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Western Potash in Talks With China Investors

By Christopher Donville - 2010-11-26T21:42:31Z

Western Potash Corp., a Canadian explorer for the fertilizer, is in preliminary talks with potential investors in China to fund development of its Milestone potash project in Saskatchewan.

The Vancouver-based company said yesterday in a statement it was “in discussions with third parties who have expressed significant interest in participating in the company and the project.”

“We definitely are talking to various entities in China,” Chief Executive Officer Patricio Varas said in a telephone interview, declining to name the potential investors.

Canadian mineral explorers are competing for capital amid heightened international interest in potash, a form of potassium used by farmers to boost crop yields and protect plants from disease.

K+S AG, Europe’s largest potash producer, said Nov. 22 it agreed to buy Vancouver-based Potash One Inc. for C$434 million ($426 million) to expand its fertilizer reserves. Vale SA, the world’s second-largest nickel producer, said last week it is studying a $2.5 billion to $3 billion project to produce 2.9 million metric tons of potash annually in Saskatchewan.

BHP Billiton Ltd., based in Melbourne, this month withdrew its $40 billion bid for Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer company, after the Canadian government blocked the takeover.

China is the world’s second-largest importer of potash after the U.S., according to 2008 data compiled by the Canadian government.

‘Strategic Alternatives’

Western Potash said in its statement it retained Lockwood Financial of Montreal to help advance “a variety of strategic alternatives designed to fast track” Milestone.

The company plans to raise C$30 million to C$50 million by April as shareholders exercise warrants and the company considers a sale of equity through “something like a private placement,” Varas said in the interview yesterday.

Early estimates suggest Milestone contains about 170 million tons of potash, which would provide annual output of as much as 2.7 million tons, Varas said. The mine, 30 kilometers (18.6 miles) southeast of Regina, Saskatchewan’s capital, will have a life of 40 years, according to the company’s website.

Western Potash was unchanged at C$1.20 at 3:59 p.m. on the TSX Venture Exchange trading in Toronto. The shares have more than doubled this year.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.