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BHP Rumored to Bid for Potash Corp Again

There have been new allegations that BHP Billiton might again be interested in buying Potash Corporation of Saskatchewan, which sent the company’s shares soaring. Shares in the Canadian fertilizer giant, the world’s second-largest producer of the crop nutrient, went up by as much as 6.6 percent to $22.18 last week. There have been rumors that BHP Billiton had made an unsolicited takeover offer for the Canadian company as well as that the miner had hired an investment bank to analyze the bid. Six years ago, Canada rejected BHP‘s $40 billion takeover bid for Potash Corp. saying that the bid would not provide a net benefit to the country.

Analysts were convinced at that time that the decision would deter any potential suitors from approaching Potash Corp in the future. However, BHP later started developing the Jansen project, its own Canadian mine. Having already invested about $3.8 billion into the project, the Jansen project is set to be a game changer with the anticipated production of up to 8 million tons of potash annually, which would be up to 15 percent of global supply. To compare, the Mosaic Company’s Esterhazy mine will produce approximately 6.3 million tons per year once its latest expansion is finalized. Most of Saskatchewan-based operations are between 3 to 4 million tons a year.

BHP has also recently added that it would not join Canpotex – the overseas marketing arm of Saskatchewan’s three largest potash producers – and instead it would come up with its own strategy.  Given this development, Jansen and BHP would be likely disruptive to the country’s potash market. Fertilizer prices have recently suffered amidst increased production as farmers spend less on crop nutrients due to low agricultural commodity prices.

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