BHP fertiliser team on alert for Brazil move
BARRY FITZGERALD
19/07/2009 4:51:00 PM
THE need for a multibillion-dollar decision by BHP Billiton to establish itself as a major presence in the world's fertiliser industry has come into sharp focus with talk that Brazil's Vale is eying a $US25 billion ($A31 billion) acquisition of the No. 2 global producer, Mosaic.
The Estado de S. Paulo newspaper in Brazil has tipped that Vale is about to move on the US-based Mosaic, in keeping with Brazil's ambition to rid itself of dependence on imported fertilisers. Brazil needs fertiliser not just to meet its food requirements but to support its ethanol-from-crops program.
Mosaic shares shot 11.5 per cent higher on the report while Vale — best known as the world's No. 1 iron ore producer with BHP No. 3 — was sent lower. The newspaper tip put BHP's fertiliser team, part of its Canadian diamond division, on high alert.
Vale has already got under BHP's guard by spending $US850 million in January to acquire advanced fertiliser projects in Argentina and Canada that Rio Tinto sold as part of its debt-reduction strategy.
Should Vale also move on Mosaic, one of the options BHP has to establish itself as a major fertiliser producer could be closed off unless BHP makes a counter-bid. Other options for BHP would be to acquire the No. 1 fertiliser producer, Canada's PotashCorp, or to pursue its own well-advanced development plans. PotashCorp shares jumped 4.3 per cent in New York.
BHP managing director Marius Kloppers would be reluctant to get into a bidding war with Vale, given the national imperative that the Brazilians would take into any bidding duel. And PotashCorp's current $US27 billion market capitalisation would represent an uncomfortably large diversification bite, even for a company with BHP's firepower.
BHP's fallback position is to push ahead with its own development plans in the world's dominant source of potash — the vast potash beds found at depths of 850 to 1100 metres beneath the prairie in southern Saskatchewan, Canada.
Last November BHP submitted a proposal for the development of its Jansen potash project, 140 kilometres east of Saskatchewan's biggest city, Saskatoon. At a suggested annual production rate of 8 million tonnes a year, Jansen could account for 16 per cent of the global market for potash (the common name for fertiliser forms of the element potassium).
Subject to environmental clearance and a go-ahead decision by BHP, construction could start in 2011, with first production, for what would be a 50-year-plus mine life, possible in 2015.
Business Day
Source: http://www.businessday.com.au, http://sj.farmonline.com.au/news/nationalrural/agribusiness-and-general/general/bhp-fertiliser-team-on-alert-for-brazil-move/1571726.aspx
