PotashCorp mine closure will have widespread economic impact

The economic fallout from Potash Corporation of Saskatchewan's decision to indefinitely suspend its Picadilly mine operation near Sussex will be hard-hitting and widespread.

• PotashCorp suspends Picadilly mine in N.B., cuts 430 jobs
• Potash mine closure greeted with dread in Sussex

The loss of up to 430 high-paying jobs in the community of 4,300 will have a ripple effect on local businesses.

Tuesday's announcement also deals a blow to suppliers and contractors, Port Saint John, and the provincial government's deficit-reduction plan.

Sussex Mayor Marc Thorne is still reeling over the loss of the town's main employer and the jobs that pay between $80,000 and $120,000.

"At first I thought the information had to be wrong," said Thorne.

"The mines have operated here for about 30 years. To have that suddenly come to a grinding halt is going to place a lot of people in a very difficult position," he said.

Joel Richardson, vice-president of the New Brunswick and P.E.I. divisions of the Canadian Manufacturers and Exporters, says the total jobs losses could be about 1,000 with suppliers included in the count.

"Companies in the restaurant, hospitality, accommodations, metal-working companies, manufacturers that have helped support the potash mine in Sussex will also be impacted by this," said Richardson.

The Gallant government, which campaigned on the promise of creating jobs, should now be careful about raising taxes on businesses, he said.

"We would suggest that the province needs to give a very serious second look to those options it's recommending within the provincial budget," Richardson said.

Unforeseen market changes

Picadilly, a $2.2-billion project, which was just recently completed, was expected to have a 73-year lifespan.

But Mark Fracchia, the president of PCS Potash and a former general manager for the New Brunswick mine, said the plunge in potash prices on the world market and a drop in demand from China, combined with the challenging geology of the area, left the company with no alternative.

"We really had to take a look at how we could best position our assets, taking advantage of our lowest cost operations, which happen to be in Saskatchewan, and unfortunately … that resulted in this decision here," he said.

About 100 employees will remain on the payroll for an estimated four-month transition period. Then about 35 people will handle care and maintenance of the mothballed facility for as long as the mine is closed.

"I certainly don't foresee [resuming operations] in the near future," said Fracchia.

Saint John terminal expansion doubtful

The official said plans to expand the Courtenay Bay terminal in Saint John will also likely be deferred.

"Certainly for the time being until we assess what kind of volumes we'll actually be processing," he said.

PotashCorp had announced plans in April to infill a 63,000-square-metre area at the terminal to make room for a new access road and two additional rail sidings in hopes of doubling capacity.

"By putting the mine in care and maintenance, it means we won't have that truck traffic [expected from the additional salt production] going through the terminal and it makes the need for an expansion there certainly far less important at this stage," said Fracchia.

But the company hopes to be able to sustain "some significant movement" of potash through the terminal at Port Saint John, he said.

The details are still being worked out, but a tentative agreement will see Saskatchewan-based Canpotex ship potash by rail to Saint John, where it will be off-loaded into the warehouse and then loaded onto ships for export.

"As far as the potash terminal and the Port of Saint John are concerned, you know we expect that there's a potential to increase throughput in time, through the port, but at this stage I can't give you any more details than that."

Jim Quinn, the president and chief executive officer of Port Saint John, said he expects to see about 750,000 tonnes of potash come through the terminal, down from about 1.2 million tonnes last year.

"But when you look at the total cargo handled by the port, such as oil products, recycled metal, and molasses, "it's less than a two per cent deviation," said Quinn.

"Of course any deviation is something that we don't like to see … so we'll continue to work very hard with the other sectors in continuing to build the business in those other sectors," he said.

"We always talk about the port in terms of its diversity and the strength of its diversity. And this is an example where one sector has made a decision that will cause a reduction in their footprint in terms of volumes through the port, but other sectors are growing and busier, so there's some of that kind of counterbalancing that occurs."

The mine's closure will mean a significant loss of revenue for the province, however, said Energy and Mines Minister Donald Arseneault.

"About $18 million in royalty loss in the future. So there's that impact," he said.

"There's no doubt that when you have that amount of employees that personal income taxes will probably take a hit … And at the same time, there's 25 to 40 megawatts of power being purchased from NB Power, so there's another impact at that site."​