First orders under $455m potash deal for Vancouver junior

Encanto Potash Corp. (CVE:EPO) has announced the first set of orders under agreement with Metal Mineral Trading Co. of India, a state-owned trading agency to supply 2 million metric tonnes of MOP annually.

Vancouver-based Encanto said the Indian firm has ordered in total 120,000 tonnes of muriate of potash which the company will source from existing producers pending the commercialization of its own project. Encanto values the deal at C$36 million or US$27.3 million.

Encanto is advancing a $2.9 billion potash project in the Saskatchewan province of Canada in a joint venture with the Muskowekwan First Nation and is currently working on an updated feasibility study for the project.

India imports roughly 6 million tonnes of muriate of potash a year, a substantial portion of a global industry for the crop nutrient of roughly 50 million to 60 million tonnes. The potash price has been under pressure since 2011 and is currently languishing around the $220 a tonne level. MOP prices peaked in 2009 shy of $900 a tonne.

Encanto, worth $51 million on the venture market in Toronto after gaining 57% in value this year, would be the first junior mining company to bring a potash mine into production in an industry dominated by a handful of global giants based in in North America and Russia. Encanto's proposed mine about 100 km northeast of Regina will also be the first potash mine in Saskatchewan on First Nations land.

According to a 2013 pre-feasibility study, the project boasts proven and probable reserves of 162 million tonnes, with plans for a 2.8 million tonne per year mine with a 50-plus year life. The proposed mine would employ 1,000 people during construction and 500 permanent jobs when complete.

In January Encanto signed a separate blockbuster agreement with India's national farmers co-operative to supply a minimum of 5 million tonnes of potash per year for the next twenty years.

NACOF was established under the Indian ministry of agriculture and represents farmers in 25 out of 29 states across the subcontinent. India is home to some 55 million small scale farmers and NACOF boasts an annual budget of $7.7 billion according to a statement.

Last year a $700 million financing deal between a private Indian fertilizer company in the state of Gujarat and another Saskatchewan junior, Karnalyte Resources, fell apart. BHP Billiton's giant Jansen potash project which at a potential 8 million tonnes per year would the the largest mine of its kind anywhere in the world, has yet to receive board approval even after the world's top mining company spent $3.8 billion on the project.