PotashCorp to boost Sask. mines’ capacity

PotashCorp plans to spend US$1.6 billion in Saskatchewan to boost two potash mine capacity expansion projects and launch a third, to raise its total annual capacity by 15 per cent by the end of 2012.

The Saskatoon company, the world’s largest potash producer by capacity, plans a new “debottlenecking” project at its mine at Allan, about 60 km southeast of Saskatoon, which will raise the mine’s annual capacity to three million tonnes per year.

That’s on top of a 400,000-tonne capacity expansion at Allan which the company completed in 2007. The $350 million debottlenecking project is to be completed by the end of 2012.

At Cory, just west of Saskatoon, an extra expansion project worth US$220 million is expected to add one million tonnes to a debottlecking and expansion project the company started last year for completion in 2010. The new project will also be completed by the end of 2012.

At Rocanville, about 125 km southeast of Yorkton, Sask., where PotashCorp already announced a two million-tonne mine and mill project last year, another 700,000 tonnes of capacity will be added at an extra investment of US$1 billion.

PotashCorp, which recently also completed expansions at its Esterhazy and Lanigan, Sask. mines, has further projects underway at Patience Lake, also near Saskatoon, and at Sussex, N.B. All these projects are expected to be financed through free cash flow, the company said.

“It is clear that global potash demand is continuing to grow more quickly than increases in supply,” CEO Bill Doyle said in a release Thursday. “With our unmatched potash assets, we can provide a solution that is faster and more cost-effective than greenfield production.”

The projects are expected to make extra production available much more quickly than a new mine could be developed, at a cost about 60 per cent below that for new “greenfield” mining capacity, the company said.

“New and higher levels”

The news follows an announcement Wednesday by Canpotex, the potash export agency co-owned by PotashCorp, Agrium and Mosaic Co., that it has wrapped up “significant volumes” for shipment to Asian spot markets at US$1,000 per tonne for standard grade material and US$1,025 for granular grade.

“As a result, Canpotex is advising its customers that all new sales for shipment through the balance of 2008 will be priced at these new and higher levels,” the agency said in a statement on PotashCorp’s website. “The new pricing will also apply to all new sales to customers in Brazil and Latin America.”

The new, higher price levels are supported by continued offshore potash demand and by “historically low” potash working inventories due to record demand this year. These factors have created an “extremely tight” supply situation for potash, and a supply/demand scenario that’s expected to continue into 2009, Canpotex said.

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