Fertilizer firm Mosaic Co. is dialing back production at another of its potash mines in eastern Saskatchewan as its potash inventories rise.
Minnesota-based Mosaic Co. said Thursday it will “temporarily curtail” potash production at its Esterhazy mine, bringing the company’s total production curtailments up to 600,000 tonnes.
The added curtailment, the company said, is based on “increasing inventories as a result of a short-term slowdown in global potash markets” as well as “increased risks of a delay in Chinese contract settlement.”
If the “full amount” of the curtailment shows up in lower sales during the fourth quarter of 2019, the company expects it to reduce adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) by about US$150 million.
Mosaic Co. said the planned curtailment at Esterhazy isn’t expected to slow the pace of development on its K3 mine project there.
The company announced in August it would accelerate development of the “low-cost” K3 mine, at the same time as it announced a production curtailment at its “higher-cost” Colonsay mine, about 65 km southeast of Saskatoon.
The accelerated ramp-up at K3 potash project had produced over 400,000 tonnes of ore so far during fiscal 2019 up to June 30, the company said in August.
Ramping up K3 and temporarily idling Colonsay was expected to lower Mosaic’s cost of production, “accelerate inventory depletion” and avoid $40 million to $50 million in cash expenditures in 2019.
Those actions were also expected to “increase the company’s leverage to strengthening markets into 2020.”
Mosaic’s latest curtailment follows fertilizer rival Nutrien’s plans, announced last month, to shut down three of its Saskatchewan potash mines for up to two months during its fourth quarter.
“While near-term fertilizer markets remain challenging, we continue to expect a very strong application season in Brazil and North America, and a better supply and demand balance in 2020,” Mosaic CEO Joc O’Rourke said in Thursday’s release. — Glacier FarmMedia Network