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PotashCorp to suspend operations indefinitely at New Brunswick

January 20, 2016
Chemical Value Chain

PotashCorp says that, against a challenging macroeconomic backdrop, it is indefinitely suspending operations at its Picadilly, NB, potash mining site.

The decision, which will affect headcount, is designed to help PotashCorp improve its production to the company’s lower-cost potash operations. PotashCorp expects the decision will increase its competitiveness and reduce cost of goods sold by $40–50 million in 2016. However, the benefits of this optimization will be partially offset by severance and transition costs associated with the suspension of potash operations, which are expected to be about $35 million and reflect in PotashCorp’s first-quarter earnings.

The indefinite suspension at Picadilly is also to help PotashCorp realize meaningful capital savings and maintain its long-term operational flexibility, the company says. The suspension of potash operations there will also eliminate significant capital expenditures (capex), including approximately $50 million in 2016 and $135 million in 2017–18. The decision is intended to preserve jobs across the company over the long term, the company adds. The Picadilly mine will be placed in care-and-maintenance mode at estimated annual costs of $20 million in 2016 and $15 million in subsequent years. Should the company decide to resume operations at Picadilly, it would require a period of about one year to restart, the company says.

A core crew of approximately 35 employees will be retained at Picadilly to keep the operation in care-and-maintenance mode, the company adds. The suspension is expected to result cut the workforce by 420–430 in New Brunswick, PotashCorp says.

PotashCorp’s international customers served by New Brunswick will now be served from Saskatchewan through the Canpotex exporting and marketing alliance, of which PotashCorp is a member, the company says. PotashCorp’s storage and loading facilities at the Port of St. John, NB—with capacity of up to 2.5 million m.t./year—will be made available to Canpotex as part of the agreement. Canadian east coast transportation costs, including rail costs and ocean freight, are expected to approximate to levels currently realized through Canadian west coast delivery, PotashCorp says. The company’s volume entitlement within Canpotex will increase by 750,000 m.t., representing an approximate 51.5% allotment beginning in 2016. Agrium and Mosaic are the other members of Canpotex.

“We understand the significant impact to our people in New Brunswick and the surrounding communities and are committed to helping those affected through this challenging time,” says Jochen Tilk, president and CEO of PotashCorp.

More than 100 open positions will be available for New Brunswick employees to join PotashCorp’s operations in Saskatchewan together with relocation assistance. Employees who do not remain at Picadilly or choose not to relocate to Saskatchewan will be provided with severance and assistance packages, PotashCorp says.

PotashCorp will also be establishing a C$5-million ($3.43 million) community investment fund to assist employees and local residents. The fund will include money to help employees with transition jobs, support to local businesses, and support local charitable organizations.

By Francinia Protti-Alvarez

Source: Chemical Week

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