K+S shares dip after it raises potash mine costs

Shares in K+S touched a 2013 low after the potash group, for a second time, raised the estimate for the cost of bringing its Canadian mine onstream, and put back the opening date too.

The German-based group said that it was raising its budget for the first phase of its so-called Legacy Project, in Saskatchewan, to Can$4.1bn, up from the Can$3.25bn in outlined in November 2011.

That estimate in turn was some Can$350m higher than had been forecast by Potash One, the prospecting group which K+S bought for Can$434m in late 2010 to gain control of the Legacy project and some further potential mining sites.

K+S also on Monday said that the site would not until summer 2016 begin production of potash, a delay from the original start date of late 2015.

Capacity of some 2m tonnes a year of production will be reached by the end of 2017, before a further round of work to bring output up 2.68m tonnes a year.

'Increased costs'

K+S said that the costs reflected "increased material and labour costs", besides some work on the group's historic infrastructure.

Even so "taking all data of the profitability calculation into account the project is economically attractive", Norbert Steiner, the K+S chief executive, said.

The scheme "still fulfils the requirement of the group, to earn a 15% premium on the cost of capital before taxes", he said.

Financing would be achieved in part through new debt.

Nonetheless, "the dividend policy of the company will remain unaffected by the decision to increase the capital expenditure", Mr Steiner said.

Market reaction

The immediate market reaction was to send K+S shares down more than 4% to E32.075 in Frankfurt, their lowest level since November.

The stock recovered some ground in late deals to stand at E32.32, a drop of 3.9%.

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