By Leia Michele Toovey-Exclusive to Potash Investing News

Share As the recession spread across the globe, the value of crops plummeted and equity froze, forcing farmers into delaying applications of much needed fertilizer to their fields. This postponement has set the stage for the potash industry to boom.  

Farmers may skip using potash fertilizer for a year without a significant effect on yields; however, missing more than a year can have a large impact.  Many farmers have already forgone fertilizer applications over the past 12 months.  ”Fertilizer customers have been slow to return to the table, but they cannot defer purchases indefinitely,” Potash Corp President and Chief Executive Bill Doyle said at the company’s annual meeting. “Many major markets are showing signs of having de stocked their inventories and must rebuild their supplies.”

Fertilizer prices soared in early 2008 on surging demand, tight inventories and record grain prices. But the global credit crunch and the economic downturn weighed on the agricultural sector, and grain and nutrient prices tumbled as farmer’s deferred applying fertilizer. The underlying factor that caused fertilizer and grain prices to soar, the food crisis, has not disappeared; it has simply been overshadowed by the economic crisis.  As potash demand returns, crop prices as well as potash producer’s stock value will go through the roof.  Citigroup’s investment advisory team is bullish on the sectors near future.  Last week Citigroup raised its ratings on three US listed makers of potash fertilizer, Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc.

Potash Corp. of Saskatchewan Inc, the world’s biggest fertilizer producer, expects the global supply of potash fertilizer to be tight for the next five to 10 years, despite a massive planned increase in its production capacity. Potash demand will grow in the second half of 2009 and rise in 2010, CEO Bill Doyle said. As demand grows, Potash Corp will start to reverse production slowdowns.  Potash Corp is spending C$7 billion on expansion and upgrading projects in the Canadian provinces of Saskatchewan and New Brunswick. They will give the company 18 million tonnes of capacity by the end of 2012, more than double the capacity when it started its expansion program in 2005.

Company News

Talon Metals has agreed to buy eight potash project areas in Brazil from privately-held Kmine Holdings, the firm announced on Monday. The properties, in the Sergipe and Alagoas states, cover some 36402 hectares, for which Kmine either holds or has applied for potash exploration licenses. The company has agreed to pay $20-million over 10 years, part of which, up to a maximum of 47 per cent, can be paid in shares. “The acquisition of the potash exploration licenses from Kmine conforms to our strategy to acquire interests in holdings that have the potential to become substantial projects,” said Talon CEO Stuart Comline.

“It also underlines our belief that, under the current uncertain circumstances and a depressed commodity market, it is important to acquire strategic holdings in commodities that may have a more settled future.” The company plans to begin exploring the properties immediately, and will also continue to look for additional potash and gold opportunities,” the CEO added.

Western Potash Corp.  (TSX .V: WPX) has completed its first potash exploration well on the Milestone property in southern Saskatchewan. The Milestone property, comprising approximately 500 square km, is located 30 km southeast of Regina, and southeast of Mosaic’s Belle Plaine Mine, one of the largest producing potash solution mines in the world. The property is immediately adjacent to the Regina Potash Property held by Vale, and potash permits held by BHP-Billiton, and Potash One. Seismic data confirming the presence of potash prospective salt beds on the eastern portion of the Milestone property have highlighted a sizeable and attractive new exploration target area amenable to solution mining technologies. Western Potash has on had C $5.4 million earmarked for a drill program. 

The company will use the funds to drill two additional wells within the Milestone property, in an attempt to define the extent, grade, thickness and type of potash mineralization present. Should positive results continue,  Western Potash will move towards the preparation of a NI 43-101 compliant resource calculation on the Milestone property during 2009.

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