German fertilizer producer K+S OKs $3.25-billion potash project in Saskatchewan

REGINA - A German fertilizer company has approved C$3.25 billion in spending for a new potash mine in Saskatchewan that will create up to 1,300 jobs.

The K+S group said Tuesday it expects to have more than 1,000 people working on construction at peak periods and employ 300 at the mine when the operation hits full production.

"Even if people do not normally attribute the term enthusiasm to the Germans, believe me, we are enthusiastic," K+S chairman Norbert Steiner said on a conference call with investors.

"The Legacy project perfectly fits into our strategy — it's economically attractive, technically state of the art and solidly financed."

Production from the proposed Legacy mine is expected to begin in 2015 and ramp up over the next few years. The rural site is located about 50 kilometres north of Moose Jaw, a city of about 35,000 people that is 75 kilometres west of Regina along the Trans-Canada Highway in south-central Saskatchewan.

"This will be a stimulus for Moose Jaw," said Glenn Hagel, major of the city, known as a retirement and tourist hub for hundreds of small towns and farms in the surrounding region.

He said there could be a significant economic impact for business and a boost in the local housing market.

"With the mine being just under a 30 minute commute from Moose Jaw (I expect) there will be businesses interested in either expanding who are here now or locating in Moose Jaw who aren't, that provide goods and services related to the construction phase or the operation phase of the mine," said Hagel.

The mayor also said he believes roads leading to the Legacy site will have to be upgraded to handle heavy truck traffic.

K+S acquired the Legacy project when it bought Vancouver-based Potash One earlier this year. Legacy will occupy only a small area of the property acquired in the Potash One deal, Steiner said, and the company will continue to explore for other areas rich in the mineral.

"The Legacy project alone, which only makes up a fraction of the total permit area, has proven reserves of 160 million tonnes of potassium chloride with a target annual production and including the ramp-up curve, this results in a useful life of more than 55 years," Steiner said.

However, "project Legacy 2 or 3 should not be ruled out in the future."

Saskatchewan Energy and Resources Minister Bill Boyd said the project is good news for the province.

"They are a first-class, world-class company. I think it's a great investment and we look forward to the business activity and the jobs that it will create," he said.

Boyd said the announcement also shows that the province's royalty structure _ the way it collects money from companies who develop resources — is encouraging investment.

K+S said assuming annual production of 2.86 million tonnes and on the basis of current potash prices, the province will get considerable income in the form of taxes and royalties in the future.

Boyd couldn't put a figure on the amount, but said it could be in the "hundreds of millions of dollars per year."

The German potash investment is part of a growing trend of mining expansion in Saskatchewan, which has the world's largest deposits of potash, a valuable mineral mainly used in fertilizer.

Other companies _ from PotashCorp of Saskatchewan (TSX:POT) to Anglo-Australian mining giant BHP Billiton _ are also expanding or building new mines in the prairie province.

Resources development in the farm, mining and oil and gas sectors has helped boost Saskatchewan's economy, pushing the seasonally adjusted jobless rate down to 4.1 per cent in October, the lowest in Canada.

In a bid to expand its operations in Saskatchewan, BHP Billiton tried to buy PotashCorp last year in a blockbuster US$40 billion hostile deal. The takeover was opposed by the Saskatchewan government and eventually blocked by Ottawa.

BHP Billiton is currently developing its $1.2 billion Jansen mine in Saskatchewan and hopes to start producing potash in 2015. The project is expected to employ 1,900 people during construction and create about 1,000 operational jobs once the mine has reached full capacity.

BHP is also exploring two other properties in Saskatchewan near Melville and Young.

Chinese companies are also acquiring stakes in potash developments in Saskatchewan. Demand for fertilizer is soaring in China and India as farmers seek to increase crop yields to feed growing populations.

K+S said Tuesday that the assets it acquired from PotashOne are among the world's most economically attractive startup projects.

"The benefits of the project include the already existing very good infrastructure, the significantly earlier availability of product that solution mining brings and, not least, our many years of expertise as an established potash producer,” said Joachim Felker, a member of the K+S board of executive directors.