The Case for Regional Development

Earnings season has come and gone for potash producerail carrs. While prices continue to improve from last year, there is yet another constant in these reports. The difficulties of getting product to markets. Continued difficulties with logistics has led to reportedly near empty product warehouses. The railroads continue to see increases in shipments. Increases are coming from intermodal, raw materials and basic materials and the transportation of oil. Add to this a record grain harvest last year, and another this year, puts continued pressure on the rail system to transport not only fertilizers, but also other goods. This has led some producers to spend additional monies on rail infrastructure. For example one producer is spending $64MM on a rail transfer facility to help improve rail deliveries.

No one can argue that the Elk Point Basin isn’t a premier potash deposit. However with a continued increase in the production in this area applying pressure to an already stressed supply chain, the case can be made to develop ore bodies that may have been overlooked in years past. The finest ore in the ground means little to the customer if it can’t be delivered when needed and in the quantity required, or if capital must be spent in other areas just to get product to the customer.

If you would like to discuss this or any mining or management consulting needs, please contact Schlumpberger Inc.

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