Mining heavyweight Rio Tinto Limited (ASX: RIO) looks set to break into the promising potash market in the near future after declaring that it is sitting on a big deposit in the Canadian state of Saskatchewan.
Rio Tinto last week revealed that it had made its eighth "tier-one" potash discovery in the past decade at its KP405 deposit, located in Saskatchewan's Elk Point Basin – the same basin that rival BHP Billiton Limited (ASX: BHP) is currently developing its Jansen potash mine in. Rio said: "Drilling results indicate encouraging potash grade and thickness" while the miner's Russian partner, Acron, described the find as "massive" (although, it is thought that the deposit is around twice as deep as BHP's which would likely make it more difficult and expensive to mine).
Mining Boom, Round 2?
It is expected that demand for potash, a key fertiliser ingredient, will soar in the coming decades as incomes in emerging economies continue to improve while the global population will also continue to expand rapidly. In fact, a recent United Nations report said that the world's population will top 9 billion people by 2050, which is 25% greater than today's total population of 7.2 billion.
Potash is definitely something for investors to be getting excited about. Although neither BHP nor Rio Tinto would be capable of producing potash within the next three or four years, it is expected that demand will steadily outpace supply levels in the future.
To highlight just how promising potash is, BHP made an incredible US$40 billion bid for Saskatchewan's Potash Corporation in 2010. While the bid was rejected by the Canadian government, the miner has since spent billions on developing Jansen, while a further US$2.6 billion will be spent over the next few years. BHP's CEO Andrew Mackenzie has also indicated that the fertiliser ingredient could well become its "fifth pillar" alongside petroleum, coal, copper and iron ore.
Foolish Takeaway
While iron ore remains Rio Tinto's primary generator of revenue, potash would be an incredible market to move into to help drive future growth.
