Denver, CO-based Prospect Global Resources Inc. reached a $2 billion agreement to deliver potash to Sichuan Chemical Industry Holding Co. a Chinese chemical company.

Under the agreement, Sichuan Chemical Industry Holding Co. will buy at least 500 kt/a (550,000 stpy) of potash over 10 years starting in late 2015, the companies said.

The agreement illustrates how demand from China is reshaping the market for agricultural goods. The U.S. last year exported 215 kt (237,000 st) of potash, which is used to make potassium fertilizer for corn and other crops, The Wall Street Journal reported.

The potash would come from deposits that Prospect Global and two other small miners are developing near Holbrook, AZ. Prospect Global still needs to secure government permits and to raise hundreds of millions of dollars to bring the project forward and start production by late 2015.

Mining companies from Saskatchewan to Ethiopia are racing to develop more potash as growing demand for food in China and India helps drive crop prices to records and fuels the need for fertilizer. China is the world's largest potash consumer but imports most of what it needs. Prospect Global and other firms are eager to show that they have customers lined up so the potash producers can get investors.

Prospect Global has spent about $75 million of the roughly $1 billion it will cost to develop the Arizona mine, said Devon Archer, a Prospect Global director who led the company’s negotiations with state-owned Sichuan Chemical. Prospect Global hopes the deal will improve its ability to attract capital, possibly from banks in China, he said.

Geologists have said the Arizona project could hold as much as 2.5 Gt (2.75 billion st) of potash, and Prospect Global expects to produce 2 Mt/a (2 million stpy).

Global production of potash is nearly 60 Mt/a (66 million stpy). The market is dominated by Belarussian Potash Co. and Canpotex, a Canadian export venture formed by Mosaic Co., Agrium Inc. and Potash Corp. of Saskatchewan. The biggest U.S. potash maker is Intrepid Potash Inc., which operates mines in New Mexico and Utah.

Canpotex’s contracts with Chinese buyers, which generally cover six months, typically are seen as a global benchmark for the fertilizer market. But Canpotex and its Chinese clients are in a standoff over prices.

Despite strong demand, the potash market won't grow fast enough to accommodate all the smaller miners trying to ramp up production, Dahlman Rose analyst Charles Neivert said before the Prospect Global deal was known. Success will depend on being "first out of the block," he said.