Potash Corp sees no new potash mines for 5 years
Jun. 29, 2012
"This business is real easy to talk about - it's much harder to do," Doyle said in a webcast during which he fielded submitted questions. "There are no greenfield projects coming on in the next five years, between now and 2017, none."
Several companies are planning new mines for potash, a crop nutrient, in Potash Corp's home base of Saskatchewan in Western Canada, led by Anglo-Australian miner BHP Billiton and Germany's K+S AG.
But Doyle said it takes an "enormous amount of time" to develop a new potash mine and downplayed predictions of excess potash production capacity.
"This is way overrated, way overplayed if you know anything about the process it takes to build new capacity," he said, adding that he does, however, expect that brownfield capacity will increase due to the expansion of existing mines.
Doyle did not specify whether he was predicting no new potash mines globally, or just in Canada, which is home to nearly half of the world's potash reserves.
A report by Rabobank on Tuesday said new players will add to potash supplies, pressuring the profits of companies such as Potash Corp by 2020.
Rabobank said in one scenario, global potash capacity could jump by 2020 to 107 million tonnes from the current 78 million tonnes. That would create 59 percent excess capacity in the open market, assuming a slight decline in import demand from key consumers China, Brazil and India, it said.
Increasing food demand in populous countries such as China and India has boosted potash prices in recent years, driving up interest in producing more of the fertilizer.
K+S held a ground-breaking ceremony last week for what it said will be the first new potash mine in Saskatchewan in nearly 40 years, with first production planned for late 2015.
Potash Corp will wrap up most of its own multi-site potash brownfield expansion plan by the end of 2012, leaving capital that it can invest elsewhere.
Doyle said the company will look at several options, including acquisitions in the potash sector and a dividend or share buy-back.
"We're going to generate a lot of cash here in 2013, '14, '15 and our shareholders should expect to see some of that."
North American potash inventories rose in May to well above-normal levels, partly because of a strike at Canadian Pacific Railway, but those stocks should draw down in the next few months, he said.
Doyle said he expects that Brazil could import record-high volumes of potash this year, while North American farmers are likely to apply healthy amounts of fertilizer this fall to restore soil nutrients.
A potash-supply contract between top potash consumer China and Canpotex, the Canadian export consortium owned by Potash Corp, Mosaic Co and Agrium Inc , will likely be done in August, he said.
Doyle affirmed Potash Corp's forecast that global potash shipments in 2012 will range from 53 million to 56 million tonnes, compared with 55 million tonnes last year.
Potash Corp shares were up nearly 2 percent in early afternoon trading at $43.25 in New York and C$44.36 in Toronto, as fertilizer stocks got support from rising corn futures.
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