K+S approves C$3.25bn Saskatchewan potash mine project

29 November 2011 13:21  [Source: ICIS news]

LONDON (ICIS)--K+S's supervisory board has approved the plan to implement the company's Legacy Project, an advanced greenfield project to develop a potash solution mine in the Canadian province of Saskatchewan, the Germany-based fertilizer producer said on Tuesday.

The company’s board of executive directors approved a capital expenditure totalling Canadian dollars (C$) 3.25bn ($3.13bn, €2.36bn) for the project, located about 50km north of the city of Moose Jaw.

Initial production and first volumes are expected in 2015. By 2017, the 2m tonne/year mark should be reached. This will be followed by the gradual expansion of production capacity to 2.86m tonnes/year by 2023.

"The Legacy Project is a significant step towards the expansion of our potash capacities and enables us to participate in the growth of the global potash market,” said Norbert Steiner, chairman of the board of executive directors of K+S.

"Together with our existing potash mines in Germany, this will considerably strengthen the international competitiveness of K+S and consequently benefit the entire K+S Group in Europe and overseas,” he added. “Furthermore, the new site will have a positive impact on our average production costs and increase our flexibility."

In a further expansion phase, total output of 4m tonnes/year of potassium chloride would be achieved about ten years later, K+S said. Initial infrastructure construction works in the areas of water supply and electricity and road development, as well as drilling activities, have already begun at the site.

The company added that the initial exploration area at the Legacy Project, which only makes up a small part of the total permitted area of K+S Potash Canada, formerly Canadian fertilizer producer Potash One, has proven reserves of 160m tonnes of final potash product. Considering the target annual production, this signifies a useful life of more than 55 years, K+S said.

Potash One, which K+S agreed to buy for approximately C$434m in cash in November last year, started work on a feasibility study for the Legacy Project in 2009.

K+S said the project, which will be financed predominantly through liquidity and future cash flows, will probably in 2016 be significantly positive in terms of earnings before interest, tax, depreciation and amortisation (EBITDA) and that earnings before interest and tax (EBIT) practically should reach the profit threshold.

“Our Legacy Project is one of the world’s economically most attractive greenfield projects,” said Joachim Felker, member of the K+S board of executive directors, whose responsibilities include the potash and magnesium products business segment.

K+S said that in future, the site will be the starting point primarily for sales to the emerging growth markets of Asia and South America and to North America. The company also said that in addition to the Legacy Project, it will explore the other permit areas taken over from Potash One in southern Saskatchewan.

($1 = C$1.04, €1 = C$1.38)

By: Franco Capaldo
+44 (0)20 8652 3214

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