Rio Tinto: Saskatchewan Potash Plans Could Hurt Junior Miners

It is no secret that Rio Tinto plc (RTP) owns mining permits in Saskatchewan, but the Anglo-Australian giant revealed its potash production targets there for the first time on Friday.

Preston Chiaro, the company’s chief executive of energy and minerals, said two potash projects in Argentina and Canada will give Rio roughly 10% of the world’s market by 2012.

The company’s 100%-owned Regina project sits on a 1,200 square kilometre property east of the Belle Plaine potash mine. It is currently in the “target testing” stage with drilling and evaluation set to begin early in August. Regina is also located close to existing infrastructure and appears suitable for solution mining, Rio said.

The company suggested total output from its $3.5-billion Potasio Rio Colorado project in Argentina and Regina could yield about six million metric tons of the fertilizer, or 10% of current global output by 2016. Regina itself could produce an estimated six million metric tons with initial output by 2014, Wellington West analyst Robert Winslow told clients.

Rio sees demand for the plant nutrient growing at 3% annually for the next eight years due to rising populations, limited arable land, improving diets and the possibility of use in biofuels.

The new details about Saskatchewan come on the heels of strong second quarter results from Potash Corp., but the future of the Regina project remains uncertain given BHP Billiton’s (BHP) hostile bid for Rio, Mr. Winslow said. He suggested Rio’s announcement could be posturing in the face of BHP’s takeover offer.

He also said Rio’s Saskatchewan play could pose a risk to Canadian juniors. If it becomes a major potash player in the region, the analyst thinks juniors would be wise to speed up their attempts to form partnerships.

Comments

[TerminatorX:]

The Canadian potash juniors are just about doomed, except maybe Potash One. Still wouldn't invest there.

2008 Jul 27 08:14 PM