BHP explores $2b stake sale in Canada potash mine

An employee holds processed potassium salts at a Uralkali potash mine near the city of Berezniki in the Perm region close to Russia's Ural mountains August 23, 2013. REUTERS/Sergei Karpukhin/Files

Anglo-Australian mining giant BHP Billiton Ltd is considering selling a 25 percent interest in its Canadian potash mine project, a stake that could be worth close to $2 billion, 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 potential stake sale in its partly 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 exposure to the project, said the sources, who asked not to be identified because the deliberations are confidential.

BHP laid out options for the Jansen project in an investor presentation dated Aug. 22, saying it could wait, find a partner, divest or optimize it. BHP spokeswoman Bronwyn Wilkinson said it was too early in the process for the company to have determined the size of a potential stake sale.

“If you bring in a partner, you can share the capital and risk and, depending on who the partner is, help secure an off-take (supply agreement) or offer expertise,” Wilkinson said.

BHP, which will keep control of the mine, is not tied to the 25 percent, and the final stake sold could depend on offers, the people said. BHP’s 4-million tonne mine would cost about $8.5 billion to build, with more than half of that still uncommitted.

The company does not need the cash either, so it is not in a hurry, the people said. The company’s underlying profit surged to $6.7 billion in the recent fiscal year.

BHP’s U.S.-listed shares jumped, rising as much as 4.5 percent to hit 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 battle between BHP, the world’s top miner, and Elliott, a hedge fund that has challenged some of the world’s biggest companies.

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

In July, BHP potash analyst Paul Burnside made a case for potash, arguing that a counter-cyclical investment would help position the company for rising demand for the commodity over the next few decades.

Elliott attacked BHP’s plans to enter the potash fertilizer market, which is facing over-supply and sluggish prices. Analysts are cautious about the sector.

Global prices of potash, a crucial crop nutrient that helps corn and other crops withstand stress, are low due to a slump in farm prices and rapid expansion of mining capacity by producers.

The company said this week it would not seek board approval in 2018 as expected for capital to finish building Jansen due to uncertainty in the potash market. Some analysts interpreted the comments as delaying the project. Production could start in the mid-2020s, BHP said.

The potash asset is expected to attract interest from global players, including Indian and Chinese firms, the people said.

Since India relies entirely on imports for potash, Indian fertilizer companies looking to sidestep price volatility could look to take advantage of attractive valuations.

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

Last month, Reuters reported that Indian agrochemicals producer UPL Ltd is exploring a bid of more than $4 billion for the agrochemicals business of Platform Specialty Products Corp, in a sign that Indian agriculture firms were actively scouting for North American assets.

Also Read:

EMR Capital buys 80% in Zambian copper mine from ARM, Vale for $97m
India: Adani hires Grant Samuel for advice on Australian mine funding

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.