It has not been an easy few years for Saskatchewan’s multi-billion dollar mining sector.
Persistently weak commodity prices have forced the province’s largest mining companies to cut costs and scale back production.
The uranium sector has been especially hard-hit, leading to the shuttering of two mines and a mill in northern Saskatchewan.
Investment in exploration — critical work aimed at establishing the next generation of mines — has also tumbled.
Cameco Corp. said earlier this year it has no plans to continue developing its three main uranium plays in 2019, for example.
The head of the province’s mining association acknowledged that 2018 was another year of “mixed” results while at the same time pointing to growing optimism in potash, strong results in gold and hints of positive news in uranium.
“We’re going to have a full few years ahead of us,” says Pam Schwann, whose association — one of the province’s most powerful — represents dozens of mining and exploration corporations with
investments in Saskatchewan.
Potassium chloride is Saskatchewan’s most abundant natural resource, and the one most closely linked to the province’s identity. Three companies currently mine it at a total of 10 sites across the province, mostly around Saskatoon.
The industry has undergone significant change over the past year, after prices — which peaked at around US$900 per tonne in 2008 — collapsed to around US$200 per tonne amid an oversupplied global fertilizer market.
The most significant change was the merger that created Nutrien Ltd., which combines Potash Corp. of Saskatchewan Inc.’s potash mining business with Agrium Inc.’s sole mine and vast network of retail outlets.
Excluding a dust-up with the Saskatchewan government over the location of its most senior executives, Nutrien had a banner year, earning US$3.6 billion on sales totalling US$19.6 billion, with greater profits expected for 2019.
Mosaic Co., which operates three of the province’s 10 potash mines, reported record production last year. Its chief executive similarly expressed optimism for 2019, largely due to the ramp-up of its massive K3 mine near Esterhazy.
K+S Potash Canada, meanwhile, said its new solution mine near Bethune — the province’s first greenfield potash operation in a generation — hit its 2018 production target and achieved positive earnings before taxes for the first time.
Schwann says those results appear to underscore the sense of optimism emerging from the sector last year, after a period marked by cost-cutting and, in PotashCorp’s case, the closure of a brand-new mine in New Brunswick.
While prices have remained comparatively weak, they were strong enough to allow the mining companies to keep their operations running “fairly continuously” without flooding the
market with excess fertilizer, she says. However, there are still challenges.
“We’re facing a lot of cost increases that we can’t pass on,” she says, referring to the federal carbon tax as well as the provincial government’s controversial decision to abruptly change the potash royalty regime, resulting in a $117 million hit to the industry.
“We have to somehow make sure that we are producing at a cost that is less than what our Russian and Belorussian competitors are producing at. If we can’t, we’re not going to keep that market share,” she adds.
Saskatchewan is also one of the world’s largest producers of uranium, which is used to fuel nuclear reactors around the world and is second only to potash in terms of its importance to the provincial mining sector.
All of the province’s uranium is mined by Cameco — the only major publicly traded company with its headquarters in Saskatoon — while Orano Canada Inc., a subsidiary of the French state-owned Orano SA, runs a uranium mill.
The sector has struggled mightily since the 2011 Fukushima Daiichi nuclear disaster forced the shutdown of every reactor in Japan, creating almost overnight a massive oversupply of uranium and a steep drop in prices.
Persistently weak prices led Cameco to temporarily shut down two mines and a mill in northern Saskatchewan and make deep cuts to its corporate office. Altogether, the company has shed around 1,300 jobs since 2016.
While there is little question the cuts have been hard on northern Saskatchewan, where Cameco’s operations are located, they also appear to be working. Earlier this year, the company reported its first annual profit since 2015.
Schwann points to that, as well as ongoing efforts to restart Japanese reactors and build new nuclear plants in countries such as China, as indications that the province will be well-positioned when prices return to more normal levels.
“Once those come online, they’ll start really seeing demand for uranium increasing — and uranium prices going up as well,” she says.
Gold and Coal
The Saskatchewan mining industry is most commonly associated with potash and uranium, but it also encompasses a gold mine north of La Ronge and a pair of coal mines in the province’s southeast, near Estevan.
SSR Mining Inc., which took over the Seabee mine in its May 2016 acquisition of Claude Resources Inc., reported another year of record gold production in 2018 — its fifth consecutive year in which records were set.
Partway through the year, the Vancouver-based company completed mining of the Seabee deposit while continuing work on the nearby Santoy deposit, which has been characterized as an extremely high-quality mine.
“That has been the vision for Seabee for a decade. It’s just that SSR Mining has been able to access more capital, to be aggressive on their exploration programs,” Schwann says of the newest player in Saskatchewan mining.
Schwann goes on to note that the province’s coal mines — operated by Westmoreland Coal Co. — are “under a lot of pressure,” both from regulations and the move to replace coal-fired power plants with natural gas and renewables.
“They are maintaining the lights on, and thank goodness over the cold winter they were mining, but there’s a lot of cost pressures for our coal sector as well,” she says.
Schwann admits that the mining sector is still facing challenges, but she sees other positives beyond the province’s existing mining operations, including increased exploration investment and major projects on the horizon.
Those include BHP’s massive Jansen potash mine east of Saskatoon, where work on the shafts is about 80 per cent complete. The company’s board hasn’t given its final approval for the project yet, but work is continuing.
Star Diamond Corp., meanwhile, recently received its long-awaited environmental approval to build an open-pit diamond mine in the Fort a la Corne forest east of Prince Albert, while its partner, a Rio Tinto subsidiary, continues drilling on the site.
“They’re really giving this a good look,” Schwann says of the Anglo-Australian mining behemoth, whose involvement in the diamond mine project is widely regarded as a positive sign for its future development.
There is also interesting work happening on the uranium front, she says.
Schwann acknowledges that “exploration people are always the best optimists in the world,” but pointed to NexGen Energy Ltd.’s Arrow uranium project as another project that could be on the horizon.
“NexGen is being a bit more optimistic in that, in looking at the agreements with some of their partners … it’s a bit more vertically integrated. So that one we might not really be looking at decades for that.”
Source: Saskatoon StarPhoenix