PotashCorp mine closure in Sussex was unexpected, reporter says

The sudden closure of the Picadilly mine operation in Sussex was unexpected even though there weresigns the potash industry was in trouble, according to an industry reporter.

Potash Corporation of Saskatchewanannounced on Tuesdayit was indefinitely closing thePicadillymine operation and cutting430 jobs.

• PotashCorp mine closure will have widespread economic impact
• Potash mine closure greeted with dread in Sussex
• PotashCorp suspends Picadilly mine, cuts 430 jobs

Ian McGugan, a mining industry reporter for theGlobe and Mail. toldInformation Morning Monctonon Wednesdaythere may be hope for the potash industryin the next few years.

McGugansays government intervention would not have stopped the layoffs.

"I think what you are looking at is the company making a very difficult decision it's not something they wanted to do," he said.

"I think they are making a rational decision to try and focus production on their lowest cost mines in what has become a very difficult market, a market that's been plagued by falling prices."

McGugan says the sector has been deteriorating with falling prices for farm goods and falling prices for commodities.

Information Morning - Fredericton4:36Ian McGugan, Sussex Mine

A mining reporter for the Globe and Mail takes us through the reasons Sussex lost its Potash operation.He says potash prices are way down and says that's in line with other commodity prices worldwide.

"A lot is about big macro forces, such as falling currency prices, which make potash more expensive to buyers in South America, for instance," he said.

McGugan said other factors not so apparent that may have lead to the closure was the breakup of the Russian potash cartel in 2013.

"Without going into all the gory details, what that did was break up the very cozy marketing arrangements that had been able to build a pretty solid floor under potash prices for many years," he said.

"Then when the cartel crumbled, potash prices began their long swoon."

Hope for Sussex

According to McGugan, while the geology and volume making mining for potash more expensive, there is hope the Sussex operation could reopen.

"I think they should hold out some hope. The question is though is how long they may have to maintain that hope for. I don't think anybody foresees a turnaround in the next couple of years," he said.

"Nobody foresaw how bad this was going to be two years ago. I think what we're really seeing is the fact that the experts have not been able to predict commodity prices with any precision at all."