March 24, 2010 / 8:46 PM / 7 years ago

Saskatchewan budget sees potash revenue recovery

TORONTO (Reuters) - The potash-rich western Canadian province of Saskatchewan said on Wednesday it expects potash revenues to rebound in 2010-11 as global demand for the crop nutrient has begun to rise after a sharp decline in 2009.

In its 2010-11 budget, Saskatchewan forecast about C$221 million in potash royalties. In 2009-10 the province had to refund over C$200 million to potash producers that had prepaid a part of their estimated royalties.

Saskatchewan had originally expected to generate almost C$2 billion in potash royalties in 2009-10, but sales volumes crumbled on the economic slowdown and high prices.

The province repeatedly cut its potash revenue expectations and this budget includes far more cautious projections.

Potash is the name to describe various compounds containing potassium. Potassium chloride is most common form and is primarily used in fertilizer production.

The provincial government expects potassium chloride sales of about 12.8 million tonnes in 2010-11, which begins April 1.

The government bases its potash revenue assumptions on an average mine-gate price of C$308 per tonne, with only a gradual increase to C$329 by 2014.

Potash pricing has been extremely volatile for years. The price of the nutrient began the last decade below $150 a tonne and soared above $1,000 a tonne during the commodity boom in 2007-2008. It has since crashed to between $350 and $400 a tonne levels, but is still well above its historical average.

Canada is the world's largest potash producer, with Saskatchewan home to the world's largest proven deposits.

Potash Corp of Saskatchewan, a former crown company, is the world's largest producer of potash. Potash Corp along with Mosaic Co and Agrium Inc are the three companies that mine the mineral in Canada.

The huge returns enjoyed by existing producers have led global mining giants like BHP Billiton and Vale to acquire potash assets, with an eye on developing new mines.

Reporting by Euan Rocha; editing by Janet Guttsman

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