Encanto Potash: A Junior in Saskatchewan's Potash Industry
November 24, 2011 @ 9:36 am
By Leia Toovey- Exclusive to Potash Investing News  
High-quality, economically mineable potash deposits are geographically concentrated, with Saskatchewan holding about half of world reserves  and 35 percent of global capacity.
Until recently, the major potash miners such as Mosaic  (NYSE:MOS ) and Potash Corporation of Saskatchewan (NYSE:POT ) have dominated the province's holdings. According to Encanto Potash 's (TSXV:EPO ) Gary Deathe an influx of juniors and speculators in Saskatchewan has meant that there are no mineral exploration licenses open for new claims. So, if a company wants to license a claim, the only options are through a merger, acquisition or a purchase of an already claimed license.
The founders of Encanto  first became interested in potash in 2008 when the skyrocketing price of potash grabbed their attention. The company decided then to shift its focus from oil  and gas  to potash exploration. Early in its research, Encanto found out that there were no big land packages available for potash exploration open to claim, therefore, it used its existing relationships with First Nations to gain other First Nations introductions and to form MOU's and joint ventures in potash. Through its partnership with the First Nations, the founders formed Encanto, a new potash exploration company that was able to get land claims in the province, claims that are still open to expansion. The company is currently working with the First Nations to develop these potash resources located on their lands.
Potash production for a junior minor
For a junior, potash production is a very difficult undertaking due to its high capital cost. One estimate puts the cost to develop a conventional 2 million metric ton greenfield mine and mill in Saskatchewan at more than US $4 billion.
For Encanto, Deathe explained that despite being formed in the midst of the financial crisis, the company "has a large, financial backer; however, when the crisis hit [it was] a small company that did not need much capital.” Presently, according to Deathe, “Encanto has been offered financing even when they have not been looking, or really needed it.”
Potash market strong fundamentals
Like so many other potash industry experts have been saying for months, if not years, Deathe was quick to point out the solid economic fundamentals supporting the potash market. "The demand for potash will increase exponentially as the world population grows by an estimated 75 million people a year while potable water and arable land decrease," said Deathe. In addition, the increase in wealth of the emerging economies will put more pressure on output per acre of arable land, because as people see their wealth increase, they demand a more protein rich diet.There is extra incentive to apply potash with high, and stable soft commodity prices.
Deathe also noted that while the other commodities have recently shown some weakness, potash has not. "While the demand forecast for potash is well known, the supply situation is not," added Deathe.
Deathe fully expects Encanto to develop a mine, however, at this point he cannot give a price date of when to expect an operational mine from Encanto. At this time a production decision has not been made, so picking a date of production is a a "crystal ball situation, " says Deathe. He was quick to point out, that Encanto has more incentive than most potash explorers to make it to production, because, their First Nations partners will see the most benefits when they have a producing mine.