TORONTO (Reuters) — Canada’s Allana Potash Corp. said on Tuesday it will talk with Norwegian fertilizer producer Yara International and three other companies about sharing costs and output in its plan to produce premium fertilizer in Ethiopia.
A partnership would involve Allana’s plan to produce sulfate of potash (SOP), a niche, premium product that is in short supply, unlike the commodity muriate of potash (MOP).
Yara would be a logical partner since it is pursuing its own SOP project in Ethiopia and owns land that adjoins Allana’s. Both projects would depend on the same road, port and power infrastructure to be built.
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Allana released a positive pre-feasibility study on Monday for SOP production at its Danakhil site, where it also plans to build a $642 million mine to produce one million tonnes of MOP annually.
Chief executive Farhad Abasov said the company will decide within weeks whether to structure its one-million-tonne, $787 million SOP project as a joint venture, subsidiary or spinoff.
It will then talk to Yara about combining projects, but is also speaking to two other fertilizer producers and an industrial company.
“There are a lot of synergies as you can imagine” with Yara, Abasov told Reuters at the Prospectors & Developers Association of Canada convention in Toronto.
“It probably makes sense to combine it and produce, say, one million tonnes for both companies.”
Yara released a study last month confirming potential for 600,000 tonnes of SOP annually at its site. It could not immediately be reached.
SOP is a chloride-free fertilizer useful for sensitive crops like fruits and nuts.
The company would sell its SOP to China, where SOP sells for more than double the MOP price, Abasov said.
“We want to move pretty fast on this because we think there’s a huge latent potential there.”
Allana aims to secure financing for MOP construction by mid-2015 and start building a mine by next year. MOP production could start by 2018, with SOP output following a year later.
Allana signed a partnership for the MOP mine last year with Israel Chemicals Ltd.
Allana’s MOP mine would face competition from new capacity built by Potash Corporation of Saskatchewan, Germany’s K+S AG and others. Concerns about too much global MOP capacity make SOP a useful option, Abasov said.
