The Mosaic Co., Tampa, announced on Jan. 28 that it intends to keep its Colonsay potash mine idled for the foreseeable future. The mine will be placed in care and maintenance mode, employing minimal staff and allowing for resumption of operations when needed to meet customers’ needs.
“The ramping up of our Esterhazy K3 production, combined with continued weak demand in North America, has left Mosaic’s potash business with excess inventory and production capacity,” said President and CEO Joc O’Rourke. “This decision will regrettably impact employees, but allows us to optimize our Canadian production assets and improve our cost position in a competitive market. In 2020, we continue to expect robust global fertilizer demand and strong business conditions.”
Mosaic curtailed the Colonsay mine in August (GM Aug. 9, 2019), with the outage impacting approximately 350 employees. Soon after, the United Steelworkers Union told workers they should find other work and that the closure was indefinite, even though O’Rourke had told analysts at the time that company thinking was the mine would likely come back up toward the end of the year (GM Aug. 16, 2019).
After the Jan. 28 announcement, Mosaic spokeswoman Sarah Fedorchuk was quoted as telling The Canadian Press that another 80 employees would be impacted by the indefinite layoff.
Mosaic said the idling will result in a fourth-quarter 2019 pretax charge of approximately $530 million, primarily non-cash charges for asset write-offs, and inclusive of cash severance charges of $15 million to $20 million. The write-off is principally the carrying value of the 2013 expansion project, which increased Colonsay’s operating capacity to 2.1 million mt. Colonsay has been operating with a modified 1.5 million mt capacity since 2016, and the company does not expect to use the expansion capacity for the foreseeable future.
Nutrien Ltd., Saskatoon, had just announced about a week earlier that it would be continuing the shutdown of the Vanscoy mine in Saskatoon until at least the end of February (GM Jan. 24, p. 1).
These same market conditions that impacted potash – primarily a third consecutive weak application season in North America – also impacted Phosphates. Average realized phosphate prices continued to decline in the fourth quarter of 2019, impacting the annual goodwill impairment analysis and leading the company to expect a write-off of up to $590 million of Phosphates segment goodwill. The company plans to treat charges related to the idling or changes in goodwill balances as notable items.
Mosaic’s Jan. 28 announcement came after market close, and by the Jan. 29 close, shares had only dropped from $19.35 from $19.31. Shares actually closed up on Jan. 30 at $20.17 after news that the coronavirus would idle some phosphate production in China for another two weeks (see Markets).
Smaller potash producer K+S Group, Kassel, Germany, which had seen its shares fall after weakness in Brazil potash prices, rebounded after news that Mosaic and Nutrien had opted to keep potash production offline.