K+S Group, Kassel, reported this week that the company is increasing the capex budget by €50 million (approximately $52.7 million at current exchange rates) for its Bethune potash mine site in Saskatchewan to accelerate the ramp-up of the operation. It said the decision has been facilitated by the high free cash flow expected for K+S for the 2022 fiscal year (see Earnings Story).
“This additional capex does not only target the short-term acceleration of the ramp-up, but proactively also the longer-term ramp-up of the site,” K+S Chairman of the Board of Executive Directors and CEO Burkhard Lohr told analysts at a company earnings call on May 11.
K+S said it has started the hiring process for more than 70 additional people for the further ramp-up project, mainly in the fields of engineering, IT, and operations.
The ramp-up project will not only increase production and reduce production costs, but improve environmental and sustainable impact.
However, Lohr said the ramp-up project would increase production capability at Bethune by no more than 50,000-150,000 mt annually as of next year. He reminded that for technical reasons there is not much more capability than that in Bethune, and that the increase would come from secondary mining.
Responding to an analyst’s question about potash shipments from Bethune, Lohr said K+S is continuing to increase volumes into the US, reiterating the target of 500,000 mt/y, which he said may be achievable in 2023 or 2024. He expects that close to 300,000 mt should be shipped to the US this year from Bethune.
Lohr said the company is going to reduce its Chinese volumes again compared to last year due to the netback situation, and that it has also started shipping volumes into Europe from Bethune.
“For the time being, we are the last significant remaining EU producer and allocator of potash in this region, and that is our contribution to stabilize the agricultural situation here in Europe,” he said.
On the question of any logistical challenges or limitations on shipping potash from Bethune to Europe, Lohr noted that for shipments of bulk products are possible from Vancouver to Europe, although he added it is now more expensive than it was a few years ago.
However, he did not indicate the volumes K+S is shipping to China and Europe.
Lohr added “non-organic” moves could be possible, including M&A transactions. But he pointed to the “very, very dynamic situation” with the war in Ukraine and that K+S wants to keep its balance sheet and financials “robust.” Nevertheless, Lohr said the company looks at “all opportunities.”