BC Iron tries its luck in the potash industry

Australian junior miner BC Iron (ASX:BCI) has decided to tap into the potash industry by signing a joint venture with Kalium Lakes Limited (ASX:KLL), which adds an exploration project to the company’s increasingly diverse project portfolio.

The Carnegie sulphate of potash project, located 220km northeast of Wiluna in Western Australia, comprises one granted exploration licence and two licence applications covering approximately 1700 km2.

The miner plans to spend around A$10.5 million on exploration and feasibility studies to earn up to a half-stake in Kalium’s Carnegie sulphate of potash project.

Both companies believe the project is highly prospective for large sub-surface brine deposits, which could be developed into a solar evaporation and processing operation producing sulphate of potash for use as a fertilizer.

BC Iron plans to spend up to A$10.5 million on exploration and feasibility studies to earn up to 50% of in Kalium’s Carnegie project.

"Through this agreement with Kalium, BC Iron has gained exposure to a highly prospective project in an agricultural commodity with attractive long term dynamics," the company’s managing director, Alwyn Vorster said in a statement.

"This move into potash, added to the pending conclusion of a scoping study on BC Iron's Mardie Salt project, positions BC Iron well in agricultural and other commodities leveraged to a growing global population," he said.

Prices for fertilizers are not exactly favourable at the moment. They continue hovering around their lowest levels since 2007, amid oversupply and weakening farm incomes, prompting consolidation.

Adding to producers’ problems, several new low-cost mines are scheduled to begin production in the coming years and last week, India announced it might cut potash subsidies by 17% in the next financial year, which would hit demand from one of the world's largest importers of the fertilizer, inevitably dragging prices down even more.