UPDATE 1-K+S ups budget for Canada potash project, delays start

Mon Apr 22, 2013 10:30am EDT

Related Topics

* Cites higher expenses for equipment and personnel

* Plans to own, not rent, harbour installations in Vancouver

* Legacy mine to start production in mid-2016, not end-2015

* Shares down 3.3 pct, hit lowest in five months (Recasts, adds shares, CEO quote, background)

FRANKFURT, April 22 (Reuters) - German potash miner K+S AG has warned that a Canadian potash mine will absorb a quarter more investment and would not come on stream for about six months later than had been planned.

Its shares dropped 3.2 percent to 32.54 euros at 1347 GMT, making it the second-worst performer on Germany's blue-chip DAX index. The stock fell as low as 32.075 euros, its lowest since late November.

K+S is splashing out on developing the Legacy mine in Canada's Saskatchewan province in a bid to become less dependent on limited domestic reserves of the fertiliser ingredient.

Yet spending on mine would now be C$4.1 billion ($4.0 billion), up from a previous budget of C$3.25 billion, partly because K+S decided to invest in its own installations at the port of Vancouver where it had previously planned to rent, the company said on Monday.

The start of production would be delayed to mid-2016 from the end of 2015 as previously forecast, the world's fourth-largest potash supplier added.

It would still, however, ramp up annual production at the site to 2 million tonnes by the end of 2017, adding to the group's current capacity of 7.5 million tonnes of potash and magnesium products.

Facing up to exhausting its domestic potash reserves in about four decades, K+S in 2010 bought Potash One and its license to exploit the Legacy deposit. The group, formerly owned by BASF, said the business rationale remained intact.

"Taking all data of the profitability calculation into account, the project is economically attractive and still fulfils the requirement of the group to earn a 15 percent premium on the cost of capital before taxes," K+S Chief Executive Norbert Steiner said in a statement.

The additional funding would come from existing liquidity, future cash flows and new debt, he added.

Mining rivals have recently been hesitant or unwilling to bring new potash mining projects on stream.

Brazil's Vale, the world's No. 2 miner, said last month the Rio Colorado project in Argentina was no longer economically viable, while BHP Billiton has yet to give final approval to a potash project in Western Canada.

($1 = 1.0260 Canadian dollars) (Reporting by Ludwig Burger and Andreas Kroener; Editing by David Holmes)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.