Saskatchewan Potash Mine Not Threatened by Flood: Mosaic

Vancouver — U.S. fertilizer giant The Mosaic Co. (MOS-N) has moved to ease concerns that a flooding problem may threaten to disrupt production at its Esterhazy, Sask., operation which ranks among the world’s largest potash mines.

“It’s business as usual,” said Mosaic spokeswoman Linda Thrasher, adding that the Minnesota-based company hopes it will soon be able to stop saturated brine (salt water) from flowing into an abandoned area several kilometres below surface at its K2 mine.

News that brine is flowing into the mine at a rate of up to 95,000 litres per minute had raised concerns among resource analysts that it would have to shut down.

But Mosaic officials say the area being flooded has long been abandoned and production rates at the 4.3-million-tonne-per-year operation are close to historical highs, following a recent expansion.

Oliver Pask, a senior human resources official with Mosaic, attributed the problem to ground shifting, which, he said, has caused the brine to flow through a porous rock formation above the orebody.

Fixing it, he said, involves pinpointing the breach, drilling a deep hole and injecting calcium chloride, which reacts with the brine to form gypsum, thus sealing the breach.

Pask said brine inflow has been an issue at the mine since 1985, and has always been dealt with effectively. “We have been successful in the past, every time we have had to deal with this and there is no reason to think we will not be successful now,” he said.

The Esterhazy operation, which consists of two interconnected mines — K1 and K2 — accounts for about 7% of world’s supply. It also employs 1,000 miners, including 840 full-time workers.

The company estimates that mitigation efforts to address the brine inflow will cost in the range of US$20-US$40 million, a portion of which is expected to be capitalized. That’s in addition to spending that had been budgeted for managing Esterhazy’s existing brine inflow area.

Postash Corp. of Saskatchewan (POT-T, POT-N), has mineral rights entitling it to receive about 1 million tonnes of potash annually from the Mosaic operation.

The breach at Esterhazy has occurred at a time when the potash market looks increasingly tight, due to improving global demand prospects and the supply shock caused by the loss of Uralkali’s Berezniki 1 mine in Russia. Any surprise will likely tighten the market further, the company said.

Shares in Potash Corp., the world’s leading potash producer, rose $2.94 to $173.74 in Toronto recently, while Mosaic eased US26 to US$21.34 in New York.

Potash Corp. appears to be benefiting from U.S. President George W. Bush’s recent State of the Union address, in which he called for reduction in U.S. gasoline consumption and the promotion of biofuels such as ethanol, made from the two biggest U.S. crops, corn and soybeans.