EANS-News: K+S Aktiengesellschaft Expansion of potash capacities
Green Light for Legacy Project in Canada
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Company Information/K+S Aktiengesellschaft
Subtitle: K+S Aktiengesellschaft / Expansion of potash capacities
Green Light for Legacy Project in Canada
Kassel (euro adhoc) - Kassel, Germany - November 29, 2011
Expansion of potash capacities
Green Light for Legacy Project in Canada
The Supervisory Board approved the plan of the Board of Executive
Directors of total capital expenditure of CAD 3.25 billion (about EUR 2.4
billion)
Total capacity of 2.86 million tonnes of potassium chloride p.a. expected
in 2023
Start of production and first volumes expected in 2015
Further expansion of production capacity to 4 million tonnes of potassium
chloride p.a. possible in the long-term
The Legacy Project is one of the world´s economically most attractive
potash greenfield projects
The Supervisory Board of K+S Aktiengesellschaft approved the plan of the Board
of Executive Directors to implement the Legacy Project in the Canadian province
of Saskatchewan. For this purpose, capital expenditure totalling 3.25 billion
Canadian dollars (CAD, equivalent to about EUR 2.4 billion) have been approved.
"The Legacy Project is a significant step towards the expansion of our potash
capacities and enables us to participate in the growth of the global potash
market. Together with our existing potash mines in Germany, this will
considerably strengthen the international competitiveness of K+S and
consequently benefit the entire K+S Group in Europe and overseas," says Norbert
Steiner, Chairman of the Board of Executive Directors of K+S. "Furthermore, the
new site will have a positive impact on our average production costs and
increase our flexibility," Steiner continues.
Feasibility study revised and optimised
K+S had acquired the Canadian exploration and development company Potash One
(now K+S Potash Canada), at the beginning of 2011, and has been revising and
optimising the existing feasibility study over recent months. A concept was
developed, which is optimally consistent with the production and market
forecasts of K+S and demonstrates very positive viability.
Production start in 2015
Initial infrastructure construction works in the areas of water supply,
electricity and road development as well as drilling activities have already
begun at the site. Through to 2015, K+S will develop a potash production based
on solution mining in southern Saskatchewan with first quantities of potassium
chloride. By 2017 the two million tonne mark shall be reached. This will be
followed by the gradual expansion of production capacity to 2.86 million tonnes
by 2023.
In a further expansion phase, total output of 4 million tonnes of potassium
chloride annually would be achieved about ten years later.
Attractive potash deposit with high material content
The Legacy Project area is located about 50 km north of the city of Moose Jaw
(Saskatchewan). The initial exploration area at the Legacy Project, which only
makes up a fraction of the total permitted area of K+S Potash Canada (formerly
Potash One), has proven reserves of 160 million tonnes of final potash product.
Considering the target annual production, this results in a useful life of more
than 55 years, including the ramp-up curve. At about 18%, the K2O content is
significantly higher than that of the German sites and will therefore enable
more efficient and more economic extraction. The remainder of this one potash
lease area contains additional resources of almost a billion tonnes of
potassium chloride.
Strong economic attractiveness
The sharp ramp-up curve means that the project in 2016 already will probably be
significantly positive in terms of EBITDA and that EBIT practically should
reach the profit threshold. In the coming years, parallel to the ramping up of
production capacity, substantial contributions to earnings can be expected.
"Our Legacy Project is one of the world´s economically most attractive
greenfield projects," says Joachim Felker, member of the Board of Executive
Directors of K+S Aktiengesellschaft whose responsibilities include the Potash
and Magnesium Products business segment. "The benefits of the project include
the already existing very good infrastructure, the significantly earlier
availability of product that solution mining brings and, not least, our many
years of expertise as an established potash producer," continues Felker.
Expanding the global presence of K+S
The Legacy Project supplements the existing German production network of K+S
with an important North American site. This makes possible a unique
diversification of production among potash producers. In future, the new site
will be the starting point primarily for sales to the emerging growth markets
of Asia and South America as well as in North America. K+S will carry out
distribution via its tried and tested infrastructure.
Financing of the project on a solid basis
With a level of indebtedness of under 25%, the K+S Group enjoys a very solid
balance sheet structure. The financing of the Legacy Project should be able to
be provided predominantly from liquidity and future cash flows. The refinancing
of the bond maturing in 2014 is assumed in this.
