The K3 shafts at Mosaic Esterhazy

Mosaic VP says future is bright for Esterhazy mine

While Colonsay mine has been idled indefinitely

February 3, 2020 7:34 am
Kevin Weedmark

Mosaic’s vice-president of public affairs and government relations says that, while the Colonsay mine has been idled indefinitely, there is a strong future for Mosaic Esterhazy. “The long term outlook for Esterhazy is bright,” Mosaic VP Sarah Fedorchuk told the World-Spectator last week. “When completed, K3 will be one of the lowest cost potash mines in the world.”

Mosaic has been investing heavily in Esterhazy, developing the K3 site and above-ground conveyors to take the ore to the K1 and K2 mills.

The Mosaic Company announced Tuesday that it intends to keep its Colonsay potash mine idled for the foreseeable future. The mine will be placed in care and maintenance mode, employing minimal staff and allowing for resumption of operations when needed to meet customers’ needs.

“The ramping up of our Esterhazy K3 production combined with continued weak demand in North America has left Mosaic’s potash business with excess inventory and production capacity. This decision will regrettably impact employees, but allows us to optimize our Canadian production assets and improve our cost position in a competitive market,” said President and CEO Joc O’Rourke. “In 2020, we continue to expect robust global fertilizer demand and strong business conditions.”

“The announcement is a continuation of the idling we announced in August,” Fedorchuk explained. “We met with our remaining Colonsay workforce to advise them that the site will remain idled for the foreseeable future.

“While a difficult decision to make, giving our Colonsay workforce a clear picture of our plans is an important step in allowing them to best prepare for their future.

“While some of our salaried Colonsay employees have moved on to new roles in other areas of the business unit, including Esterhazy, this decision will impact the remaining approximately 80 salaried staff. We met with them to discuss their role, varying end dates or other opportunities.

“We will be providing transition services, educational bursaries through a retraining fund to obtain new skills and education, and access to other services like our Employee Family Assistance Plan (EFAP).”

Approximately 45 positions will remain in place at Colonsay to complete safety and regulatory checks and conduct minimal maintenance.

Fedorchuk said the indefinite idling of the Colonsay site was a difficult decision.

“This is a continuation of the idling announced in August,” she says.

“At that time, we issued our 395 lay off notices for our hourly workforce. Because we do now think it will be idled in the foreseeable future we had to make the very difficult decision in that we could no longer have the salaried staff on payroll anymore just because the site had not been producing now for several months and the long term outlook for the site just wasn’t such that we needed it.

“Colonsay is our highest cost facility. Esterhazy on the cost curve is just much lower than Colonsay and so although I understand that people in Esterhazy might have concerns, Esterhazy is in just a really great competitive position, and the ramping up of K3 just puts them in an even stronger position.”

Volume means lower costs

She said the volume of potash produced at Esterhazy makes its cost much lower than some other sites.

“Esterhazy is such a bigger operation than some of our other sites that although some of their base costs might be similar they have a much lower cost per tonne because they are producing so many more tonnes than Colonsay would be,” she explained.

Mosaic is investing billions of dollars in K3 at Esterhazy and has now twice accelerated the project to bring it online more quickly.

“We anticipate K3 to be fully online by the end of 2022,” Fedorchuk said. “We’ve announced a couple different accelerations to that project and I think it really speaks to the workforce at our Esterhazy site that the transition is going so smoothly and we are so ahead of schedule.”

She said Esterhazy has been a major focus for Mosaic.

“The Esterhazy K3 project has a very good return on investment for the company,” she said. “It will allow us to eliminate our brine inflow spending which is a huge cost—it’s over $100 million a year for the company to deal with the brine inflow. K3 will allow us to have Esterhazy-scale size and efficiencies but without that cost overhang.

“Once K3 is online, The K1 and K2 mills will continue and we will be decommissioning K1 and K2 underground.”

She said a significant amount of work still needs to be done before K3 is totally up and running.

“We still have one overland conveyor system to K1 that we are finishing. We’re still commissioning one of the hoists. So there is definitely work to do. We are still building miners. We are slowly transitioning our workforce over there so there is change management work to do but also quite a bit of capital work to do.”

The number of contractors on site will vary for the next three years.

“Until K3 is commissioned it kind of ebbs and flows depending on how many contractors are needed. Then, post K3 being fully operational, most of the maintenance work would be done by employees. We would be bringing in contractors just to do some bigger projects much like we do now.”

The Esterhazy mine usually produces between four and five million tonnes a year, about 60-70 percent of Mosaic’s Saskatchewan potash production. Fedorchuk said K3 will have the capacity to ramp up slightly from there.

Staffing will be slightly smaller once the transition to K3 is complete.

“We are doing a workforce transition plan right now,” Fedorchuk said. “It might be a smaller workforce in three or four years, however, we will be handling that with attrition and retirements. There are not layoffs anticipated at Esterhazy. “

One of lowest cost mines

Fedorchuk said she wants to reassure people in the area that despite the idling at Colonsay, there is a strong future for the Esterhazy mine.

“We understand that this is unsettling for some people, but Esterhazy is going to be one of the lowest cost mines in North America, the most efficient. We’ve done the most innovation in Esterhazy.

“Esterhazy is going to have a really long future and they’re going to be even more competitive than they are right now. We have as a company put all of our eggs in the Esterhazy basket so to speak.

“You don’t build a mine for a year, you build it for 50 years. So K3 will have a very long life and will guarantee a lot of stability and job opportunities in the Esterhazy and surrounding areas for a long, long time to come.”