Saskatchewan potash industry prepared for growth in 2017

By Kylie Williams

 Potash in PotashCorp’s Rocanville mine. Photo courtesy of PotashCorp.

Potash in PotashCorp’s Rocanville mine. Photo courtesy of PotashCorp.

Saskatchewan produced a record 18.2 million tonnes of potassium chloride in 2015, with a value of $6.1 billion dollars. As the world’s largest potash producer, the province is hopeful that the low potash prices of recent years, due to over-supply and lower-than-expected demand, have reached their lowest point. In August 2016 the price of potash was $220 USD/metric tonne (mt) in, down from $300 USD/mt the same time last year, and well below the peak price of $870 USD/mt reached in February 2009.

The Food and Agriculture Organization of the United Nations have predicted steady growth in demand for nitrogen, phosphate, and potassium fertilizer between 2015 and 2019. In addition, signs of improvement in other commodity prices have been observed since January 2016, as economies around the world strengthen. In response, Saskatchewan’s potash industry has been building and expanding operations, and a number of projects are set to advance in 2017.

Dominating global agriculture news in 2016 was the announcement of a proposed merger between the Potash Corporation of Saskatchewan (PotashCorp) and Calgary-based fertilizer producer, Agrium Inc. The new company will be the largest crop nutrient company in the world and the third-largest natural resource company in Canada, employing close to 20,000 employees in 18 countries with a value of US$36 billion.

“This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone,” said Chuck Magro, Agrium president and CEO in a news release on September 12, 2016. The deal is described as a “merger of equals” and the new company expects to generate up to US$500 million annually as an integrated global supplier of crop inputs.

In January 2016, PotashCorp suspended operations at the Picadilly potash mine in New Brunswick indefinitely, resulting in the loss of over 400 jobs. Extra positions were offered to 100 affected employees willing to relocate to Saskatchewan, where PotashCorp operates five mines. The company’s eight-year, $3-billion expansion to the Rocanville mine, 200 kilometres east of Regina near the Manitoba border, is expected to be completed in November 2016. The expansion will double production capacity, making it one of the biggest underground mines in the world.

Rocanville underground machinery. Photo courtesy of PotashCorp.

Rocanville underground machinery. Photo courtesy of PotashCorp.

PotashCorp’s Cory, Allan, and Lanigan mines were temporarily closed for several weeks each in late 2015 and early 2016 to reduce production due to market oversupply. The Patience Lake solution mine accounted for only 2.9 per cent of the company’s potash 28 million tonne ore production in 2015.

The new company will also control Agrium’s Vanscoy potash mine near Saskatoon, if the merger is approved by shareholders. Production at Vanscoy ramped-up in 2015, but the mine was rocked by two serious safety incidents within a few weeks in August 2016.

For Mosaic Company, who operate the remaining three potash mines in Saskatchewan, good news came in the form of a $3.2 billion K3 mine expansion at the giant Esterhazy mine, while the bad news involved 330 employees temporarily laid-off at Colonsay. The mine will remain idle for the rest of 2016, but employees will be recalled in January 2017. K3 should also be operating in 2017 and is expected to reach capacity of 21 million ore tonnes by 2024.

The first new potash mine to be built in Saskatchewan in almost 40 years should be completed in 2016. K+S Potash Canada’s Legacy solution mining operation is under construction near Bethune, Sask. An incident caused considerable damage to property in mid-July 2016, but nobody was injured and the mine is expected to reach the two-million tonne production capacity by the end of 2017.

In October 2016, K+S Potash Canada announced a $1 million grasslands protection project in partnership with the Nature Conservancy of Canada. Over 190 hectares of natural grassland impacted by the Legacy Project will be off-set by conserving an additional 400 hectares of high-value grassland in an arrangement that Saskatchewan’s Ministry of Environment hopes will be adopted by other stakeholders in the province.

A number of advanced potash projects are under development around the province. YanCoal Canada, a wholly owned subsidiary of Yanzhou Coal Mining Co. Ltd., received conditional approval from the Saskatchewan Ministry of Environment in August 2016 for their proposed Southey potash solution mine, 60 kilometres north of Regina. The communities around the proposed mine are divided and have voiced concerns over the environmental impact of the project, particularly on water supplies. Several community meetings were held during 2016 and 800 submissions were received by the Ministry of Environment in a 45-day period.

Western Potash Corp. announced a strategic investment of $80 million from a Chinese private equity firm in September 2015 toward construction of their 100 per cent-owned Milestone Property, 30 kilometres southeast of Regina. Contracts were awarded in April 2016 for engineering, procurement and subsurface design, and should be complete by the end of 2016.

BHP’s activities are aimed at potash project development. Their interest in potash is via development projects largely within the Canadian province of Saskatchewan. The Jansen Project, located 140 kilometres east of Saskatoon, Saskatchewan, is their most advanced project and is in feasibility study stage. Photo courtesy of BHP Billiton.

BHP’s activities are aimed at potash project development. Their interest in potash is via development projects largely within the Canadian province of Saskatchewan. The Jansen Project, located 140 kilometres east of Saskatoon, Saskatchewan, is their most advanced project and is in feasibility study stage. Photo courtesy of BHP Billiton.

Karnalyte Resources announced financing for construction of their potash mine at Wynyard, Saskatchewan in March 2015. As of September 2016, they had successfully commissioned the second stage and testing was underway in increase previously reported potash concentrations.

Vale’s Kronau Project’s final feasibility study has been completed and the company is determining the next steps for the project. Also progressing slowly is BHP Billiton’s $3.4 billion Jansen Project, 140 kilometres east of Saskatoon, which is around 60 per cent complete.

There has been no news on a buyer for the Russell-McAuley potash project, an estimated one-billion-tonne high-grade potash deposit in Manitoba. Four companies were said to be interested in the deposit in late 2015, but no new announcements have been made in 2016.

Looking ahead, there seems to be little doubt that the potash market will recover to meet the demands of farmers producing food for a growing global population. Saskatchewan mines are gearing up to increase production in 2017 as supply and demand even out after a tumultuous few years.

“Fertilizer markets have been under pressure through the first six months of 2016, however we believe the uncertainty that weighed on potash market sentiment is now lifting and a recovery is beginning,” said Jochen Tilk, PotashCorp president and CEO in a company news release in July 2016. “With key Asian contract prices settled by a number of producers – and buyer inventories at reduced levels – we are seeing improved engagement in all key markets.”

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