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Shutdown at German sites to weigh on K+S potash output

German potash mining group K+S AG said March 29 that it would temporarily suspend productionat its Hattorf andUnterbreizbach miningsites from April 1, in a move that impacts 950 jobs and over 3 million tonnes ofannualized potash and magnesium production.

The company said that a period of low rainfall had reduced watervolumes in the Werra River system, preventing the company from utilizing the riverto dispose of tailings.

Its existing agreement with local authorities, which limits thechloride content of the river to 2,500 milligrams per liter, meant K+S can usuallyonly pump its wastewater into the river following periods of heavy rainfall.

Its only other method of disposal — injection of the tailingsunderground — has also been severely curtailed over environmental concerns.

The result is K+S' operations around the Werra plant, where about45% of its potash and magnesium are produced, are dependent on rainfall, said ThorstenBoeckers, head of investor relations at the mining group.

"As you can imagine, we are all busy doing rain dances here,"he told SNL Metals & Mining during a telephone interview March 30.

He was unable to say when operations would resume, given thatprecipitation in the Werra River region is usually higher in winter than in thespring.

As a result, he said the company now expects to produce "slightly"less potash and magnesium than last year, when output from the business unit totaled6.8 million tonnes.

The German salt and potash miner has been in disputes over the impact ofits wastewater disposal with local authorities and environmental groups for thepast few years.

German prosecutors raided the company's headquarters last yearas part of a criminal investigation into allegations that the company violated lawsand dumped waste into waterways.

Local councils have also delayed K+S' request for a permit toinject 2 million cubic meters of wastewater into underground porous rock layersannually.

According to Boeckers, state authorities are busy reviewing a3D model of the potential effects of these injections. He said one of the reasonsfor the delay so far was that changes to the computer model often took four or fivedays to calculate.

"It takes time when they want to include new things in themodel. So we are hoping [to] have this permit in the summer. Don't ask me when theGerman Summer begins," he said.

Last year the company disposed of approximately 7 million cubicmeters of wastewater, and is planning to reduce this further, under a four-phaseplan that includes construction of a pipeline to transport the liquid waste, andexpensive new processing facilities that should help to cut the amount of wastewaterproduced annually from 7 million cubic meters to 5.5 million cubic meters by 2017.

All up, the company plans to spend about €400 million solvingits wastewater problems by 2021, after spending a similar amount since 2008.

K+S noted that it has been reducing the amount of wastewaterit produces, from over 40 million cubic meters in the 1970s, to 7 million cubicmeters last year. It achieved this by investing approximately €400 million in newfacilities and technology, including a new kieserite flotation facility that producesvery little wastewater.

Rainer Gerling, managing director of K+S KALI GmbH, said thelocal council's approval of new injection permits was crucial to prolonging productionat the two mines and securing jobs there.

"It is very important for the Werra plant and for our employeesto receive an injection permit of sufficient scope as soon as possible," hewas quoted as saying in the news release.

After the injections were suspended, the company continued todispose of limited amounts of wastewater into the river. But this was insufficientto maintain production at the Werra sites, prompting the company to a complete shutdown last November.

After discussions in early December, local authorities allowedthe company to resume the underground injections, albeit at a lower rate of about120,000 cubic meters per month.

Boeckers said the lower allowance was insufficient.

"It is not adequate at all, it makes us dependent on therainfall. This is why we need to have the permit approved as soon as possible. …At the moment, if we cannot inject into the river, we have to suspend production,like we have now."

S&P Global Market Intelligenceand SNL Metals & Mining are owned by McGraw Hill Financial, Inc.