K+S secures major potash supply deal from its Canadian Legacy mine

Legacy mine’s production plant under construction. (Image courtesy of K+S)

German fertilizer company K+S AG has won a deal to supply about 25% of the projected output from its Legacy potash mine in Saskatchewan, Canada, to a U.S distributor.

“We are seeing enormous interest in potash from our Legacy mine both from existing and new customers,” K+S board member Andreas Radmacher said in a statement.

The agreement grants Koch exclusive rights to 453,000 metric tonnes a year of the output from Legacy, which is expected to produce about two million tonnes of potash annually by the end of 2017.

The deal with Kansas-based Koch Fertilizer comes as the European firm attempts to fend off a takeover bid from Potash Corp. (TSX:POT), which in K+S view undervalues the project.

Potash Corp., the world’s second-largest producer of the fertilizer ingredient, is hoping to take over rival K+S, as global competition among sellers deepens.

The German company, which has rejected two takeover bids by Potash Corp. so far, has spent two billion euros on its Legacy project, located in southern Saskatchewan. The development, the first potash mine being built from scratch in 40 years, is expected to begin mid-2016.

Last week, K+S said it remained open to a tie-up with the Canadian giant if the terms of Potash Corp.’s unsolicited offer change.

If the merger succeeds, Potash Corp. would regain some of its historic dominance over the fertilizer market, as the two combined companies would account for 30% of global potash production.