Potash Corporation of Saskatchewan, the world’s largest potash supplier, announced on Tuesday that it will close its operations in Picadilly, New Brunswick.
Potash Corporation of Saskatchewan (TSX:POT), the world’s largest potash supplier, announced on Tuesday that it will close its operations in Picadilly, New Brunswick. The company called the decision “difficult but necessary,” noting that it expects the closure to result in 420 to 430 job losses.
The move comes as PotashCorp aims to cut costs amid lower potash prices and an overall weak commodities market. Potash prices are currently sitting around $300 a tonne, down from roughly $470 four years ago. While some may see a few bright spots on the horizon (especially for sulfate of potash prices), oversupply is still still putting pressure on potash prices overall.
“This is a very difficult day for our employees and our company,” said PotashCorp President and CEO Jochen Tilk in a statement. “While these are important steps in running a sustainable business and positioning the company to best meet the needs of its many stakeholders over the long term, such decisions are never easy.”
With the suspension of production at Picadilly, PotashCorp expects to cut about $185 million in capital expenditures over the next three years; it will also reduce its cost of goods sold to $40 to $50 million in 2016, though that will be offset by severance and transition costs. It will cost $20 million to put Picadilly on care and maintenance this year, and $15 million in subsequent years.
At the same time, PotashCorp is opening up over 100 positions in Saskatchewan for its former New Brunswick workers, offering relocation assistance and setting up a $5-million community investment fund to support employee job transitions.
Picadilly is the second New Brunswick mine that PotashCorp has shuttered in recent months. As the Canadian Press notes, the company moved up the closure of its Penobsquis mine, adjacent to Picadilly, from 2016 to November 2015. “At the time, PotashCorp. said the Penobsquis closure would allow the company to ramp up production at Picadilly, which is a newer and lower-cost operation,” the Press states. Picadilly opened in late 2014.
Shares of PotashCorp have lost roughly 43 percent on the Toronto Stock Exchange over the past year. As of 2:15 p.m. EST on Tuesday, the company’s share price was up 1.26 percent, at $23.32.
Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the securities mentioned in this article.