A Denver-based producer of potash ? mined for use mainly in fertilizers ? has reached a $2 billion, 10-year deal to supply a Chinese manufacturer.
Prospect Global Resources said Sichuan Chemical Industry Holding will purchase at least 500,000 metric tons of potash annually, or 25 percent of the projected output of Prospect Global's American West Potash Field in development in Holbrook, Ariz.
The deal valuation reflects market prices of about $475 per metric ton for a total of 5 million metric tons.
Steve Rauzi, Arizona's oil-and-gas administrator and a geologist for the Arizona Geological Survey, said the Holbrook Basin Potash Deposit is huge, with an estimated 700 million to 2.5 billion metric tons of potash. The federal government says domestic potash resources total about 7 billion tons, he said.
"We are very excited," said Rauzi. "We are very optimistic this will come to fruition."
Prospect Global said the deal is believed to be the largest-ever purchase-and-sale contract ? in price and volume ? for a potash mine under development in the United States. It added that the deal is also believed to be one of the largest potash-export contracts in U.S. history.
Prospect Global's American West project would significantly increase U.S. potash production. The U.S. currently imports most of its potash, producing 1.1 million metric tons in 2011, importing 5.6 million and exporting 215,000, according to the U.S. Geological Survey.
Prospect Global said Monday that once the mine is in production in late 2015 or early 2016, it will create an estimated 700 U.S. domestic jobs in mining, transportation and logistics, mainly in eastern Arizona but also at warehouses and North American ports.
Sichuan Chemical is a state-owned enterprise that is one of China's largest fertilizer manufacturers. The accord provides the company with a large and independent source of a commodity that is critical to meeting the challenge of feeding the world's largest nation, Prospect Global said.
Rauzi said the cattle and timber industries in eastern Arizona have been suffering and that communities such as Holbrook and Snowflake believe the potash mines will give the region an economic boost.
The agreement announced Monday also provides an option for American West to sell and Sichuan Chemical to purchase additional potash.
Prospect Global shares rose 14.5 percent Monday to close at $3.30.
Howard Pankratz: 303-954-1939, hpankratz@denverpost.com or twitter.com/howardpankratz
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