Fertilizer Maker Migao Inks Potash Deal

Potash fertilizer maker Migao said it had arranged for the supply of 500,000 tons of potash a year at a discount to market prices for 10 years starting 2013.

The multi-year supply agreement would help Migao cut costs at a time when prices for the coveted commodity are rising due to growing pressures on food supplies.

Migao, which signed the agreement with Potash Export, a private entity established by Russian potash producers, said it would prepay $100 million and further payments would be made before the initial delivery.

The potash from the Russian group is meant for import to China.

Migao, which operates plants across China, expects its production capacity to be 380,000 tons a year by the end of this month, for which it needs about 300,000 tons of potash as a raw material. Migao expects its capacity to be 570,000 tons a year by the year-end.

Shares of Toronto-based Migao, which have lost about 5% in value since the company reported third-quarter results last month.