Potash pushes for even more production

JOHN PARTRIDGE

Globe and Mail Update

July 17, 2008 at 2:29 PM EDT

Global demand for fertilizer is so hot that Potash Corp. of Saskatchewan Inc. [POT-T] is expanding its already ambitious expansion plans.

The Saskatoon company said Thursday that it now is seeking to boost its annual potash production capacity to 18 million tonnes by the end of 2012, up from the previous target for that year of 15.7 million tonnes and its current capacity of 10.2 million tonnes.

It will do so, it said in a news release, by adding 2.7 million tonnes of capacity at three of its existing Saskatchewan mines, starting right away, at an additional combined cost of $1.6-billion (U.S.).

The company said in April that it had budgeted a total of $4.5-billion to expand its Saskatchewan and New Brunswick operations to get to the 15.7-million-tonne target.

“It is clear that global potash demand is continuing to grow more quickly than increases in supply,” Bill Doyle, the company's chief executive officer, said in a news release, adding that the mine expansions will be a “faster and more cost-effective” than building an entirely new mine from scratch.

The additional expansions will be achieved through “debottlenecking” at the three Saskatchewan mines, Potash Corp. said.

The target is to add 1 million tonnes of capacity at the Allan mine, bringing the total to 3 million tonnes a year, at an additional cost of $350-million. Another 1 million tonnes will be added at the Cory mine, also taking its capacity to 3 million tonnes a year, at a cost of $220 million.

The largest additional expansion is set for the company's Rocanville mine. The plan for this mine and mill now calls for an increase of 2.7 million tonnes in capacity, up by 700,000 tonnes, to a total of 5.7 million tonnes by the end of 2012, with costs now estimated to rise by $1-billion to a total of $2.8-billion, the company said.

Potash Corp. said it expects to finance the new projects from free cash flow.