The State-owned State Development & Investment Corp plans to build a fertilizer plant in Northwest China's Xinjiang Uygur Autonomous Region with an ultimate capacity to yield 3 million tons of potash a year.

The project will be divided into two phases and is expected to involve a total investment of 10 billion yuan (US$1.2 billion), Li Hao, president of the management company for the new venture, said yesterday.

Located in the resource-rich Tarim Basin, the construction of the first-phase of the project will start today, and is expected to produce 1.2 million tons of potash by 2009.

After the completion of the second phase in 2014, the plant will boast an annual capacity of 3 million tons, Li yesterday said in Urumqi, the capital city of Xinjiang.

The initial project will cost 3.1 billion yuan (US$382 million), 2.6 billion yuan (US$321 million) of which will come from bank loans with the rest financed by the company's internal sources, Wang Huisheng, president of State Development, said.

The Beijing-based investment firm will own a controlling 63 per cent of the fertilizer plant, with remaining shares going to local companies.

"The new project has great market potential and is in line with the country's ambitious drive to develop the west," Wang told reporters yesterday.

Drawing upon the Luobupo salt lake in the northeastern part of Tarim Basin with a sylvite reserve of more than 100 million tons, the new plant will make 2 billion yuan (US$247 million) in revenue a year after 2009, with profit being more than 200 million yuan (US$24.7 million), Wang said. Sylvite is used to make potash.

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