PotashCorp mine closure will have widespread economic impact

The economicfallout fromPotash Corporation of Saskatchewan's decision to indefinitelysuspendits Picadilly mine operation near Sussexwill 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 jobsinthe community of 4,300 will have a ripple effect on local businesses.

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

Sussex Mayor MarcThorneis 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 theCanadian Manufacturers and Exporters, says the total jobs losses could be about 1,000with suppliers includedin 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, whichwas just recently completed, was expected to have a 73-year lifespan.

ButMarkFracchia, the president of PCS Potash and a former general manager for the New Brunswick mine, saidtheplunge in potash prices on theworld market anda drop in demand from China, combined with thechallenging 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 transitionperiod. Then about 35 people willhandle 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 theCourtenay 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.

PotashCorphad announced plans in April toinfilla 63,000-square-metre areaat the terminalto 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 throughthe terminal and it makes the need for an expansionthere 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 atentative agreement will see Saskatchewan-basedCanpotexshippotash by rail to Saint John, where it will be off-loadedinto the warehouse and then loaded onto ships for export.

"As far as the potash terminal and the Port of Saint Johnare 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 tonneslast year.

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

"Of course any deviation is something thatwe don't like to seeso we'll continue to work very hard with the other sectors in continuing to build the businessin those other sectors," he said.

"Wealways talk about the port in terms of its diversity and the strength of its diversity. And this is an examplewhere one sector has made a decision that will cause a reduction in their footprint in terms of volumes throughthe 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, saidEnergy and Mines Minister Donald Arseneault.

"About $18million 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 hitAnd 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."