in Saskatchewan's Elk Point Basin.

BHP last year approved a $US2.6bn spend to gain access to the deposit, bringing total approved spending to $US3.8bn before it has made a definite decision to mine.

Rio has been more tentative.

It sold its potash ground in Canada and Brazil to Brazil's Vale in 2009 to reduce debt, only to return in 2011 through a joint venture with Russia's Acron in a deal so small the price and stake sizes have still not been announced.

There has been little talk of potash from Rio, apart from a brief mention in December by minerals boss Alan Davies, who has taken over the deposit from the exploration unit.

Mr Davies said only that he had an early stage option to expand into Canadian potash.

Rio gave little detail on KP405 in its annual report but Acron has filled in the details.

The day after Mr Davies' speech, Acron revealed that a deposit with an inferred resource of 1.4 billion tonnes of potash with an average grade of 31 per cent had been discovered.

This compares with BHP's 6.6 billion tonnes of total resources at an average grade of 26 per cent.

Acron said it was focused on developing the asset.

"This massive potash deposit is located in one of the most favourable potash regions in the world," the Moscow-based company said.

"Exploration shows that this deposit has the potential to support a world-class solution mine for many years and its technical characteristics point to very favourable operating costs."

Rio has 40 per cent of the joint venture and reportedly has the potential to earn 80 per cent through funding exploration.

Separately, Rio has backed out of a joint venture in South Australia that was targeting a discovery to the north of BHP's huge Olympic Dam copper and uranium deposit.

Tasman Resources said Rio had elected not to proceed with a farm-in on the Vulcan project and had withdrawn.