UK to join race for potash supply

London-listed Sirius Minerals (LON:SXX) announced it is moving forward with its plans to develop a vast potash mine in the U.K., posed to be one of the world’s largest deposits of the commodity.

The $2.7 billion (£1.7bn) York Potash project, located in a national park in the North Yorkshire county, is supposed to employ about 1,800 workers during construction and generate 1,000 permanent jobs once opened. But it is now up to the North York Moors park planners to decide whether to allow excavations under the protected area.

Chris Fraser, managing director and CEO of Sirius, said the application was a major milestone for the company.

“This is a nationally significant project with many local benefits and we have been extremely grateful for the wide ranging support received during our extensive pre-application public consultations,” he said in a statement.

He added Sirius hopes to receive approval by May and start operations in 2016.

According to the company, 91% of people it had asked in the region were in favour of the proposed mine, with only 8% undecided and less than 1% against it.

The park authorities said in a press release the project was a “major proposal” as it would involve the construction of two deep mine shafts and it would extend for at least 253 square kilometres.

They also said they are planning to hold a public meeting in the local area as part of a consultation process.

Current demand for the fertilizer, however, is not very promising. In fact, Potash Corp. of Saskatchewan (TSX:POT), the main producer of the soil nutrient, logged Friday a gloomy 38% decline in Q4 profits due to dwindling demand from core Asian export markets India and China.

Based on the latest report by Rabobank, a Netherlands-based global financial service, worldwide reserves of potash could surpass demand by 59% to 100% by 2020. But they believe the North American potash consortium Canpotex and its European counterpart BPC won't sit back and watch while new players inject additional quantities of the fertilizer into the global market.

Thanks to its central role in the production of fertilizer and thus in food production, potash is one of the crucial ingredients of the world economy. Little known outside the commodities world until 2007, it got increased media attention when the price of agricultural commodities boomed, sparking fears over food security and highlighting the dominance of the market by two supply consortiums, Belarus's BPC and Canadian group Canpotex.

(Image courtesy of North York Moors)

RELATED:

Potash supply to exceed demand by 2020: report >> >>