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The hostile takeover battle ended 18 months ago, but the fight to dominate Canada’s potash resources seems far from over between Potash Corp. of Saskatchewan Inc. and BHP Billiton Ltd.
After fending off the Australian mining giant’s $39-billion bid with Ottawa’s help, Potash chief executive Bill Doyle said he remains a doubter about BHP’s Plan B — to build a Canadian-based global potash business from the ground up, starting with its proposed Jansen mine.
In an interview, Mr. Doyle suggested BHP’s construction progress at the Jansen mine and its expanding presence in Saskatoon are just part of “horse racing” in a competitive business.
“Until they decide to push ahead, we’ll believe it when we see it,” he said during a stop in Calgary, where he attended a meeting of the Canadian Council of Chief Executives this week.
But right now they can’t make the numbers work. I know. Returns aren’t there. There is no mystery to us why they haven’t decided to go ahead, because no one takes a project to the board of directors and they say, ‘What is the return on investment?’ And you say, ‘It’s negative’. ”
If it looks like Mr. Doyle is once again defending his company, the world’s largest producer of the fertilizer, and its turf, it may be because its stock price has slumped to about same level it was when BHP made its hostile bid in August 2010.
The Saskatoon-based company had weak results in the last two quarters, when global demand suffered as buyers nervous about global economic turbulence deferred purchases.
Mr. Doyle insists the setback was a “supply chain blip,” potash shipments have rebounded and empty shelves are being replenished.
While Potash is well placed to absorb the speed bumps, Mr. Doyle believes BHP’s efforts to build mines in Saskatchewan will be hamstrung by high costs and the long lead time required to bring them into production, making it too risky amid price volatility.
In Saskatchewan’s booming economy, BHP faces the additional challenge of labour availability, he said.
“We just sat into a couple of days of presentations here at the Canadian Council of Chief Executives meeting and the big takeaway is that labour costs are going to explode between 2013 and 2015,” he said. “We don’t have enough labour. And so for us to have the great majority of spending behind us, is a huge benefit. And these [new] projects are going to be even more expensive.”
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/05/02/duel-between-potash-corp-and-bhp-far-from-over/