SUSSEX, N.B. — Amid weak global markets for fertilizer, Potash Corporation of Saskatchewan shut down its Picadilly mine in southern New Brunswick for an indefinite period Tuesday, eliminating up to 430 high-paying jobs.
The company (TSX:POT), based in Saskatoon, Sask., said it must 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. “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 closure amounts to a major blow to the provincial government’s efforts to turn New Brunswick’s 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 production, but equipment problems and challenges making 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 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 in the last six years just to walk away.”
About 35 employees will be kept on to maintain the idled facility near Sussex. Another 100 workers will remain in place through a four-month transition. Should the company decide to resume operations, it would take about a year to get it running again.
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 the economic pain caused by low commodity prices.
“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 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.
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.
Bruce Fitch, New Brunswick’s Progressive Conservative leader, issued a statement saying the closure is partially the result of a “toxic business environment” created by the Liberal government through increased business property tax and the highest income tax in North America.
“It is clear the Liberals have mismanaged the energy and resource sector,” he said.
Customers traditionally served by the New Brunswick mines will now get their potash from the company’s Canpotex operation in Saskatchewan, where volume is expected to grow by 750,000 tonnes.
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, which are also used as crop nutrients.