The financial squabble between Mosaic Company and Potash Corporation of Saskatchewan Inc. about Mosaic’s legal obligation to supply potash to PCS from its mine in Esterhazy, Saskatchewan, will reach a boiling point before July 1 but still might require going to trial in January 2012.

The expectation is based on the two companies’ reported legal maneuvering about each company’s respective rights and obligations in working together in mining and marketing potash.

The Mosaic Company announced earlier this month that it notified PCS that the obligation to produce potash for PCS at cost from its mine in Esterhazy, Saskatchewan, under a 40-year tolling agreement, had been fulfilled. PCS claims otherwise. 

“Over the life of the agreement, PCS has requested and received substantially more potash than has been mined from PCS's reserves. Mosaic has supplied the excess from its own reserves. In recent years, PCS has elected to receive approximately one million tonnes per year,” a Mosaic news release claims. 

Based on Mosaic's calculations, the amount of potash mined for PCS from Mosaic's reserves is now equal to the amount expected to be mined from the remaining PCS reserves.

“As a result, Mosaic believes that it has no further obligation to deliver potash to PCS from the Esterhazy mine, other than PCS's remaining inventory. Mosaic has conducted a thorough analysis to estimate the amount of remaining PCS reserves. This analysis relies on Mosaic's 50 years of Esterhazy mining experience and was developed using the latest and most scientifically advanced technologies, including 3D seismic imaging,” notes the Mosaic news release.

Mosaic and PCS are currently in litigation concerning their respective rights and obligations at the Esterhazy mine, including the amount of potash Mosaic is required to deliver to PCS. Mosaic officials say the company will continue to ship additional product to PCS but only at market-based prices during the next 60 days and to continue potash shipments to PCS until the conclusion of a trial scheduled to begin in January 2012.

“Should PCS not pursue any alternative, Mosaic intends to cease additional potash shipments on July 1, 2011,” it was announced. This is why there is anticipation that some form of interim settlement or court injunction is likely before July 1.

According to industry analysts, at stake in the case is about 1 million tones of potash per year, which could affect about 10 percent of PCS’s earnings.