Brazilian mining company Vale announced it will wait until market conditions improve to continue developing its Kronau project in Saskatchewan as low potash prices have made the mine uneconomic, the miner said in a public letter to the local community.
The $3.5 billion mining project is expected to produce 3-4 million tons of potash annually for more than 40 years. As of October, Vale had entered the final feasibility stage for the project and depending on the outcome a final investment decision to proceed into construction would have be made by 2016.
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“It’s still a very promising project with the economics and everything, there just isn’t an opportunity to start any new construction next year,” said Matthew Wood, senior project leader at Vale for the Kronau project.
Kronau was projected to create 2,000 construction jobs and 350 permanent jobs. Vale currently has a team of 30 people in Saksatchewan.
“We’re just sort of evaluating what we can do with those staff, whether we can reassign them other places, whether we can find other opportunities for them,” Wood said.
In 2012, Vale momentarily postponed the potash project at Kronau citing the need to curb “its appetite for an accelerated timeline.”
"We had originally planned for the project to start early construction potentially by 2013, and that has been postponed for the time being and the commitment to the project has not lessened, just maybe our appetite for an accelerated timeline has," said Lara Ludwig, the community consultation specialist with the Kroneau project.
Prices for potash are currently in a multi-year slump, with many producers of the fertilizer ingredient suffering due to weak demand and higher costs.
“Once they get going, then it’s going to help the surrounding towns with potash royalties and now everything’s put on hold,” said to Erwin Beitel, the reeve of the R.M. of Lajord which covers the communities of Kronau, Riceton, Gray and Davin.
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According to Beitel, Vale told leaders in the community several weeks ago that the project will be paused. He says they have no idea what the timeframe will be to start back up again, but he’s optimistic that it will.
“It’s just going to be a wait and see situation and who knows, in two years, four years, 10 years – they’ll come out. This has been suspended before and then started up again,” he said.