UpdateMosaic may halt potash deliveries to PotashCorp

03 May 2011 00:15  [Source: ICIS news]

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HOUSTON (ICIS)--Mosaic said on Monday it may stop providing potash to PotashCorp from its mine in Esterhazy, Saskatchewan, by 1 July as a result of an end to a 40-year-old tolling agreement between the two fertilizer companies.

Mosaic said it has satisfied its legal obligation to produce potash for PotashCorp.

“Mosaic has been providing PCS [PotashCorp] with potash from the Esterhazy mine at cost for forty years under a tolling agreement,” Mosaic said. “Over the life of the agreement, PCS has requested and received substantially more potash than has been mined from PCS’s reserves.

“Mosaic has supplied the excess from its own reserves,” Mosaic continued. “In recent years, PCS has elected to receive approximately 1m tonnes per year.”

Mosaic said it calculates the amount of potash mined for PotashCorp from Mosaic’s reserves is now equal to the amount expected to be mined from the remaining PotashCorp reserves.

“As a result, Mosaic believes that it has no further obligation to deliver potash to PCS from the Esterhazy mine, other than PCS's remaining inventory,” Mosaic said.

Mosaic and PotashCorp are in litigation over their rights and obligations at the Esterhazy mine, Mosaic said, including the amount of potash that Mosaic is required to deliver to PotashCorp.

“Mosaic has offered to continue to ship additional product to PCS at market-based prices during the next 60 days, and Mosaic has also offered other alternatives to allow continued potash shipments to PCS until the conclusion of trial, currently scheduled to begin in January 2012,” Mosaic said.

“Should PCS not pursue any alternative, Mosaic intends to cease additional potash shipments on July 1, 2011.”

PotashCorp maintained in a recent securities filing that the tolling agreement gives it the right to receive potash from Mosaic until at least 2012 “and potentially much later”.

PotashCorp has asked a Saskatchewan court to declare the amount of potash which PotashCorp has a right to receive under the tolling agreement, it said in the securities filing.

If Mosaic temporarily suspends potash deliveries in violation of the tolling agreement, PotashCorp said it “intends to take all necessary steps to enforce its rights under the agreement…”.

By: Brian Ford
+1 713 525 2653

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