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Aussie explorer targets potash 'cradle'

AAP logoAAP 1/11/2016 Trevor Chappell

Australian minerals explorer Davenport Resources is looking to the cradle of potash mining, Germany, as a source to meet future global demand for fertiliser.

Davenport is seeking to raise between $5 million and $6 million through an initial public offer to explore for potash in the central Thuringia region of Germany, where it holds exploration rights.

The region was part of East Germany before East and West Germany were re-unified in 1990.

Potash refers generally to any potassium fertilisers used in agriculture. Potassium is the seventh most common element in the earth's crust and is essential for healthy plant growth.

Germany has the fourth largest potash deposits in the world after Canada, Russia and Belarus and was the first country to mine potash.

"Germany, as a potassium producer, is really the cradle of potash," Davenport chief executive Chris Bain said.

Mr Bain said Germany recognised potash as a mineral as early as 1850 and was exporting potassium by 1862. Germany was the sole supplier of potassium salts until after the end of World War One.

Under the East German government, potash production fell away because the industry lacked capital, and after the re-unification of East and West Germany, much of what was left of the industry was shut down.

Mr Bain said the area in which Davenport plans to operate in Germany had already produced more than 100 million tonnes of potash before 1993 and unmined potash deposits in the area appeared "unlimited".

Davenport plans to use most of the money raised in the float to evaluate and drill on its Kullstedt and Grafentonna potash licences.

The company's exploration areas were drilled before 1990 and a lot of exploration data is already available.

"If you look at the mining areas that have been excavated, they hardly scratched the surface," Mr Bain said.

He said the initial cost of mining the potash in Germany, was likely to be lower than Canada, for example, because the deposits were at a shallower depth: 600 to 800 metres compared to 1,400 metres in Canada.

Mr Bain acknowledged that world markets are currently oversupplied with potash from Russia and Belarus, while economic problems in Brazil, one of the big importers of potash, are making the oversupply worse.

"Yes, there's been oversupply like many of the bulk commodities, but if you look at what's happened with coal recently, we've gone from an oversupply to a much more balanced market and a terrific price recovery," Mr Bain said.

Mr Bain said the recent move by Australian mining magnate Gina Rinehart to invest $US300 million into a potash project in the UK showed confidence in the potential of the potash sector.

Davenport is offering shares at 20 cents each in the IPO and plans to list on the Australian share market on December 14.

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