New joint venture could have Tugaske, SK potash mine running by 2019
New joint venture could have Tugaske potash mine running by 2019
ALEX MACPHERSON, SASKATOON STARPHOENIX
Published on: May 18, 2017 | Last Updated: May 18, 2017 10:00 PM CST
Vanguard Potash Corp. President and CEO Mike Ferguson. MICHELLE BERG / THE SASKATOON STARPHOENIX
After months of aggressive cost-cutting, Saskatchewan’s beleaguered potash industry appears to be turning the corner, with established mining companies recording higher profits and several new firms working to develop greenfield projects.
The latest is Vanguard Potash Corp., a joint venture formed last month by Gensource Potash Corp. and Essel Group ME Ltd., which says it could have a mine that does not require surface tailings deposits operating near Tugaske by 2019.
“The first one is a huge deal for us,” said Mike Ferguson, a potash industry veteran who steered Potash One Inc. to its 2010 friendly takeover by K+S AG before forming Gensource with the notion of “disrupting” the industry.
That disruption hinges on building small “selective dissolution” mines about a tenth the size of most conventional underground operations and then selling 250,000 tonnes of potash on long-term contracts each year.
Vanguard’s formation was a significant victory for Gensource, but the joint venture still has major hurdles to clear before it can start work on the mine northwest of Moose Jaw, which could create 400 construction jobs and 46 permanent ones.
The company is about 90 per cent done its feasibility study, expects to apply to the provincial government for environmental approval this month, and is working toward raising the US$200 million it needs to build the mine.
“(Essel’s) size and their balance sheet brought to this project is what really makes the capex financing, the construction financing, much easier to accomplish,” Ferguson said.
Analysts have questioned the ability of junior firms to compete with established companies like Potash Corp. of Saskatchewan Inc. Last summer, Karnalyte Resources Inc.’s plan to do just that failed after its financing fell through.
Ferguson admitted there are significant risks, including the major miners being able to “bleed” longer in an oversupplied market, but said the joint venture will be at least partially shielded from market forces.
“The important part is that we will have the guaranteed sales. Coupled with our very low operating cost (which is estimated to be around US$42 per tonne), that should keep us solvent.”
Vanguard’s announcement comes as Encanto Potash Corp. works to build a $3 billion mine on a First Nation near Regina, and days after BHP Billiton revealed plans to get its under-construction Jansen mine running as soon as 2023.
Recent announcements, as well as K+S Potash Canada’s opening of its Legacy mine and Mosaic Co.’s expansion to its K3 operation, are good news for Saskatchewan, according to the government’s executive director of mineral policy.
Despite struggling to cope with extremely low prices — the result of an oversupplied global market — Saskatchewan remains an attractive place for mining companies to invest, build and operate, Cory Hughes said.
“We remain the jurisdiction to go to when you’re looking at potash investment.”