November 14, 2007 / 6:00 PM / 12 years ago

UPDATE 3-Potash Corp plans $1.8 bln mine, mill expansion

(Adds analyst comments; in U.S. dollars unless noted)

By Jeffrey Jones

CALGARY, Alberta, Nov 14 (Reuters) - Potash Corp of Saskatchewan Inc POT.TO plans to expand a Canadian potash mine and mill for $1.8 billion to boost the company’s output of the fertilizer by nearly 15 percent within five years, it said on Wednesday.

Potash Corp, the world’s largest fertilizer producer, said it will expand the capacity of its Rocanville facility in southeastern Saskatchewan by 2 million tonnes a year amid strong global demand and high prices for the crop nutrient.

The expansion will boost company-wide potash production capacity to 15.7 million tonnes annually by 2012, three years earlier than previously estimated. The Rocanville operations now have a capacity of 3 million tonnes.

Investors welcomed word of the expansion, driving Potash Corp shares up C$5.03, or nearly 5 percent, to C$113.15 on the Toronto Stock Exchange, and up $4.36 to $117.12 in New York.

UBS Securities analyst Brian MacArthur said the new output is expected to be low-cost, tax-efficient and eventually boost Potash Corp’s allocation in Canpotex, the exporting joint venture of Canada’s potash fertilizer producers.

The price tag for the project is 25 percent less than building an all-new mine and mill in Saskatchewan, which would require new infrastructure such as transportation links, Potash Corp Chief Executive Bill Doyle said.

“With our existing facilities at Rocanville, we have a significant head start,” Doyle said in a statement. “For example, we only need to sink one new shaft instead of two, which will save considerable time and money.”

Saskatoon, Saskatchewan-based Potash Corp said the deposit and facility are valuable due to the high quality of the potash and close proximity to the U.S. market.

The company is also working to boost output at other mines, including Patience Lake and Cory in Saskatchewan and its facility in New Brunswick.

Potash prices have strengthened because of soaring demand around the world for both food and biofuel production and fears of a supply disruption in Russia, where a sinkhole has threatened the stability of a rail line used to transport product.

In September, Doyle said he did not expect his competitors to add new production capacity any time soon. Potash Corp has said it expects to sell 9 million tonnes this year.

The company said it expects to start construction on the Rocanville expansion as soon as it gets regulatory approval. It has just started discussions with Saskatchewan’s environment ministry to determine what permits it will need, spokeswoman Rhonda Speiss said.

She also said the company is not fretting over rising construction costs or the short supply of skilled labor in Western Canada, as it has staggered the timing of its various developments.

“It’s getting to be more and more of a challenge but we are competitive in what we have to offer those people, so we’re doing our best to get the best people that we can,” Speiss said.

$1=$0.97 Canadian Reporting by Jeffrey Jones; Editing by Rob Wilson

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