Price, demand to guide K&S potash output from Canada: CFO

Tue Jun 21, 2016 6:42pm EDT
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By Rod Nickel

BETHUNE, Saskatchewan (Reuters) - German fertilizer and salt producer K&S AG (SDFGn.DE: Quote) will adjust potash production from its new Canadian mine according to price and demand, and will not necessarily maximize output during the industry's worst slump in nearly a decade, Chief Financial Officer Burkhard Lohr said on Tuesday.

The fifth-largest global potash producer, finishing construction of its C$4.1 billion Legacy mine near Bethune, Saskatchewan, will provide competition for Canada's three existing producers, Potash Corp of Saskatchewan (POT.TO: Quote), Mosaic Co (MOS.N: Quote) and Agrium Inc (AGU.TO: Quote).

A disciplined supply strategy by K&S would mirror one practised for years by those three, which co-ordinate offshore potash sales through Canpotex Ltd, aimed at supporting prices.

"If we have the full capacity in place, that does not necessarily mean that we fully utilize the capacity," Lohr said in an interview at Legacy.

The company expects to produce about 1 million tonnes in 2017 as it ramps up to full capacity. By 2018, it should have capacity for 2 million tonnes annually.

"We have to see by '18 what the conditions are like and adjusting utilization rate is an option at least," Lohr said.

Legacy, built by Amec Foster Wheeler PLC (AMFW.L: Quote), will use solution mining, a less expensive alternative to conventional mining that treats underground minerals with hot water and brings them to the surface for processing.

Legacy will add to overbuilt global production capacity, but offers the high-cost producer cheaper supplies to replace tonnes mined at some older German facilities.   Continued...

K+S Potash Canada partnered with Canadian Pacific (CP) to build a rail line for Potash that is bound for port and will be transported from the Legacy Project mine site near Bethune, Saskatchewan, Canada, in this May 16, 2016 handout photo.  Greg Huszar Photography via K+S Potash Canada/Handout via Reuters