By EPCM World contributor Joe Veroni
It’s an interesting time for the potash industry. Prices remain steady as demand for the water soluble mineral rises. Potash is mainly used in fertilizer production, and there is no known replacement for the mineral.
More countries are paying attention to agricultural concerns as the world’s population continues to grow, in excess of 200,000 people per day. Consequently, the demand for potash is going to continue to rise. Good news for the major potash companies and even better news for the province of Saskatchewan – home to the world’s largest supply of potash.
Worldwide, only a dozen countries mine potash, totalling more than 30MM tonnes per year. Canada leads the way, producing about 9.5MM tonnes, which accounts for about 35% of the world’s production. Russia is the second largest producer, mining about 6.8MM tonnes per year. The world’s largest consumers of the product are China, the United Sates, Brazil and India. With potash usage on the rise, companies have plans to start mining more – much more.
It should come as no surprise that the world’s leading company in the fertilizer industry hails from Saskatchewan. The Saskatoon-based company doesn’t control as much land as some of the other heavy hitters, but the land they do own yields a whopping 20% of the world’s potash production. PotashCorp’s crown jewel is their Rocanville site. Under constant upgrade, the site is expected to reach a capacity production of 5.7MM tonnes of potash by 2014, making it one of the largest facilities in the world. With the site’s close proximity to the Unites States, PotashCorp has high hopes for filling American potash needs.
The Mosaic company operates five potash mines, including the world’s largest in Esterhazy, Saskatchewan. After a successful expansion project, Esterhazy is now able to produce 5.3MM tonnes of potash per year, enough to make Esterhazy the current global leader in potash production. Overall, Mosaic produces roughly 12% of the globe’s potash, and 38% on North America’s production. Aside from being a major player in Saskatchewan, Mosaic also operates out of Carlsbad, New Mexico, home to the USA’s largest volume of potash. The company has several aggressive expansions underway (all expected to be completed by 2020) and should have no problem competing with PotashCorp in the ever-growing global market.
The world’s largest mining company made a hostile bid to take over PotashCorp, a deal which was killed by the Canadian Federal government in late 2010. Undeterred, BHP Billiton moved into the potash game by purchasing Athabasca Potash, and are now considered a major player in the potash industry. The company’s massive Jansen project is just starting to get underway after nearly a year of putting staff and contactors (Atco to build housing for site workers, for instance) in place. Located east of Saskatoon, SK, the Jansen project is expected to yield about 8MM tonnes of potash per year. It’s an aggressive project covering a lot of Saskatchewan land. With such a massive amount of potash nearly ready for production, BHP Billiton is hoping to take advantage of American potash needs. Despite being the world’s eighth largest producer of potash (1.2MM tonnes per year), the USA consumes about 5.2MM tonnes per year, making the country the second largest importer of potash in the world.
Western Potash Corp’s prized Milestone mine isn’t scheduled for start-up until 2016. Furthermore, Milestone’s target production is 2.8MM tonnes – a far cry from what the big boys are pumping out per year. But what makes Western’s mine so interesting is the fact that Milestone is to be a solution mine. Solution mining has the benefits of lower capital costs, a shorter timeline to production and lower operating costs. However, solution mining also yields less product than traditional underground-based mines. Justin Robinson, a Search Consultant who works exclusively for the mining industry calls solution mining “a niche.” It’s something that you only use “when you’re going really deep, so you don’t put miners underground.” He continues, “It’s quite a bit cheaper, but you don’t quite get the return that you would if you went down. Some mines are 1,000 meters [below the surface] – so it gets quite dangerous. Potash is getting deeper and deeper underground, so to cut costs, companies are switching to solution mines.”
Although already a German heavyweight in the fertilizer and salt industries, K+S decided to move into the Saskatchewan potash game by purchasing Canada’s Potash One, and their Legacy project (also a solution mine). Located north of Moosejaw, the Legacy project was recently green lighted and production is scheduled to start in 2015. At capacity, the site will mine 4MM tonnes per year. K+S is the world’s leading producer of salt, and one of the leading producers of fertilizer. Considering that only 12 countries produce potash, and 150 countries use the mineral, it’s no wonder that K+S wanted to expand their reach to potash.