The deal struck between Alberta's Karnalyte Resources (TSX:KRN) and India's Gujarat State Fertilizers & Chemicals (BSE:500690) has cast light on the ability of junior potash plays to fill Asian consumers' demand for potash fertilizers .
Karnalyte, based south of Calgary, Alberta, with carnallite deposits in the heart of Saskatchewan's potash basin, signed a deal that will see it receive upwards of $60 million from Gujarat. Gujarat has also made a 20-year commitment to purchase 350,000 tonnes of potash at market price from Karnalyte; that amount will increase to 600,000 tonnes per year in the second phase of the deal, the company said in a statement. Karnalyte's website states that the company expects to start construction on its Wynyard carnallite potash project late in the first quarter of 2013 — or early in the second — and plans to spend $626 million on the first phase of development. That should see it produce 625,000 tonnes of potash annually, with that amount later increasing to 2.125 million tonnes per year. On the heels of Karnalyte's announcement, Reuters reported that Saskatchewan-based Encanto Potash (TSXV:EPO) is in talks with an Indian fertilizer company, Rashtriya Chemicals and Fertilizers (BSE:524230), which, if successful, could see Rashtriya buy up to 2 million tonnes of potash from Encanto. Potash juniors in spotlight The recent attention given to junior potash projects by major emerging market players began in earnest last year, with Arizona-based Prospect Global Resources (NASDAQ:PGRX) inking a 10-year potash supply deal with Chinese fertilizer company Sichuan Chemical Industry Holding Group. Prospect also received a $100-million investment from Apollo Global Management, and along with Encanto and Karnalyte, holds one of the few projects with a completed or near-completed feasibility study.