target price range 250-520 p -minimum 8 bagger, page-4

Rio signs potash deal

RIO Tinto is back for a second dip into potash following its reluctant retreat from the crop nutrient industry in January 2009, when it sold what potash interests it had in Argentina and Canada to Brazil's Vale for $US850 million ($A859 million).

The sale to Vale occurred when Rio was desperately pulling in cash to deal with its debt load in the wake of the global financial crisis. Now it is returning to the sector in a joint-venture deal with Russia's Acron on early-stage exploration ground in Saskatchewan, Canada.

Saskatchewan is home to BHP Billiton's big-time ambitions in the potash industry. Having failed to acquire Canada's PotashCorp last year for $US38 billion, BHP is planning a $US12 billion development of its Jansen project in Saskatchewan.
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BHP's bid for PotashCorp was rejected on national interest grounds that were never elaborated on by Canada, although Saskatchewan Premier Brad Wall led the campaign against the bid on the basis that ''Canadian-led mining companies are in risk of becoming an endangered species''.

Details on the deal between Rio and Acron - one of the biggest suppliers of fertilisers to China - are sketchy. But Canadian media reported that the deal involved Rio earning an interest in an Acron-controlled company called North Atlantic Potash.

Rio was said to have the right to earn up to 80 per cent of the potash projects assembled by North Atlantic since 2008. Rio will manage exploration and development of the joint venture. Rio's Melbourne office said yesterday that potash was a ''good fit with its current industrial minerals portfolio''.

Big diversified miners such as BHP and Rio are attracted to the potash business because of its projected strong annual demand growth, reflecting rising living standards in China and India. It is also argued that the world is under-fertilised with the crop nutrient to meet the growing food demand.

Potash is a ''bulk'' commodity, the mining of which has a high-cost barrier to entry. Potash is also a new commodity for BHP and Rio, which need to find new growth opportunities to keep the market interested.

Read more: http://www.theage.com.au/business/rio-signs-potash-deal-20110928-1kxbk.html#ixzz1ZICYrRqz