BHP Investigates $2-billion Bet sale in Canada potash mine: Resources

Anglo-Australian mining giant BHP Billiton Ltd is considering selling a 25 percent interest in its Canadian potash mine project, a bet that could be worth close to $2-billion (1.55 billion pounds), people familiar with the matter told Reuters.

The move comes as activist investor Elliott Management Corp has been pushing the company for changes. BHP is working with an investment bank for the possible stake sale in its partially built Jansen, Saskatchewan potash project, the sources said this week.

For BHP, the move will help share the risk of developing the mine and reduce its vulnerability to the job, said the sources, who asked not to be identified as the deliberations are confidential.

BHP laid out options for the Jansen job in an investor presentation dated Aug. 22, saying it could wait, find a spouse, divest or optimise it. BHP spokeswoman Bronwyn Wilkinson said it was too early in the process for the company to have decided the extent of a possible stake sale.

“If you bring in a partner, you can share the funds and risk and, depending on who the partner is, help secure an off-take (supply arrangement) or provide experience,” Wilkinson said.

BHP, that will keep control of the mine, isn’t tied to the 25 percent, and the last bet sold could depend on supplies, the people said. BHP’s 4-million tonne mine will cost about $8.5-billion to assemble, with over half of the still uncommitted.

The company doesn’t need the money either, so it isn’t in a rush, the people said. The business’s underlying profit jumped to $6.7-billion from the new fiscal year.

BHP’s U.S.-listed stocks jumped, rising up to 4.5 percent to reach a two-year high of $43.60. They were up 2.3 percent at $42.68 in afternoon trading in New York.

The potash mine has become the latest front in the struggle between BHP, the world’s leading miner, and Elliott, a hedge fund that has challenged some of the world’s most important companies.

Elliott’s requirements include getting BHP to spin off its U.S. oil and gas resources, doing away with its dual-listing structure, and enhancing shareholder returns. BHP earlier this week said it would exit the U.S. shale gas and oil business.

In July, BHP potash analyst Paul Burnside made a case for potash, asserting that a counter-cyclical investment could help position the company for increasing demand for the commodity during the next few decades.

Elliott assaulted BHP’s plans to enter the potash fertiliser market, which is confronting over-supply and sluggish rates. Analysts are cautious about the industry.

Global costs of potash, a critical crop nutrient which helps corn and other crops withstand stress, are reduced because of slump in farm costs and accelerated expansion of mining capability by manufacturers.

The company said this week it wouldn’t seek board approval in 2018 as anticipated for capital to complete building Jansen because of uncertainty in the potash industry. Some analysts interpreted the remarks as delaying the project. Production could start from the mid-2020s, BHP said.

The potash advantage is expected to draw interest from international players, including Chinese and Indian companies, the people said.

Since India relies entirely on imports for potash, Indian fertiliser companies seeking to sidestep price volatility might look to benefit from attractive valuations.

Indian Potash Ltd, IFFCO, Deepak Fertilisers and Petrochemicals Corp, Rashtriya Chemicals and Fertilizers Ltd , Coromandel International Ltd are a Few of the top potash players in India.

Last month, Reuters reported that Indian agrochemicals manufacturer UPL Ltd is exploring a bid of over $4-billion for its agrochemicals business of Platform Specialty Products Corp., in a sign that Indian agriculture companies were actively scouting for North American resources.

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