PotashCorp mothballs Picadilly mine, leaves more than 420 jobless

PotashCorp mothballs Picadilly mine, leaves more than 420 jobless

PotashCorp Picadilly mine in Penobsquis, New Brunswick.

Potash Corp of Saskatchewan (TSX, NYSE:POT), the world's largest crop nutrient company by capacity, is "indefinitely" halting operations at its relatively new Picadilly mine, in Canada’s New Brunswick, in response to falling potash demand and weakening prices.

The company, which had more than 5,000 employees worldwide at the end of 2014, said the suspension, effective immediately, would lead to 420-430 job cuts.

However, a crew of roughly 35 employees will remain at Picadilly to keep the operation in "care-and-maintenance mode".

In addition, up to 100 workers will remain in place through a transition period of roughly four months, and the company will set up a $5 million fund to assist other employees with finding new jobs.

“This is a very difficult day for our employees and our company,” said PotashCorp President and Chief Executive Officer, Jochen Tilk, in a statement.

“While these are important steps in running a sustainable business and positioning the company to best meet the needs of its many stakeholders over the long term, such decisions are never easy,” Tilk added.

Weakened potash market conditions led PotashCorp in November to move forward the planned closure of its other New Brunswick mine, Penobsquis, and take inventory shutdowns at three mines in its home province of Saskatchewan.

PotashCorp mothballs Picadilly mine, leaves more than 420 jobless

Potash prices have fallen sharply over the past year, under pressure from bloated capacity, soft grain prices and weak currencies in major consumers such as Brazil and India. (Chart by InvestmentMine)

The $2.2 billion Picadilly mine, which began operations in late 2014 — almost seven years after the firm first announced its expansion plans — was supposed to provide PotashCorp strategic access to the Latin American market.

Additionally, a 2-million-ton expansion project at the mine was set to replace the closing Penobsquis operation.

For now, the company’s international customers, who depended on supply from Picadilly, would now be served from Saskatchewan through Canpotex, PotashCorp said.

The annual cost of keeping the mine in care and maintenance is estimated at $20 million in 2016, dropping to $15 million in following years.

But decision is expected to cut PotashCorp's capital costs by $50 million in 2016 and $135 million over the next two years.