Prospect Global Resources announced signing of an agreement with Sichuan Chemical Industry Holding (Group) Co., Ltd. for more than $2-billion over a 10-year period, under which Sichuan will purchase at least 500,000 metric tons of potash annually, or 25% of the projected output of Prospect Global's American West Potash field in Holbrook, Arizona [right, credit American West].
Prospect says "The conservative deal valuation reflects current market prices of about $475 per metric ton for a total of 5 million metric tons. The contract is take-or-pay, backed by a letter of credit. The agreement also provides an option for American West to sell and Sichuan Chemical to purchase an additional amount of potash." By my calculation, the agreement is worth $2.375 billion.
Financial news sources are reporting on the agreement, which Prospect believes is "the largest-ever purchase and sale contract - in price and volume - for a potash mine under development in the United States. It is also believed to be one of the largest potash export contracts in U.S. history."
Wall Street Journal: U.S. Firm, China Sign Potash Deal
Reuters: China inks 10-year potash supply deal with tiny American miner
Bloomberg: Prospect Global Signs $2 Billion Potash Sale to Sichuan Chemical
Our potash consumption is fairly constant. Our domestic potash production has been steadily declining for more than 40 years. Our imports of potash are far more than our production. I know we need exports desperately, but how do we justify this sale? Check out the data for yourself at: http://mazamascience.com/Minerals/USGS/.
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