The Selinger government is about to invite the world's potash producers to sink their machines into a western Manitoba mine that could generate $2 billion worth of royalties for the province over the course of 40 years.

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The Selinger government is about to invite the world's potash producers to sink their machines into a western Manitoba mine that could generate $2 billion worth of royalties for the province over the course of 40 years.

After decades of poking around the Russell-McAuley potash deposit, a mineral formation located below Manitoba's western edge, the province is serious about attracting interest in developing a mine.

The Potash Corporation of Manitoba is preparing to issue letters to major mining-industry players -- including Canadian potash companies Agrium, Mosaic and Potash Corp. of Saskatchewan -- to gather expressions of interest in developing a $3-billion to $4-billion Russell-McAuley mine.

Slightly more than one billion tonnes of potash are estimated to lie 800 metres to one kilometre below ground in the 2,247-square-kilometre Russell-McAuley deposit, which the province claims is comparable in quality and mining conditions to similar deposits across the Saskatchewan border, where Agrium, Mosaic and Potash Corp. operate mines.

The Manitoba deposit covers large stretches of the RMs of Russell and Ellice, between the Assiniboine River and the Saskatchewan border. The province has been promoting its development for decades, but was stymied by the fact the rights were divided among a number of different owners.

Manitoba Potash Corp., a Crown corporation, acquired all the rights over the past year, making the entire potash deposit available for development. It has created the opportunity for a single company to crunch the numbers, figure out the technical issues related to the construction of a Russell-McAuley mine and ultimately determine whether it's feasible.

"For the first time since potash exploration started in Manitoba in 1959, the entire resource is now under the control of one entity," said Chris Beaumont-Smith, acting manager of the province's minerals policy, who led the potash-mine marketing effort. "We have no interest in being a potash miner. We are just looking to create the opportunity."

The scope of the potential project is huge. Over a 40-year lifespan, the mine could yield two million tonnes of potash per year, sustain close to 600 jobs and create a $60-million annual payroll -- in addition to generating $2 billion worth of mining royalty revenues for the province over the life of the mine.

The catch is, even if a mine is feasible to build -- something by no means certain -- it would take seven years to develop. The undertaking also faces a serious short-term obstacle in that potash prices are at a six-year low.

Given the 55-year history of Manitoba potash exploration, mining proponents are cautious about the prospects of the expression-of-interest letter resulting in an actual mine.

Exploration companies have come and gone in the area in recent decades, all testing the waters, said Ed Huebert, executive director of the Mining Association of Manitoba.

"But anything the province can do to promote mineral development in Manitoba is a good thing," he said.

"I'll believe it when I see it," added Robert Muir, the RM of Russell's outgoing reeve. "It would be wonderful if it happened. We've been looking at it for years and it still hasn't come about."

Over the past several years, mining companies such as Agrium and BHP Billiton have spent tens of millions on exploratory drilling on properties overlying the deposit.

On one parcel of land now incorporated into the Manitoba Potash Corporation's holding, the Crown corporation was in a partnership with BHP Billiton, which completed an internal scoping study of a potash mine. When BHP Billiton decided to divest, Manitoba Potash acquired that stake for a nominal fee.

Agrium held an exploration lease on another former parcel for several years. It was negotiating with the province on a production lease, but chose not to pursue a mine. That land then reverted back to the Crown.

As recently as 2013, a provincial mineral-resources report, citing a BHP Billiton assessment, described a two-million-tonne-per-year mine as "technically feasible" while facing "significant technical and economic challenges."

Martin Cash

Martin Cash

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

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