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CHICAGO (ResourceInvestor.com) -- There’s an old adage in mining, if it can’t be grown it has to be mined. Potash (K2O) is a ‘two-fer’ in that observation. It’s increasingly essential in the agricultural sector’s growing intensity of use of fertilizer, given the inexorable pressures for higher crop yields per hectare, i.e. phosphorous (P, from phosphate rock), potash (K, from K2O salt), and nitrogen (N) which are the principal elements contained in commercial fertilizer. Potash prices have risen in recent years and that trend is expected to continue. And one analyst has just boosted expectations for potash; see the news from Merrill Lynch.

Resource Investor interviewed Paul Matysek, CEO of contrarian company with a contrarian commodity, Saskatchewan-based Potash One (P1). No stranger to mining, Matysek has a geological background spanning and success in developing a new mining company (with a market cap of $1.8 billion when it was sold) and raising capital—some $200 million in less than a decade. He sees the current economic situation as an opportunity of sorts for P1 and, using a hockey analogy: ‘player’ costs (steel, energy, labour etc.) are lower, and the opposition (potential competitors) is more inclined to play defence than offence, waiting for a ‘power play’ to come their way, i.e. a brighter time economically with rejuvenated national economies, to come. Clearly, in P1’s view, now is the time for a new entrant to get ‘on the ice;’ it’s ‘power play’ time for the potash junior—play with strength when the opposition is undermanned.

The bulk of the world’s potash is extracted from less than two dozen deposits. Saskatchewan is home to both the world’s largest reserves and producers of potash. And Matysek observes that, like other mines, new facilities for potash mining are a long lead time undertaking, taking from four to six years for solution facilities and upwards of 10 years for conventional underground mines. He said, “the last new potash mine came online in 1987; and after planned expansions at existing operations—plus P1 development, demand should be met for the next five decades. Barring the unforeseen, the company aims to have its new potash mine producing by 2012.

Some investors might think that the ‘bust’ on the ethanol side (corn derived) will impact fertilizer. Matysek commented that, “that notion is a red herring; corn-for-ethanol demand only takes 2% of potash supply.”

While no one sees financing as an easy proposition, Matysek is a realist and sees the equity:debt ratio as 70:30 these days. And he sees potash and its underlying demand more than adequately supporting finance. Moreover, since fertiliser is often bought by state-owned entities, e.g. China, there is less concern about the ability of the consumer to pay. Indeed, it’s quite possible that one or more nations may see an equity stake in P1 as a smart play. And it should be noted that the BRIC (Brazil, Russia, India, and China) nations constitute the globe’s largest potash consuming block.