Since buying its massive Jansen potash deposit in Saskatchewan in 2011, BHP Billiton (BHP -3.43%) has sunk more than $1 billion into the project, committed to spending another $2.6 billion over the next few years just to gain access to the site, and it's sinking big mine shafts and building associated infrastructure that are expected to be completed by 2016 with surface facilities coming online in 2017.

But it's about to have company up north, as Rio Tinto (RIO -0.53%) has quietly revealed that it's sitting atop another massive potash deposit close to Jansen that could launch it into a top-tier position in potash.

Rio's KP405 potash lease in Saskatchewan's Elk Point Basin has already been characterized as a Tier 1 deposit, meaning it's one of the biggest in the world, containing some 329 million tons of potash. Its Russian partner in the project, Acron, calls it massive and says Rio has the capability of operating the deposit for decades at low cost. The world's largest potash mine is Mosaic's (MOS -0.69%) Esterhazy project in Saskatchewan, with an annual capacity of 5.3 million tonnes. Potash production is limited to just 12 countries, with Canada controlling more than half of the world's reserves.

For its part BHP calls potash the "fifth pillar" of its plan to meet the diverse needs of a developed and developing world, BHP is developing the potash project in preparation for the anticipated food boom and the resulting surge in demand for fertilizer to grow it. Although the industry was thrown into confusion last year when the Belarusian cartel split apart, causing potash prices to crater, China has since stabilized the market to a large degree by setting a floor of $305 per tonne. The situation in Ukraine has the potential to destabilize it again -- though perhaps to the high side this time -- but there seems little doubt the need for potash will continue to grow unabated. 

In addition to the currently fractured Belarusian cartel, which controls 40% of world potash supplies, another 30% is controlled by Canpotex, an exporter jointly owned by producers Mosaic, Agrium, and PotashCorp. The balance is made up of companies like Chemical & Mining Co. of Chile, Europe's K+S (KPLUY 2.05%), and smaller operators including U.S.-based Intrepid Potash.

As big as Rio's discovery is, though, there are several caveats that should serve to dampen rampant enthusiasm even if it's still an exciting development. First, KP405 is of a lower grade than BHP's, with an average grade of 31% KCl compared with 40.7% based on Jansen's 25.7% K2O, a measure of potassium oxide.

Second, The Australian says KP405 is much smaller than Jansen, being about a third its size, but because it also runs almost twice as deep, it means Rio will likely have to use different mining methods than its rival will, which would likely make it more expensive to exploit.

While this is still an early stage development, the industry has to contend with a glut of the fertilizer even before these projects come online so we may see more cost-containment initiatives being employed. K+S, for example, recently slashed its dividend 82%, reducing the payout ratio to just 11% of adjusted after-tax earnings. While PotashCorp has called its own payout "sacrosanct," others might not have such a devout belief, but it could still determine how large a role Rio Tinto and BHP Billiton ultimately play in the industry.