Encanto Potash Corp. (CVE:EPO) on Wednesday announced the finalization of a 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.
Vancouver-based Encanto’s is advancing a $2.9 billion potash project in the Saskatchewan province of Canada in a joint venture with the Muskowekwan First Nation. Encanto President Stavros Daskos said the deal is “clearly a defining moment for our company and the industry. India imports 100% of its potash and is susceptible to cartel-like practices from producers that can hurt its national food security.”
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.
The country 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 fell sharply last year ending 2016 at $215 a tonne. MOP prices peaked in 2009 shy of $900 a tonne.
Encanto 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.
Encanto also has an agreement with Metal Mineral Trading Co. of India, a state-owed trading agency to supply 2 million metric tonnes of MOP annually. Encanto plans to source potash from existing producers pending the commercialization of its Muskowekwan project.
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.