Saskatchewan’s mining landscape is changing
With around $20 billion invested in Saskatchewan’s potash industry over the past decade, it’s clear that momentum has been growing. The province was ranked as the number one jurisdiction for mining investment in the world in the 2016 Fraser Institute’s annual survey of mining companies.
“The landscape of the Saskatchewan potash industry has been slowly changing over the past decade with the significant expansions of our existing mines and the new interest in our world class potash resource from many international mining companies,” said Nancy Heppner, Saskatchewan’s Minister of Energy and Resources.
It has been full speed ahead for the industry in 2017, with a highly anticipated merger nearing completion, the launch of a new mine, upgrades on existing ones and a continued focus on innovation.
“It’s an exciting time for the Saskatchewan potash industry,” Heppner said.
A lot of the excitement surrounds the upcoming merger between PotashCorp and Agrium, which is expected to close by the end of the fourth quarter of 2017. The merger combines PotashCorp’s large network of fertilizer mines with Agrium’s global direct-to-farmer retail network. The new company is to be called Nutrien and it’s expected that it will be worth $36 billion U.S. The merged company will be the world’s number one producer of potash and number two producer of nitrogen fertilizer, boasting operations in 18 countries and more than 20,000 employees worldwide.
A significant milestone also occurred this year in Bethune, where K+S Potash Canada opened the first new potash mine in Saskatchewan in over 45 years. It’s the single largest project in the history of K+S. The first tonnes of marketable potash were produced in June and K+S is expecting to reach an annual production of 2 million tonnes by the end of 2017.
Another milestone was achieved this year by The Mosaic Company through their multi-billion dollar K3 potash project in Esterhazy. After spending five years on completing two production shafts, the shafts reached potash on Feb. 16, 3,350 feet below the surface. The K3 production shafts are the first to be sunk in the province in nearly 50 years. Upon completion of K3, Mosaic’s Esterhazy operation is expected to be the largest, most competitive underground potash mine in the world.
“Saskatchewan has long been the world’s largest potash producer and with the recent expansions and continued interest in new projects and investment, our province will continue to be the place to invest far into the future,” Heppner said.
While some big news concerning mines may have stolen the headlines, mining companies are also focusing a lot of effort on innovation. According to Heppner, the Saskatchewan potash industry has always been driven by innovation. As an example, she pointed to the development of the Blairmore Ring, which allowed companies to successfully construct mine shafts through water-bearing ground and gain access to the potash resource that resides at lower depths.
“Today, companies continue to evaluate and invest in new technologies to make their operations more efficient and profitable,” she continued. “As an example, some of the potential new entrants to the industry are planning to use solution mining techniques that involve horizontal drilling to develop mines on a much smaller scale than our existing mines. According to these companies, this can be done very efficiently and may actually reduce the environmental footprint by bringing less salt to the surface.”
The financial performance of Saskatchewan’s potash industry in 2016 could be described as a “mixed bag”. Sales and production reached 11.0 million tonnes K2O, the second highest sales and production levels achieved in the province’s history. However, due to substantial decreases in prices, total 2016 revenue for the industry decreased to $4.1 billion, the lowest amount since 2009.
Although prices remain below 2015 levels, the government noted that potash pricing has been slowly rising since major contracts were signed in the summer of 2016.
In 2017, world potash shipment demand is expected to reach a record level of 40 million tonnes K2O, with primary drivers being the rising global population and the increasing wealth of the people of developing nations. However, with this increased demand there are also increased challenges.
“Over the next few years, there are risks of increasing global competition due to the start-up of new potash mines in several jurisdictions,” Heppner said. “However, the short- and medium-term impacts of these new operations on the global supply/demand balance will be heavily dependent on how quickly they ramp up production.”
According to Heppner, the Government of Saskatchewan is working hard to ensure the continued success of the province’s potash industry.
“The Government of Saskatchewan continues to promote our world class potash resource by attending national and international mining events, regularly meeting with companies interested in investing in the potash sector, ensuring regulations are clear and transparent, and investing in geological information to assist companies making investment decisions,” said Heppner.
“The Government of Saskatchewan also has a competitive potash royalty and tax system that encourages continued investment into the potash sector, while still providing the owners of the resource – the people of Saskatchewan – with a fair return that provides money for education, roads and hospitals.”