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(Reuters) - Potash Corp (POT.TO) (POT.N) and Mosaic Co (MOS.N) settled a lawsuit over tolling rights to the Esterhazy mine in Saskatchewan, ending a long-standing legal battle between the two potash producers.
Just a month away from a scheduled trial, Minnesota-based Mosaic agreed to deliver the output it owed to Potash Corp -- the world's largest producer of its namesake crop nutrient -- for this year and the next, from the mine.
Mosaic's obligation to supply about 1.1 million metric tonnes of potash per year, under the tolling agreement, will expire on December 31, 2012.
"The reversion of these potash tonnes, including an adjustment of our Canpotex entitlement ... will increase our annual potash production capacity to over 16 million tonnes by 2021," Mosaic Chief Executive Jim Prokopanko said.
Canpotex, jointly owned by fertilizer producers Potash Corp, Mosaic and Agrium Inc (AGU.TO), is the international marketing arm of Canadian potash producers.
On December 31, 2012, Potash Corp will reallocate the production capacity at the mine to Mosaic.
Mosaic had said in May that it satisfied its obligation to Potash Corp after selling the crop nutrient to the fertilizer giant for 40 years, at cost, under a tolling agreement.
Saskatchewan-based Potash Corp dismissed Mosaic's claims at the time, and a trial was scheduled to begin in January.
"This settlement provides Potash Corp and its stakeholders with certainty through 2012 and dovetails with our ongoing potash expansion program," Potash Corp Chief Executive Bill Doyle said in a statement.
Mosaic's counterclaim for damages arising from Potash Corp's declaration of force majeure in April 2009 will also be dismissed as part of the settlement.
Shares of Potash closed at C$44.08 on Wednesday on the Toronto Stock Exchange. Mosaic shares were up slightly in pre-market trade at $53.58 on Thursday on the New York Stock Exchange.
Reporting by Gowri Jayakumar in Bangalore; Editing by Esha Dey