Fertilizer firms settle legal fight over Sask. potash

An expected court clash over how much potash PotashCorp can have from a U.S. rival’s Saskatchewan mine has been settled without trial.

Minnesota-based Mosaic Co. and Saskatoon fertilizer giant PotashCorp on Thursday announced they’ve settled a months-long dispute over the end point of a 1978 tolling agreement to supply potash to PotashCorp from Mosaic’s mine at Esterhazy, Sask.

Mosaic announced in May that it had "satisfied its obligation" under the agreement and would halt its shipments to PotashCorp from the mine effective July 1.

PotashCorp disagreed and obtained an order from the province’s Court of Queen’s Bench for Mosaic to maintain shipments until the matter could be settled at trial, which was scheduled to begin sometime next month.

Under the terms of the deal announced Thursday, Mosaic reported, its obligation to supply up to 1.1 million tonnes of potash per year will expire at the end of December 2012.

Also effective Dec. 31, 2012, Mosaic will get credit for 1.3 million tonnes of capacity at Esterhazy in the calculation of its share of annual sales through Canpotex, the joint export sales arm of PotashCorp, Mosaic and Agrium.

That tonnage represents Esterhazy’s obligation to Canpotex and has been allocated to PotashCorp.

The agreement also cancels next month’s scheduled court hearing and dismisses both PotashCorp’s claim and a counterclaim by Mosaic for damages stemming from PotashCorp’s related declaration of force majeure in 2009.

"The reversion of these potash tonnes, including an adjustment of our Canpotex entitlement, along with our previously announced expansion efforts, will increase our annual potash production capacity to over 16 million tonnes by 2021," Mosaic CEO Jim Prokopanko said Thursday in a release.

"This settlement provides certainty to our investors around the timing of this agreement and allows our customers access to this additional inventory," he said.

Likewise, PotashCorp CEO Bill Doyle said Thursday, the deal "provides PotashCorp and its stakeholders with certainty through 2012 and dovetails with our ongoing potash expansion program, which will increase operational capability to 17.1 million tonnes by 2015."

The Esterhazy site, billed as the world’s largest potash mine, has operated since 1962. The tolling agreement was set up when the mine was owned by IMC Global, which merged its fertilizer business with Cargill’s in 2004 to form Mosaic. Cargill sold off its 64 per cent stake in Mosaic earlier this year.

Related story:

Mosaic not done supplying us, PotashCorp says, May 4, 2011

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