By Ana Mano

SAO PAULO (Reuters) – A unit of Toronto-based miner Brazil Potash is working to keep a $2.5 billion potash project on schedule, as legal challenges are mounting to its plans for extracting the fertilizer ingredient from beneath the Amazon rainforest.

In an interview, Potassio do Brasil Chief Executive Adriano Espeschit described a protracted licensing process hinging on court-supervised talks with the Mura Indigenous people, who have the right to be consulted under an International Labor Organization (ILO) convention.

The proposed mine and processing facilities in Autazes, 75 miles (120 kms) southeast of the Amazonas state capital Manaus, would require about three years to build, Espeschit said.

Consultations with the Mura have no fixed timeline, but he insisted the project remains on track to start production in 2026. Potassio do Brasil is hoping to get a license to start building installations while continuing to engage in the Indigenous consultations, Espeschit said.

The situation highlights risks associated with mining projects in the Amazon at a time when global potash prices have tumbled after steep rises last year.

Although the company says the mining project is not on officially demarcated Indigenous territory, federal prosecutors argue it should not go forward until authorities have given full consideration to the proposed demarcation of native lands.

The prosecutors have asked a judge to halt consultations with the Mura, which the company agreed with in 2017, until a final decision on the demarcation of a proposed Soares/Urucurituba Indigenous reservation overlapping the mine’s site.

In court filings and public statements, prosecutors accused Potassio do Brasil of “intimidating” the Mura with its public promotion of the project in their community.

The company denied any intimidation and said it has complied with court orders to stay out of Mura lands.

Potassio do Brasil got the first of three licenses required for the project from state environmental agency IPAAM in 2015.

In February, however, a judge gave federal environmental agency IBAMA jurisdiction over the licensing process. An Ibama spokeswoman said the permitting process will not necessarily start from scratch, because some studies submitted to state authorities may be useful in the federal review.

Prospects for the Amazon potash mine were looking up last year when the previous government, which has defended mining on Indigenous land, announced a plan to boost domestic fertilizer production and cut dependence on imports.

The owner of Brazil’s biggest homegrown grains trader also touted talks in early 2022 with Brazil Potash investor Stan Bharti to partner on the Autazes mining project.

But as the effects of Western sanctions on major potash producers subsided, the cost for Brazil to import potassium chloride in Brazil dropped 65% from last year’s peak.

Potassio do Brasil insists the Autazes project, with output forecast to cover about a fifth of Brazil’s current demand, remains competitive due to favorable logistics and proximity to major South American farm belts.

(Reporting by Ana Mano; Editing by Brad Haynes and David Gregorio)