Western Potash Moving Ahead with Milestone Project

The company has signed an amended project agreement with Saskatchewan's Rural Municipality of Lajord.

western potash

Western Potash, a subsidiary of Western Resources (TSX:WRX), is moving forward with its Milestone selective solution mining project in Saskatchewan.

On Tuesday (August 8), the firm entered into an amended project agreement with the Rural Municipality of Lajord. The agreement facilitates the collaboration of both parties on numerous aspects of the Milestone project, including road access routes, as well as waste and site construction management.

The parties originally signed an agreement after the Saskatchewan government approved the project’s environmental impact assessment in 2013, but a fall in potash prices prompted Western Potash to make changes to Milestone to reduce initial operating costs.

The first phase of the project will now be a plant that is capable of processing 146,000 tonnes of potash per year, and eventually capacity will be expanded to 2.8 million tonnes annually.

The updated agreement signed this week addresses construction, operation and road use during that initial phase. Western Potash plans to break ground on Phase I by late 2017 or early 2018. Construction is expected to take between 12 to 18 months with an anticipated start of production in 2019.

Western Resources’ share price saw a modest uptick of 4.88 percent on Wednesday (August 9).

Potash market rebounding?

Potash prices were at $218 per tonne as of June 30, 2017, roughly the same as a year earlier, according to data from InfoMine. When Western Potash first announced the Milestone project in 2009, prices were nearly twice as high, at about $400.

Despite that decline, major producer Potash Corporation of Saskatchewan (TSX:POT,NYSE:POT) is optimistic. The firm recently raised its global shipment forecast from 62 million MT to 65 million MT for 2017, higher sales in emerging countries like India and China.

The company also posted better-than-expected Q2 earnings, and Canpotex, a joint venture that takes care of overseas potash sales for PotashCorp and other major producers, notes that it has signed supply contracts at prices $11 per MT higher than in 2016.

PotashCorp President and CEO Jochen Tilk said, “robust potash demand, especially in offshore markets, where Canpotex achieved its second highest first-half shipment total, supported a constructive market and is expected to carry through the remainder of the year.”

Tilk added that strength in potash prices will offset the subdued nitrogen and phosphate markets; “as a result, [the company has] maintained [its] full-year earnings guidance range.” The firm’s merger with Agrium (TSX:AGU,NYSE:AGU) is underway and is expected to close late in the third quarter of 2017.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

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