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Elemental to Raise $1.7 Billion Next Year to Mine Potash

Elemental Minerals Ltd., owner of a potash project in the Republic of Congo, plans to raise about $1.7 billion next year to develop production by 2015, Chief Executive Officer Iain Macpherson said.

“There is an exciting but limited window of opportunity for potash producers like ourselves,” Macpherson said in an interview. “We are pushing full-steam ahead to achieving full production of 2 million tons per annum from 2015” through to 2017, when that output level is expected to be reached, he said.

World potash demand will rise 3 percent this year, leaving a shortage, mainly due to delays in commissioning new capacity, the International Fertilizer Industry Association says. Prices this year may gain 4.5 percent to $575 a metric ton in the U.S., compared with $380 in July 2010, and settle at $520 in China and India, according to Credit Agricole Securities USA Inc.

Elemental may raise funds with a mix of bank loans, a stake sale and an off-take agreement, Macpherson said. The company, which announced a resource of 804 million tons at the site, may double the figure in its update in the second quarter, he said.

“We are very confident in the project fundamentals and that we can create a low cost, high volume potash producer that will serve the market for many years to come,” Macpherson said.

The company has been approached by “those mining majors that have been quite open about their interest in potash,” he said. BHP Billiton Ltd., the biggest mine operator, failed to buy Potash Corp. of Saskatchewan Inc. for $40 billion in 2010.

Reined in Costs

Elemental, set to complete its so-called pre-feasibility study in August, plans to begin construction on its mine after a bankable study in the first quarter of 2013, Macpherson said. Building work will take two years and the company may begin production in 2015 with a cash cost of about $99 a ton, he said. It will reach annual full capacity of 2 million tons in 2017.

“Costs are reined with room-and-pillar mining 264 meters (866 feet) below surface, recovery rates in excess of 90 percent and cost-effective project site configuration,” Fadi Benjamin, a Northern Securities Inc. analyst, said in a note on Feb. 2.

Potash, mined from deposits of salts laid down in ancient seas and captured in rock layers, helps plants to grow strong roots, resist disease and withstand drought conditions.

Elemental fell 0.4 percent to A$1.27 by the close of Sydney trading, valuing it at A$290.9 million ($313 million).

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