China agrees to ten-year fertilizer deal

State-owned Sichuan Chemical Industry Holding (000155.SZ) has signed a 10-year agreement with Prospect Global Resources (PGRX.NASDAQ), guaranteeing China a stable supply of potash, Reuters reported. The deal, worth more than US$2 billion, allows the Chinese company to partially avoid multinational suppliers of the key fertilizer, in line with a larger Chinese trend of securing resources abroad from small mining firms looking for capital to develop their land. Denver-based Prospect Global Resources owns a mine in Holbrook, Arizona, which is estimated to have nearly 40 years of potash reserves, the largest in the US. The mine is unlikely to be opened until at least 2015 while the company obtains financing and regulatory permits to mine it. Prospect launched an initial public offering in July and can now use this secure source of finance to develop the mine. Typically, similar-sized projects cost more than US$1 billion to develop.