Potash mining best left to those who know best

I hate being on holidays when really interesting news breaks.

It happens remarkably often. In 2003, for example, it was BSE, which really blew my mind.

This time, it was potash. This time, though, the announcements did not blow my mind.

You may recall that Vale SA, the massive Brazilian mining company, postponed and is “reassessing” its Kronau, Sask., potash project, worth $3 billion and a whole lot of jobs.

Then, BHP Billiton announced its unsurprising delay on the Jansen mine near Humboldt, Sask. BHP originally intended to make a decision on Jansen this year, but now any final approvals will come in mid-2013 — at the earliest.

This project is probably the largest greenfield mine ever, and will eat up $12 billion to bring onstream. Both Vale and BHP recently announced disappointing financial results.

Meanwhile, PotashCorp will close its Lanigan mine for a month starting Sept. 15. This, of course, was the least surprising of all. It’s a rare year that does not see a pull-back in production at a PotashCorp mine to match demand.

What is going ahead is the K+S Potash Canada mine northeast of Moose Jaw, a $3 billion solution mine. It is no coincidence that K+S is going ahead while Vale and BHP are not. Along with the big three North American fertilizer producers, K+S is among the world’s most knowledgeable and focused fertilizer companies.

With no intention to throw stones at the BHP and Vale models, which are highly diversified and very different from K+S, the difference here is that K+S knows precisely what it’s doing in potash.

It knows what kind and what size of mine will be an economic addition to the market; how much to spend on bringing it on; and how much production fits into the global fertilizer scene.

Saskatchewan has incredible re-serves of potash, but bringing the entire bowel of the province onto the market at once makes little sense. While food will increasingly need fertilizer, flooding the market won’t support consistent production.

The resource must be managed intelligently, and three greenfield mines opening within a couple of years would have been a heck of a jolt to the market.

For now, leaving potash mining to the fertilizer experts might be for the best … except for the dashed hopes and dreams of the communities that expected new mines to open.

explore

Stories from our other publications