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Far in Saskatchewan’s southern plains, between immaculate century-old villages and snow-dusted grain fields, Australian mining giant BHP Billiton Ltd. is toiling hard to grow a Canada-based potash business from the underground up.
Its foundation, the planned Jansen project, is beginning to take shape near the rural municipality of LeRoy, 140 kilometres east of Saskatoon. Two shafts — one to hoist ore, the other men and equipment — are being prepped to sink a kilometre below the surface, where the province’s immense ore deposits lie.
A giant refrigeration plant, the site’s central facility, has started producing brine that is pumped below, freezing the ground so the shafts can be cemented and sealed through a big aquifer that stands in the way.
Coming up next is the carving of an underground city that will be teeming with workers in assembly and maintenance shops, lunchrooms and refuge stations, a maze of tunnels and production areas.
Pending final sign-off next year from the Melbourne-based company’s board of directors, production of the coveted fertilizer is slated to start in 2015, bound through a West Coast port to hungry populations around the world.
When Jansen reaches its full capacity, eight million tonnes a year, it will be the world’s largest potash operation.
It will also be the flagship of a potash rush in Saskatchewan involving dozens of billions of dollars in investment that promises to give Canada’s other resource hot spots, including Alberta’s oil sands, a run for their money — and their labour.
With a friendly multinational staff and modern new headquarters in Saskatoon’s core, it’s hard to believe this is the same multinational that only a year ago fought an acrimonious hostile battle to take over Potash Corp. of Saskatchewan, the provincial crown jewel, and lost after Ottawa blocked its $39-billion offer.
The then-Federal Industry Minister, Tony Clement, rejected the bid after Saskatchewan’s Premier, Brad Wall, complained it would not bring a “net benefit” to the country, while the company argued it was too low.
The popular premier was particularly concerned about the fiscal hit on the province’s royalty income. If BHP had taken over Potash, it would have been able to deduct the capital cost of its new mine against Potash’s existing profits. By building a new business, it will have to wait until profits are flowing before it can deduct capital costs, promising greater provincial revenue.
While Mr. Clement gave BHP 30 days to revise its offer, BHP decided to withdraw. But instead of packing up, as big corporations are known to do in response to hardball politics, the company decided to get down to work on its next best plan: building a potash business from scratch.
The Jansen project was already in advanced planning and previous acquisitions gave BHP a land exploration base of more than 14,500 square-kilometres.
“You can be stubborn and walk away from the table, or you can look at the facts and say: ‘That didn’t work, still a good place to be’,” said Tim Cutt, president of BHP Canada Billiton Canada Inc., a former senior executive at Exxon Mobil Corp. who moved to Saskatoon this summer to take charge of the massive build-up.
“Our company thinks in decades, not hours. If you think about what we have the opportunity to do here, it’s not a tough decision. We just decided this is where the best potash in the world is, we know how to operate in Canada, and we know we can operate successfully in potash.”
It helped that the community welcomed BHP with open arms immediately after the fight, enabling the company to shift gears quickly, he said.
The province’s reaction to the takeover battle was seen outside its borders as a throwback to its social-democratic heritage. The big worry was that it would damage Canada’s reputation as a place to invest.
Inside, it was seen as promoting competition and as a show of confidence in its immense resource base. It’s only recently that this humble, hard-working province stopped the outflow of its best and brightest, mostly to Alberta.
That confidence was reflected in the landslide re-election Monday of Mr. Wall and his Saskatchewan Party, the conservative party that nearly wiped out the once-dominant and business-hostile NDP.
“After years of losing our young people to other provinces, our population is now growing back, and we’re not going back,” Mr. Wall told constituents in Swift Current in his victory speech. “Today, after years of lagging behind the rest of the country, we are leading in so very many respects.”
For the rest of this article, please go to the National Post/Fincancial Post website: http://business.financialpost.com/2011/11/12/the-revenge-of-jansen/