TORONTO (miningweekly.com) – Canada’s largest potash producer Potash Corporation of Saskatchewan on Tuesday announced that it would immediately close its Picadilly, New Brunswick potash operations, citing a challenging macroeconomic backdrop.
The suspension would make between 420 and 430 jobs redundant, with only a core crew of about 35 workers expected to remain to keep the operation in care-and-maintenance mode.
“This is a very difficult day for our employees and our company. While these are important steps in running a sustainable business and positioning the company to best meet the needs of its many stakeholders over the long term, such decisions are never easy,” said PotashCorp president and CEO Jochen Tilk.
Prices for the crop nutrient potash have been in decline as the market faces downward pressure from fewer sales in China, which had introduced a new value-added tax on fertiliser sales, while drier weather in India and lower demand caused by weaker currencies and adverse weather conditions had affected the rest of Asia. In response to weak demand, PotashCorp in October announced the permanent closure date of its Penobsquis, New Brunswick mine and inventory shutdowns in December at three of its Saskatchewan mines.
OPTIMISATION
By optimising production, PotashCorp expected to increase its competitiveness and reduce cost of goods sold by between $40-million and $50-million in 2016, which would be partially offset by severance pay and transition costs of about $35-million, to be booked in the company’s first-quarter earnings.
The suspension of potash operations at Picadilly would also eliminate significant capital expenditures, including capital of about $50-million in 2016 and $135-million in 2017/18.
PotashCorp’s international customers that were historically served by New Brunswick would now be served from Saskatchewan through its marketing cartel Canpotex. PotashCorp said its storage and loading facilities at the Port of St John – including capacity of up to 2.5-million tonnes a year – would be made available to Canpotex.
Meanwhile, East Coast transportation costs – including rail costs and ocean freight – were expected to be similar to levels currently realised through West Coast delivery. The company’s volume entitlement within Canpotex would increase by 750 000 t, representing a 51.5% allotment, starting in 2016.
The Picadilly mine would be placed in care-and-maintenance mode at an estimated cost of $20-million a year in 2016 and $15-million in subsequent years. The company would need a year if it decided to resume operations at Picadilly.
Environmental remediation work and care and maintenance at Cassidy Lake would continue, as would decommissioning at the Penobsquis mine.
TRANSITION
Tilk added that the company was committed to helping those affected by the layoffs by transferring up to 100 employees to join the company’s Saskatchewan operations, along with relocation assistance. Employees who did not remain at Picadilly or who chose not to relocate to Saskatchewan would be provided severance and assistance packages.
PotashCorp would also be establishing a C$5-million community investment fund that would include funding streams to help employees with job transition assistance, including skills training and educational support; provide financial support to local businesses; and support local charitable organisations.
The company said that up to 100 employees would remain in place through a transitional period of about four months.
Edited by: Samantha Herbst
Creamer Media Deputy Editor
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