TORONTO (miningweekly.com) – Potash prices will need to rise about 40% from current levels to justify building brand new mines, Mosaic CEO James Prokopanko said on Thursday.
“On the greenfield side, I just don’t see projects being justified as yet,” he said on the company’s third-quarter results call.
Spot prices for the crop nutrient were trading at $392,50/t this month, Scotia Capital reported on Monday, while Prokopanko said prices of at least $600/t would be needed for companies, including BHP Billiton, to justify the costs of building new projects.
He added that so-called brownfields projects – expansions to existing facilities – would make money at $300/t.
BHP Billiton, the world’s biggest mining company, said in February it was advancing its Jansen potash project in Saskatchewan into the feasibility stage. If built, the mine will be the biggest potash operation in the world, at eight-million tons a year.
There have been no new potash mines built in Saskatchewan in almost four decades.
Prokopanko said that expansions that existing operators were making to their mines would be sufficient to meet global demand for the fertiliser.
“Presently, I think we’re going to have a solid supply/demand balance with brownfields expansions,” he said.
Mosaic warned that although the company was benefitting from rising prices for the phosphate and potash it produces, input costs were rapidly climbing too.
It said that cost increases might outpace the growth in prices in the fourth quarter.
Mosaic’s 64% shareholder, Cargill, announced in January that it would dispose of the shares to its shareholders and lenders in a complicated deal.
Prokopanko said he anticipated the transaction would be completed by the end of June.
He added that the move would allow Mocaic to use its balance sheet “more aggressively” in pursuing future growth options. The company aims to lift yearly potash output by five-million tons over the next decade.
Mosaic is Canada’s second-biggest potash producer after Potash Corp.