Potash Corporation of Saskatchewan suspends N.B. operation, cuts 430 jobs

PotashCorp has announced that it is indefinitely suspending its Picadilly mine operation near Sussex, N.B.

SUSSEX, N.B. -- The New Brunswick economy suffered a sudden shock Tuesday when the Potash Corporation of Saskatchewan shut down its Picadilly mine for an indefinite period, eliminating up to 430 high-paying jobs.

Citing weak global markets for the fertilizer, the Saskatoon-based company (TSX:POT) said it had to cut expenses by shifting its focus to lower-cost operations in Saskatchewan.

"This is a very difficult day for our employees and our company," PotashCorp CEO Jochen Tilk said in a statement, referring to the mine near Sussex, N.B. "We understand the significant impact to our people in New Brunswick and the surrounding communities."

The move is expected to save the company up to $50 million in 2016, although these savings will be offset by $35 million in one-time severance costs.

The company is the world's largest supplier of potash, which is used mainly as a fertilizer. It also produces large amounts of nitrogen and phosphates, also used as crop nutrients.

The closure amounts to a major setback for a province trying to turn its economy around.

Sussex Mayor Marc Thorne said the shutdown of the area's largest direct employer came as a shock to the town of 4,300.

"Those who have grown up here and gone to the mine for employment have been able to live a very comfortable lifestyle and raise families ... (so) we're going to be looking at a significant loss," he said in an interview.

"There will be no aspect of our community and region that won't feel the effects of this closure."

The mayor said the company had invested almost $2 billion over six years getting the mine ready for full production, but equipment problems and challenges digging caverns for tailings led to delays.

"We never expected, despite the delays and bad news, none of us anticipated full closure of the mine," he said.

However, the mayor said company officials told him the delays did not prompt the closure. Instead, it was lack of demand from the mine's principal market in Brazil.

As well, operating costs for the new mine were expected to be roughly three times higher than in Saskatchewan because of the depth of the potash deposits, he said.

Still, Thorne said he expects the mine to reopen.

"I can assure you that PotashCorp didn't invest $2 billion ... just to walk away."

About 35 employees will be kept on to maintain the idled facility and another 100 will remain in place during a four-month transition. Should the company decide to resume operations, it would take about a year to get it running again.

The province's mines minister, Donald Arseneault, said the company contributed $18 million in royalties to the province last year, and it also purchased up to 40 megawatts of electricity from the Crown-owned utility NB Power.

"These are very high-paying jobs," he said. "When you lose over 400 of them, it does have an impact on the province's revenues ... It's a tough day."

He said the provincial government has already deployed a post-secondary training team to help the residents of Sussex.

Dominic LeBlanc, federal Liberal House leader and senior cabinet minister from New Brunswick, admitted it will be tough for people in the Sussex area to find new jobs.

"The New Brunswick economy is in a particularly tough spot," he said at the conclusion of a federal cabinet retreat in Saint Andrews, N.B.

"We shouldn't underestimate the personal disruption and worry that this will represent for these hundreds of families. The Sussex economy largely depended on this global leader."

Federal Natural Resources Minister Jim Carr, who is from Manitoba, said people from the West are well acquainted with what southern New Brunswick is going through.

Slumping commodity prices are to blame for the elimination of tens-of-thousands of jobs in energy-rich Alberta, Saskatchewan and Newfoundland and Labrador.

"As a government, we are committed to broadening in the long term our capacity to create jobs in the energy sector ... and New Brunswick is a very important part of that strategy," he said. "We in Western Canada understand the personal consequence of layoffs in this sector."

PotashCorp has been struggling to cope with weak markets for years. Cuts made in 2013 took out 3.5 million tonnes in potash production.

When the company reported a drop in quarterly profits and sales in October, it also announced it would permanently close its older Penobsquis mine in New Brunswick, cutting 140 contract jobs.

The mine, adjacent to the Picadilly operation, was supposed to close in 2016 but the shutdown was moved up to November 2015.

At the time, PotashCorp said the Penobsquis closure would allow the company to ramp up production at Picadilly, a lower-cost operation.

For the three months ended Sept. 30, PotashCorp said its net income dropped to US$282 million or 34 cents per share, down from US$317 million or 38 cents per share in the third quarter of 2014.

Revenue from sales of potash, nitrogen and phosphates and related fertilizer products or services fell to US$1.53 billion from US$1.64 billion.

On Tuesday, the company said more than 100 positions will be available for New Brunswick employees at its Saskatchewan operations, with funds being made available for relocation.

As well, a $5-million community fund will help former employees get skills training and provide support to local businesses and charitable organizations.