Since 2009, a hamlet in southeastern Saskatchewan has been waiting for news about the development of a potash mine, but with the December sale of Vale’s fertilizer business to Mosaic, the Kronau project is at a standstill once again.
The sale by the world’s largest iron ore miner, Brazilian company Vale, was announced weeks before the new year and is worth US$2.5 billion. Mosaic will pay $1.25 billion in cash and the balance will be settled in the form of 42.3 million company shares.
In addition to the potash project north of Kronau, Mosaic will acquire Vale’s potash and phosphate assets in Brazil, except for one phosphate operation in Cubatão, São Paulo. However, Mosaic says it negotiated the deal for Vale’s phosphate assets in Brazil, rather than the potash deposit 20 kilometers southeast of Regina on Highway 33.
The company’s senior director of public affairs, Sarah Fedorchuk, said “Mosaic was looking to grow their phosphate business and... this is mainly a phosphate play.”
Details of how Mosaic will develop the land near Kronau is unknown until the deal is finalized in late 2017, she added.
The news has been disappointing to Kronau’s hamlet board chair, Larry Euteneier.
“It was sort of disheartening that this has happened twice now that it’s been put on hold. It would have been nice that yes, okay, it’s going to go through, let’s build this thing and get it done at the time when they said it was going to be done,” he said.
Prior to the sale, Vale had been planning the $3.5 billion development of a solution mine near the community where a potash deposit is thought to span nearly 52,000 hectares. Once running, the Kronau mine was expected to operate for 70 years, throughout which it would produce 2.9 million tonnes of potash annually.
As the market worsened over the years, Vale put the project on hold in 2012, and again for a second time in late 2015.
Currently, the spot price for potash sits at US$214 per metric tonne, down 24 per cent from Feb. 2016, and 30 per cent since Feb. 2015.
Stuck in the final feasibility stages, the Kronau project remained suspended until the announcement of Mosaic’s purchase last year.
Although Fedorchuk couldn’t say exactly when Mosaic began negotiating with Vale, the possibility was first reported by Reuters in June 2016 and both companies announced the sale just six months later.
In Vale’s press release, the company said it “will use the proceeds of this sale to reduce its debt position” and that it would remain “exposed to the fertilizer business” through the shares that constitute half of Mosaic’s purchase.
But, while both companies manage the ebbs and flows of an evolving market, Kronau and surrounding areas are left waiting to learn how they will be impacted once again.
“With the price of potash right now, (Vale) was holding off until it started coming back and then they were going to start developing it then,” said Euteneier.
According to him, the community had been anticipating the growth in population and business it likely would have experienced as a result of the mine’s construction.
His family was one of many who sold farmland to Vale nearly eight years ago, believing it was the better option over upgrading their equipment to continue the farm operation. The confidence in this decision has remained, but Euteneier doesn’t know what to expect for the future.
He sits on an advisory committee of local and municipal representatives that were consulted by Vale throughout the project’s progress. The board was notified mid-December of the sale.
Since then, they haven’t heard from the project’s new owner.
“I’m still hoping it does go through because, like I said, it would be the best thing that happened to our community.”