With over 20 years of industrial experience and three degrees from the University of Saskatchewan, it seems you are well prepared for your new position as president and CEO of Canpotex. What would you say has been the greatest lesson you’ve learned along the way? I’ve had the good fortune of participating in the Canadian mining industry and for 20 years I’ve worked with quite competitive companies and industries. We are quite blessed here in Saskatchewan in terms of mineral endowments. You very quickly realize that your competitive position is only as good as the people you surround yourself with. In terms of greatest lessons, maybe it’s obvious for a lot of people, but for me it’s reaching the understanding that while you can have all these wonderful assets, they’re only as good as the people you have around you. This mining business is all about the people. I’ve been incredibly fortunate for my entire career to be working with such unbelievable people here in Saskatchewan.
And how have you noticed the people around you impacting business so far at Canpotex? [Laughs] I have so many examples to give! Here we are in the most landlocked location on earth basically, and we are getting 10 to 11 million tonnes [of product] from rail to port to ocean-bearing vessels, going to far-flung ports around the world. We have this concentration of expertise here in Saskatoon, Saskatchewan, of some of the best people in the world executing that supply chain in a world-class fashion. Were we to not have that expertise and those people operating in this incredible team environment, we wouldn’t be competitive. We wouldn’t be able to get our products to market competitively. We have our people doing it with Saskatchewan values intact, and they’re creative and innovative and that leads to competitiveness.
Being from Saskatchewan, how has it been being a part of the mining industry all these years? Was it always your goal to remain close to home? Yes and no. In the 1990s I was a mechanical engineer working at the uranium mines. I was doing my MBA at night and my wife, who was a medical resident, got a residency in Calgary. I left the uranium industry for about five years to go to Calgary with her. Eventually there was an opportunity in the uranium industry so I came back here, but it was really not by design. Coming back here has been a great opportunity for me and Saskatoon is our home. My wife and I have lived in Saskatoon longer than anywhere else on the planet. It’s our home and we’re happy here.
Now that you’ve been in your new position at Canpotex for a few months, what can you tell us about being CEO of one of our province’s biggest companies? Was there anything you weren’t expecting? It’s probably a little bit shameful to say, but even at the time I accepted the position, I didn’t have a full appreciation for the scale of Canpotex’s business and operations. To come here and gain appreciation for the 10 to 11 million tonnes we’re sending out of landlocked Saskatchewan to the various corners of the planet – what that all means has been a lot of fun and really eye-opening.
That sounds like a massive system. Can you put that in perspective? To break it down, every year, we have 100,000 railcars full of potash that go from the prairies to North American ports to 225 vessels hitting the waters going to every corner of the planet. We sell to 34 countries. We are the largest Canadian exporter to three gargantuan markets – Brazil, Malaysia and Indonesia and we are among the top five Canadian exports to 12 other major international markets, including India and South Korea. We sit among the top levels of all Canadian exports. And so maybe I should be embarrassed, but that scale and the importance of Canpotex to Canada has been a real eye-opener for me. It’s difficult to imagine and appreciate the logistics and brainpower required to move 100,000 railcars out of the province each year until you actually see it happen.
You had some very kind words to say regarding Steve Dechka’s leadership. What is something you have learned from his time as CEO? Steve has a number of really incredible qualities. If you look at the legacy of Canpotex, they’ve been doing this for 43 years now, and strong relationships have been built by this Saskatchewan-based company. I have been travelling to every corner of the planet for the better part of 15 years now, so I believe I have an appreciation for what it means to create long-term relationships in these offshore markets. Steve has a particular gift for that. You can see it in the business, but you can also see it at the time of his retirement, the loyalty he has created among our customer base and the respect and admiration is really, really deep. During the course of his career, he did a world-class job of going out and developing our international markets.
And how might your leadership differ from or mirror his? We are going to build off the legacy Steve has left behind and I’m going to borrow from some of my previous experiences in different commodities. We have an opportunity to meet the growing complexity in our markets with growing sophistication here at Canpotex. There are a few ways we can go about that. Frankly, take some of the challenges we face and turn them into opportunities or at least something that can continue to position Canpotex for the long term.
So what is the largest obstacle you expect to face this coming year? Our coming obstacles are all a part of the changing nature of our business. If we look at the long-term picture for Canpotex, for potash, for our shareholders – it’s a good picture. The world population continues to grow, and with it comes growth in food demand. With the increase in the demand for food comes the increase in demand for potash. Here at Canpotex, we need to take a very long-term view of the world and that’s what we’re doing. In the meantime, we find ourselves with shorter-term challenges which all commodities face. Today, one of the challenges we’re facing in near-term headways is that of foreign exchange rates.
Can you give an example? Brazil is a great example. While we sell in US dollars, some of our customers are buying in US dollars, yet their local currency has devalued against the US dollar in an absolutely incredible way. The Brazilian real has devalued so much so, that while potash prices in US dollars are lower, when they use the real to buy it, the devaluation is so significant that in Brazilian currency terms, they are paying some of the highest potash prices in our markets. We’re also in a highly-competitive industry. Some of our competitors in places like Russia and Belarus, are selling in US dollars but are producing in rubles, which has devalued so much that the cost of production has gone down in US dollar terms at an incredible rate. They’re experiencing this huge benefit in the devaluation in terms of US dollars and making them much more competitive in the potash market.
How will Canpotex meet these challenges? For our part, in these challenging times, we will seek to, to the benefit of our shareholders, control the things we can control. That will be for one, our own costs. If you look at the supply chain, we spend approximately one billion dollars every year. We’re looking to manage those costs in the most efficient way. We will also be approaching the markets in the way we have approached them in the past. We will continue to compete head-on with our competitors – we have over eight of them in the market – while achieving maximum returns for our shareholders.
With recent layoffs at Mosaic and production halts at PotashCorp mines, what can we expect from Canpotex? Are these signs of trouble ahead? At Canpotex, we’re built for a commodity cycle. We built ourselves to be flexible so when production is ramped up we can absolutely manage that. We have the rail and port and ship capacity to do so. When supply is not as significant as previous years, we’re flexible to cope with that as well. That’s the way we view movements in the market. We know it’s going to happen to us; we know it given that we’re in the commodity business.
With new players poised to come on stream within the next few years, what might this mean for Canpotex and the market as a whole? For the time that we’ve existed and for the time that we will exist, we’ll be in a very competitive market. We will meet that competition head-on. If you look at how we’ve built our infrastructure and our capabilities and our customer base, then it gives us some confidence that we’re going to compete and compete head-on. Is it going to be easy? No. Additional competitors will make the landscape that much more competitive but they will find us to be a very challenging and formidable presence.
Anything else you would like to mention? We’re quite proud of what we do here at Canpotex. I’ve only been here four months and I’m a very proud Canpotex employee. I’m proud that we’re a world-class business and proud that we are contributing to food security. It feels pretty good. I have four children and I don’t mind telling them the kind of company I’m a part of and the things that we do. It’s definitely a source of pride.
Saskatchewan Mining Journal 2016, Issue 1
Written by Cassi Smith
August 12, 2016 | Originally posted in Mining Journal, Issue