Nutrien Ltd., Saskatoon, announced late on Nov. 5 that following a strategic review of the company’s potash portfolio, it has decided to permanently close its New Brunswick potash facility and will record a US$1.8 billion non-cash impairment in the third quarter of 2018. The company has no plans to sell the mine. The facility was placed in care and maintenance in early 2016 (GM Jan. 22, 2016), and has not produced potash since that time.
Nutrien said the decision to close the New Brunswick potash facility reflects the company’s ability to increase potash production in Saskatchewan at a significantly lower operating and capital cost than resuming production in New Brunswick.
Nutrien CEO and President Charles Magro reiterated during the Nov. 6 company conference call that the company had reported earlier in the year – soon after the Potash Corp. of Saskatchewan Inc. and Agrium Inc. merger – that it was doing a full portfolio review. “We have five million mt in Saskatchewan of excess capacity today,” said Magro. “And if we invest a little bit of capital into the six facilities in Saskatchewan, we can even go much higher than our operational capacity that is stated at 18 million mt/y for very economic expansion. The cash cost of production in New Brunswick is just so much higher than Saskatchewan’s, so it’s the best use of cash.”
Nutrien said the impairment is non-cash and has no impact on Nutrien’s previously announced financial guidance or future global potash sales. It is also not a part of the company’s updated merger synergies of $600 million.
At the time of the closure, the newly-constructed $2.2 billion potash operation had a workforce of 430. Nutrien last week put annual care and maintenance costs at about $25 million per year, up from $15-$20 million estimates given in 2016. Some 35 employees were retained to keep it in a care and maintenance mode. The company said at the time it would take a year to bring it out of that mode, and that it did not foresee the operations reopening in the near future.
In addition, at the time of closure PotashCorp had sued Cementation Canada Inc., which had constructed the two new mine shafts at the site, saying construction flaws led to the “complete failure” of one shaft and problems with another. However, PotashCorp said at the time the lawsuit had nothing to do with the suspension, and that it had filed the suit to preserve its rights in the event no settlement was reached.
When the 2 million mt/y New Brunswick mine and expanded milling operation was first announced in 2007 (GM July 30, 2007), then Potash Corp. of Saskatchewan Inc. President and CEO Bill Doyle called the deposit “spectacular,” saying the relatively flat new deposit contained two potash seams, each varying in thickness to a maximum of 60 feet, that would provide a long-term, low-cost source of potash. By comparison, he had noted that Saskatchewan seams were 17 feet.
The new mine was built adjacent to the company’s existing New Brunswick mine, which had water inflow problems. The old mine produced potash while the new one was being constructed. The New Brunswick facility was not a part of Canpotex Ltd., the Saskatchewan producer export organization.