Agrium raised the production potential of potash expansion plans, and put a $1.5bn price tag on them, as it announced that the longstanding project had been signed off by its board.

The Canadian fertilizer and farm retail group said that the expansion of its Saskatchewan-based Vanscoy mine, first opened in 1969, would add 1m tonnes in annual production capacity, raising the site total by 50% to 3m tonnes.

The group, when two years announcing the signing of an engineering contract for the project, estimated the capacity uplift at 750,000 tonnes.

In May, Mike Wilson, the Agrium chief executive, told shareholders that expansion would raise capacity by "more than 40%".

'Significantly less expensive'

Agrium said that the capital expenditure needed to realise project, set for completion in 2014, would come in at about $1,500 per tonne of potash, implying a total price of about $1.5bn.

The plan, as a "brownfield" project, representing the expansion of an existing site, "will ultimately be much quicker to bring on, and significantly less expensive to develop, than any greenfield project that is under consideration", Mike Wilson, the Agrium chief executive, said.

In fact, the cost is slightly more than the Can$1,450 ($1,390) a tonne announced two weeks ago by K+S for developing its Legacy potash mine – a greenfield project, also in Saskatchewan.

Legacy, for which a first phase will not be completed until 2017, is a larger programme, with initial capacity of 2.0m tonnes.

Credit Suisse in October pegged the average cost of potash expansion projects at about $1,000 per tonne.

Sector growth

Other potash expansion projects in train include $5.8bn plans by Russia's Uralkali, the top potash group by output, to lift capacity by 3.8m tonnes to 17.1m tonnes by 2015 through mine expansion.

K+S estimates world potash capacity growing from current levels of about 65m tonnes to well over 85m tonnes by 2015, mostly from brownfield projects.

Production will grow from 58m-60m tonnes this year to 67m-71m tonnes in 2015, the German-based group said.

Agrium shares closed down 0.5% at Can$67.13 in Toronto.