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8 years ago
UPDATE 2-Agrium to expand Saskatchewan potash plant
December 17, 2009 / 1:18 PM / 8 years ago

UPDATE 2-Agrium to expand Saskatchewan potash plant

4 Min Read

* Expansion to add 750,000 tonnes of annual capacity

* Construction to be completed by 2014

* Still committed to CF bid

* Shares down 3 pct on TSX (Adds details, company and analyst's comments and share price. In U.S. dollars unless noted)

TORONTO, Dec 17 (Reuters) - Canada's Agrium Inc (AGU.TO) said on Thursday it expects final approval of expansion at a potash mine in late 2010, when demand for the mineral used in fertilizer is expected to rebound.

Calgary, Alberta-based Agrium said the $800 million expansion at its Vanscoy, Saskatchewan, potash mine is expected to add 750,000 tonnes or 37 percent of the site's annual potash capacity.

Most of the construction work, awarded to SNC-Lavalin (SNC.TO) and PCL Industrial Management, is to be completed by 2014, with full production reaching 2.8 million tonnes in 2015.

Agrium boosted its expansion plans from 300,000 tonnes to 750,000 about six months ago, said Agrium spokesman Richard Downey. Even so, one analyst said the expansion is bigger than he had expected and would take longer to complete.

Analyst Raymond Goldie of Salman Partners Inc. said he had expected the mine to expand to 2.5 million tonnes by 2012 from current capacity of 2.05 million tonnes.

"They're delaying their expansion from what (I) had expected but they're also making it bigger," Goldie said. "I'd say it's pretty much a wash for markets."

Agrium shares on the Toronto Stock Exchange were down 3 percent at C$64.14 in early trading on Thursday.

News that Belarussian Potash Co. may look to settle deals with China on a spot basis from 2011, replacing annual contracts, may have pushed down shares of Canadian producers, Goldie said. [ID:nLDE5BG036]

Shares of Potash Corp of Saskatchewan (POT.TO) dropped 2.9 percent at C$121.85.

China, one of the biggest importers of Canadian potash, has not yet signed a contract for this year, adding to uncertainty about demand.

Overall weakness on the TSX is also weighing against the potash stocks, Goldie said.

Agrium's Vanscoy mine has run at less than full production this year as potash demand remained weak. The company expects to return the mine to full speed in the first quarter of 2010, Downey said.

The company said the expansion was needed to feed global demand for the mineral, which it expects to show signs of recovery beginning next year.

Fertilizer prices jumped in early 2008 on surging demand, tight inventories and record grain prices. But the global credit crunch and the deepening economic downturn have weighed on the agricultural sector, and grain and nutrient prices have fallen as farmers have deferred applying fertilizer.

Agrium is one of three major potash producers in Saskatchewan that are expanding, along with Potash Corp of Saskatchewan (POT.TO) and Mosaic Co (MOS.N).

Agrium also reaffirmed its determination to acquire rival CF Industries (CF.N).

CF has been fending off Agrium's overtures since February and is itself locked in a hostile campaign to acquire U.S. fertilizer maker Terra Industries TRA.N.

Agrium's $5 billion bid for CF is contingent on CF dropping its takeover bid for Terra. ($1=$1.07 Canadian) (Reporting by Scott Anderson and Rod Nickel; Editing by Frank McGurty)

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