Potash Corp. of Saskatchewan Inc. announced May 2 a major mine expansion at its Cory, Sask., facility, as well as a three-for-one stock split and dividend increase. The debottlenecking and expansion will increase product potash production at its Cory facility by 1.2 million mt from 2006 levels. The project will cost approximately US$775 million, which includes US$70 million for 750,000 mt of new compaction capacity.
Cory produced approximately 800,000 mt of its 1.37 million mt nameplate capacity in 2006. It currently makes only white potash products, primarily for industrial customers. The project will involve debottlenecking of underground operations, as well as a significant expansion into the production of red potash products. A new plant will be constructed for the crushing, flotation, centrifuging, and drying of 2.0 million mt/y of red products, with up to 800,000 mt of this to be crystallized for white product production. Additionally, storage, load-out, and rail yard capabilities will be expanded to support the new red product line. Work is scheduled to begin immediately and will take 36 months to complete.
This will increase capacity at Cory to 2.0 million mt and, combined with other announced projects in Saskatchewan, should raise PotashCorp’s total production capability to 13.5 million mt by the second quarter of 2010. Beyond this, the company is considering additional projects at its facilities in New Brunswick and Saskatchewan that could raise its potential capacity to 15.7 million mt by 2015.
PotashCorp says with a 12-16 percent increase in potash consumption expected in 2007 and further 3-4 percent annual increases anticipated through the end of the decade, global potash producers – with the exception of PotashCorp – are at or near their production limits. The company notes that a new conventional greenfield mine requires a good deposit, 5-7 years of lead time to build, and an investment of $2 billion for 2 million mt of production. PotashCorp says the Cory project will bring expanded production tonnage online more quickly and at a 40-percent discount to the estimated cost of a greenfield development.
“We believe that the world will need more potash, and we are in the best position to meet that demand,” said PotashCorp President and CEO Bill Doyle. “For almost 20 years, we have patiently managed our potash resources, recognizing that significant and sustainable growth in global consumption would eventually arrive. Our project at Cory demonstrates the continuing execution of our Potash First strategy, as we will be bringing back capacity and expanding our product mix to meet the growing requirements for potash in offshore markets.”
PotashCorp also announced a three-for-one stock split of common shares and a 100 percent dividend increase. Payable in the form of a stock dividend, all shareholders will receive two additional shares for each share owned on the record date of May 22, 2007. The board of directors also approved the doubling of the company’s quarterly cash dividend (from $0.15 per share to $0.30 per share on a pre-split basis), and declared a quarterly cash dividend of US$0.10 per common share (on a post-split basis) payable Aug. 10, 2007, to shareholders of record on July 20, 2007. Quarterly dividends have been declared since the first quarter of 1990, the company’s first full quarter subsequent to its initial public offering in November 1989.
“Investors have demonstrated their confidence in our company and the price of PotashCorp shares has risen by over 270 percent since our two-for- one stock split in August 2004,” said PotashCorp President and CEO Bill Doyle. “The increased number of shares resulting from the split should enhance trading liquidity in our stock, benefiting all of our shareholders. The doubling of our dividend further emphasizes the confidence we have in our business over the long term, once again delivering on our promise to use our strong and sustainable cash flow in ways that provide maximum shareholder value.”
Shareholders who have PotashCorp stock certificates should retain them. The transfer agent, CIBC Mellon Trust Company, will mail new certificates on May 29, 2007. Upon completion of the stock dividend, the number of shares outstanding will approximate 315.4 million. PotashCorp’s common shares are expected to commence trading on a split basis on May 17, 2007, on the Toronto Stock Exchange and May 30, 2007, on the New York Stock Exchange. The stock split will have no unfavorable tax consequences in Canada or the U.S.