K+S Canada potash mine equipment collapse causes serious damage

(Reuters) - An equipment collapse on Sunday at a new Canadian potash mine owned by K+S SDFGn.DE resulted in "consequential damage," the German mining company said Monday, fueling speculation the opening of the project could be delayed.

A process vessel at the Legacy mine site near Bethune, Saskatchewan fell during routine testing, resulting in no significant injuries to workers, K+S said. It was aiming to complete construction late this year.

The C$4.1 billion ($3.17 billion) project is the first new potash mine in four decades in the western Canadian province and is expected to start significant production in 2017. By 2018, it has been expected to have capacity for 2 million tonnes annually.

Asked how the accident may affect the start of production, K+S spokeswoman Maeghan Dubois said on Monday that the company would take steps to “maximize progress and move the project further along, while emphasizing worker safety.”

She added that the company did not have details about how it would adjust work at the mine.

K+S shares eased 0.1 percent in Frankfurt to 20.13 euros.

The accident, which happened less than a month after K+S toured journalists through the site, comes as the potash industry grapples with its lowest prices in a decade.

It’s “a fascinating development considering the impact the Legacy greenfield may have on the already oversupplied potash industry,” said BMO analyst Joel Jackson, in a note.

The accident to a key piece of equipment at the solution mine could result in, at best, a six to eight-week delay or, at worst, a one-year delay, Jackson said.

Legacy will use solution mining, a less expensive alternative to conventional mining that treats underground minerals with hot water and brings them to the surface for processing.

Legacy will provide competition for Canada's three existing producers, Potash Corp of Saskatchewan POT.TO, Mosaic Co MOS.N and Agrium Inc AGU.TO.

Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Jeffrey Hodgson