TORONTO – BHP Billiton says it’s still working to get Canadian federal approval for a proposed takeover of PotashCorp despite reports that Saskatchewan’s provincial government wants Ottawa to block the deal.
The Anglo-Australian mining giant says it’s aware that Saskatchewan officials are expected to object to the controversial deal, which would see BHP buy the world’s largest potash producer for US$38.6-billion.
The government of Saskatchewan, which is home to PotashCorp’s main mining operations, is concerned that provincial revenues would be hurt over the long term if control of PotashCorp shifts to BHP.
BHP offered a C$370-million one-time payment into a proposed infrastructure fund to help offset the shortfall but a Saskatchewan official said Tuesday that doesn’t come close to offsetting the potential loss.
The province pegs its lost revenue at $3 billion over 10 years.
BHP responded Wednesday that it hasn’t been deterred and will continue to seek approval from Industry Minister Tony Clement, who oversees the foreign takeover process.
The company, the world’s biggest mining business, restated its commitment to have the head office and management control of its global potash business in Saskatchewan and to maintain current levels of employment at PotashCorp’s operations in Canada.
The company also said it is confident that it can address the province’s concerns about lost revenue.
"Our focus continues to be on working with the Government of Canada and demonstrating the significant net benefits we can bring to the country. We believe that by combining PotashCorp’s operations with BHP Billiton and returning control of PotashCorp to Saskatchewan, we can create a stronger business that will help ensure Saskatchewan is at the centre of the global potash industry for decades to come," Andrew Mackenzie, BHP’s chief of non-ferrous operations said in a statement.
"We are ready to underline our commitment to Canada with substantial undertakings on jobs, taxes, investment and community spending that will create immediate benefits for the people of Saskatchewan and the nation more broadly."
PotashCorp shares lost $2.08 or 1.4 per cent to C$146.32 in Toronto but remained above BHP’s offer of $130 per share. BHP’s shares gained US$2.61 or 3.3 per cent to $81.34 in New York.
Meanwhile, the Canpotex potash marketing cartel owned by PotashCorp, Agrium Inc. and Mosaic Co., has reached a preliminary three-year agreement with a division of Sinofert, a China-based fertilizer company that’s partly owned by PotashCorp.
Under the agreement, announced by Sinofert in a filing with the Hong Kong Stock Exchange, Canpotex will supply about one million tonnes of Canadian potash in 2011, increasing by 50,000 tonnes in each of 2012 and 2013.
The prices paid for the potash will be subject to negotiated adjustment in relation to market conditions but the three-year price cap is contemplated at US$2.2 billion.
That’s broken down as US$600 million in 2011, US$730 million in 2012 and US$870 million in 2013.
Sinochem Macao, on behalf of its parent, will buy all of its Canadian potash from Canpotex and Canpotex will not sell to any other buyers in China except under conditions outlined in the memorandum of understanding.
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