Reuters — Weak conditions in the potash market will not improve any time soon, PotashCorp’s CEO said Tuesday as the fertilizer company announced it would suspend operations “indefinitely” at its New Brunswick mine.
Potash Corp said it was putting its new Picadilly mine near Sussex, about 75 km northeast of St. John, in “care and maintenance” mode, resulting in the loss of 420 to 430 jobs.
Potash prices have fallen sharply over the past year, under pressure from bloated capacity, soft grain prices and weak currencies in major consumers such as India and Brazil, one of PotashCorp’s largest customers.
“We don’t see in the short term how things will turn around quickly that would change the environment,” CEO Jochen Tilk said in an interview.
“We are repositioning the company in light of that but we are still optimistic on the long-term prospects for our business,” he said.
Saskatoon-based PotashCorp’s stock was 60 cents firmer at $23.63 on the TSX on Tuesday. The stock is down 45 per cent in the past 12 months.
As demand for potash has fallen worldwide, PotashCorp, the world’s biggest fertilizer company by capacity, has in recent months closed its nearby Penobsquis potash mine and suspended production at three mines in Saskatchewan. PotashCorp’s other New Brunswick mine, at nearby Cassidy Lake, was shut down in the late 1990s.
PotashCorp, which had more than 5,000 employees worldwide at the end of 2014, said it would retain 35 employees at Picadilly to keep the operation in “care-and-maintenance,” while another 100 are to stay on through a four-month “transitional period.”
The Picadilly mine, built between 2008 and 2014, would take about a year to restart if PotashCorp decides to resume its operations, the company said.
About 100 affected New Brunswick employees could be relocated to the company’s Saskatchewan sites, PotashCorp added.
PotashCorp said it expected to recognize severance and transition costs of about $35 million in the first quarter as a result of suspending operations at Picadilly.
PotashCorp said its customers “historically served” via New Brunswick will now be served from Saskatchewan through Canpotex, the joint potash export arm it operates with Agrium and Mosaic Co.
PotashCorp’s port terminal at St. John will also be made available to Canpotex, the company said.
The suspension would help PotashCorp to reduce its full-year cost of goods sold by $40 million to $50 million and would eliminate capital expenditures of about $50 million in 2016 and $135 million in 2017-18, the company said.
— Reporting for Reuters by Swetha Gopinath in Bangalore and Nicole Mordant in Vancouver. Includes files from AGCanada.com Network staff.