K+S also intends to maintain its existing, essentially earnings-driven dividend
policy with a payout ratio of 40 to 50% of adjusted Group earnings after taxes
and, moreover, strive to retain its "Investment Grade" rating.
Further expansion potential exists
In addition to the Legacy Project, over the coming years, K+S will also explore
in more detail the other permit areas taken over from Potash One in southern
Saskatchewan. Due to the limited geological data, the deposits there cannot yet
be divided into resources and reserves. However, the exploration permits are
located in areas of known geologically high-quality potash deposits in
Saskatchewan and should for that reason constitute a future potential that is
not to be underestimated. Therefore, a Legacy Project II or III cannot be ruled
out in the future.
Advantages for the province of Saskatchewan
With Legacy, the first greenfield potash project in over forty years will be
implemented in Saskatchewan. At present, around 30 people are employed at K+S
Potash Canada in Saskatoon. During the construction phase, more than 1,000
people will be working on the site during peak times. In its final expansion
stage, the new K+S site will employ more than 300 people. Additionally,
external contractors will support the brine plant and plant operations over the
long term.
Assuming annual production of 2.86 million tonnes of KCl and on the basis of
current potash prices, the province of Saskatchewan will in future receive
considerable income in the form of taxes and royalties.
Experience growth
The K+S Group is one of the world's leading suppliers of standard and
speciality fertilizers. In the salt business, K+S is the world´s leading
producer with sites in Europe as well as North and South America. K+S offers a
comprehensive range of goods and services for agriculture, industry, and
private consumers which provides growth opportunities in virtually every sphere
of daily life. The K+S Group employs more than 14,000 people. The K+S share -
the commodities stock on the German DAX index - is listed on all German stock
exchanges (ISIN: DE000KSAG888, symbol: SDF). Further information about K+S can
be found at www.k-plus-s.com and information about the Legacy Project and K+S
Potash Canada at www.ks-potashcanada.com.
Note to editors
We are offering a conference call with members of the Board of Executive
Directors for investors and analysts in English today at 2:30 p.m.
Shareholders, investors, representatives of the press and all other interested
parties are invited to follow the conference via a live webcast at
(http://www.k-plus-s.com/kspcen) or by phone under +49-(0)69-71044-5598. The
presentation of the conference call can be found on our website. The conference
will be recorded and will also be available as a podcast.
Your contact persons:
Press:
Michael Wudonig, CFA
Phone: +49 561 9301-1262
Fax: +49 561 9301-1666
michael.wudonig@k-plus-s.com
Investor Relations:
Christian Herrmann, CFA
Phone: +49 561 9301-1460
Fax: +49 561 9301-2425
christian.herrmann@k-plus-s.com
Forward-looking statements
This press release contains forward-looking statements that are subject to
various risks and uncertainties. Such statements represent management's best
judgment as determined on the basis of all the information currently available.
Statements in this press release other than purely historical information as
well as statements on future plans and objectives or on expected results
constitute forward-looking statements. Forward-looking statements are based on
numerous assumptions and are subject to all business-related risks and
uncertainties. The companies assume no obligation to update the forward-looking
statements contained herein.
Further inquiry note:
Press:
Michael Wudonig, CFA
Phone: +49 561 9301-1262
Fax: +49 561 9301-1666
michael.wudonig@k-plus-s.com
Investor Relations:
Christian Herrmann, CFA
Phone: +49 561 9301-1460
Fax: +49 561 9301-2425
christian.herrmann@k-plus-s.com
end of announcement euro adhoc
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company: K+S Aktiengesellschaft
Bertha-von-Suttner-Straße 7
D-34131 Kassel
phone: +49 (0)561 9301-1460
FAX: +49 (0)561 9301-2425
mail: christian.herrmann@k-plus-s.com
WWW: http://www.k-plus-s.com
sector: Chemicals
ISIN: DE000KSAG888
indexes: DAX, Midcap Market Index, CDAX, Classic All Share, HDAX, Prime All
Share
stockmarkets: official dealing/prime standard: Frankfurt, regulated dealing:
Stuttgart, München, official dealing: Berlin, Hamburg, Hannover
language: English