Mosaic, one of the world’s leading producers and marketers of concentrated phosphate and potash crop nutrients, announced on Friday it would immediately cut production at its biggest potash mine due to flood risks.
The Tampa-based fertilizer company, which owns and mines more than 380,000 acres in the Sunshine State, said it is immediately closing the K1 and K2 potash mine shafts at Esterhazy, Saskatchewan as part of a key transition to K3. Mosaic noted, however, the timeline for the closure had been accelerated by nine months due to a recent acceleration of brine inflows, which have forced the company to continuously pump out salty water.
“Mosaic has been managing inflows at Esterhazy since 1985, and has accelerated the development of the K3 shafts to allow for the ultimate closure of the K1 and K2 shafts,” said Joc O’Rourke, President and Chief Executive Officer. “For the last decade, we’ve run scenarios that relate to the early closure of these shafts. As a result of that planning, we expect to end up in a stronger position than ever in 2022.”
In order to offset some reduction, the company said they’re planning to resume production at the Colonsay potash mine and recall workers as soon as practical. This restart will neutralize a portion of the production lost by the early closure of the K1 and K2 shafts at Esterhazy, and position the company to take advantage of the expected strong potash markets in 2022 and beyond. By March of 2022, the company’s is forecasting a annualized potash production increase of 2 million tonnes from 2020 levels, as Esterhazy K3 ramps up to full capacity and Colonsay returns to service.
As a result of these operational changes, the company expects to eliminate brine management expenses after July 2021 and materially increase 2022 available potash capacity to take advantage of the expected potash market strength. During the expected transition period of July 2021 to March 2022, the company anticipates its potash production to be reduced by approximately one million tonnes. By mid-2022, available annualized operational MOP capacity is expected to be 10.5 million tonnes.
In the second quarter of 2021, the company expects to record costs related to the following: $20-$25 million in brine management cash costs to cover initial efforts to manage the accelerated inflows; $80-$100 million in noncash charges for asset write downs for the remaining mining asset values at K1 and K2; and $50-$100 million in a noncash asset retirement obligation reserve increase for the permanent closure of the underground works at K1 and K2.