Canadian fertilizer company Agrium Inc. said on Thursday it plans to complete the expansion of its Vanscoy, Saskatchewan, potash mine despite the breakup last week of the Belarusian Potash Co. (BPC), which raised fears of a drop in prices.
Russia's Uralkali quit BPC in a dispute with partner Belaruskali, leaving North America's Canpotex Ltd as the remaining potash trading consortium. Uralkali said it would maximize potash production, upsetting the industry's long practice of limiting supply to support price and leading to predictions that miners would scrap some projects.
But Agrium officials said the company will forge ahead with boosting potash capacity by 60% to as much as 3.2 million tonnes at Vanscoy by the end of 2014. Construction of the project, costing $1,500 per tonne or about $1.7 billion, is about 40% complete.
"We think it's still a very robust project for us and we are committed to it," said Chief Operating Officer Chuck Magro, adding that the project is viable even if potash prices drop steeply.
Shares of Agrium rose 3.7% in New York and 3.2% in Toronto, in line with a gain by rival Mosaic Co. and ahead of advances by Potash Corp of Saskatchewan and CF Industries.
Earlier this week, Germany's K+S AG said it too will stick to construction of a new potash mine in Saskatchewan, and BHP Billiton's Chief Executive Andrew Mackenzie said he's taking a long view on potash as that company considers building the world's biggest potash mine at Jansen, Saskatchewan.
Agrium also said it sees no changes at Canpotex, which it owns jointly with Potash Corp and Mosaic to sell Saskatchewan potash off-shore. Chief Executive Mike Wilson praised Canpotex's cost structure and relationships with customers on a call with analysts and investors to discuss Agrium's quarterly results.
"From a strategy point of view, we'll obviously look at price/volume and try to maximize the best shareholder value, so I don't see any major change."