BHP, Vale ramp up push into potash businessM&A will certainly be on the table for Verde once the end of year scoping study is complete...Vale probably the most likely interested party.https://www.ctv.ca/generic/generated/static/business/article2073273.html
The world’s two largest mining companies continue to make bold moves inthe potash business that threaten to shake up how the crucial fertilizeringredient is sold to global customers.
BHP Billiton Ltd. said Thursday it will spend another $488-milliontoward developing its Jansen project in Saskatchewan that, if approved,could see the world’s largest miner begin producing potash by 2015.
The Australian-based miner also said it’s aggressively pursuingdevelopment of other potash projects in the province that have thepotential to some day make it one of the world’s largest producers ofthe coveted crop nutrient.
Also, Vale SA said late Wednesday that it’s planning to consolidate itsposition in the potash industry by taking its fertilizer unit private.
The change would give the Brazilian-based miner more control over thebusiness that now represents about 2 per cent of global potashproduction, as the country tries to reduce dependence on importedfertilizers. Vale is also planning to build a $3-billion potash projectin Saskatchewan, and has other projects in the pipeline around theworld.
Miners are looking to enter the potash business or expand existingoperations as they anticipate increased demand from rapidly growingnations such as China, India and Brazil.
The moves come amid a recent surge in potash prices as farmers buy morefertilizer to boost crop production and capitalize on rising prices ofagricultural commodities such as corn and wheat.
The spot price for potash has risen by about 25 per cent so far this year to more than $500 (U.S.) per ton.
Still, prices aren’t predicted to surge to a record $1,000 as they didin 2007, in part because of new projects being proposed from companiessuch as BHP and Vale that would increase supply.
“Four years ago, when potash prices took off, we didn’t have a lot ofgreenfield projects on the go,” said BMO Nesbitt Burns analyst JoelJackson.
BHP is moving forward with plans to develop Jansen, even after theSaskatchewan government successfully campaigned for Ottawa to blockBHP’s $38.6-billion bid for Potash Corp. of Saskatchewan Inc. last fall.
BHP’s latest infusion of $488-million to support development of Jansenbrings its total investment so far to $1.2-billion. And that’s onlypreparing the site for construction.
BHP’s board is expected to decide next year whether to approveconstruction, estimated to cost about $12-billion. If approved, the mineis scheduled to begin producing two million tons of potash annually,growing to its capacity of eight million tons by 2022.
BHP also said Thursday it could produce more than 16 million tons a yearfrom Jansen and its later-stage Melville, Boulder and Young sitesnearby. BHP said it plans to begin drilling at its Melville project inSaskatchewan next month.
Executives at Saskatoon-based Potash Corp., the world’s largest potashproducer, have been critical of competitors’ plans to build new minesand enter the potash industry, saying the high cost of constructiondoesn’t make it economical.
There is also the argument that new projects will increase global potashsupply, which would weigh on prices. Other contend that new playerscould also threaten the industry dominance of the two main potashmarketing companies, Canpotex Ltd. and Belarusian Potash Co., whichtogether control about two-thirds of the global market. Canpotex marketspotash produced in Saskatchewan by Potash Corp., Mosaic Co. and AgriumInc., while BPC is an arm of Belaruskali and Russia’s Uralkali.
BHP, whose push for more market-driven potash sales became an issue inits bid for Potash Corp., believes global potash demand will continue toincrease as new mines come into production.
“We believe the world needs more tons of potash,” Graham Kerr, BHP’soutgoing president of diamonds and specialty products, said in aninterview Thursday.