Vale may sell potash assets in Saskatchewan – by Rachelle Younglai and Niall McGee (Globe and Mail – May 28, 2015)

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As Brazil’s Vale SA figures out what to do with its fertilizer business, the mining giant is thought to be testing the waters on a potential sale, according to people familiar with the matter.

In addition to potash mines in South America, the Brazilian mining company owns a big potash development project and slew of fertilizer concessions in Saskatchewan, the world’s biggest producer of potash – a crop nutrient.

“There has been a lot of chatter that Vale is possibly considering selling their fertilizer business. If you are preparing your assets for sale, you want to increase the value of your portfolio,” said Joel Jackson, an analyst with Bank of Montreal.

Vale, the world’s biggest iron ore supplier and a major producer of other metals, is under pressure to sell assets amid a nearly $20-billion (U.S.) expansion of its iron ore complex in Brazil. People familiar with the matter said it has been trying to gauge how much its fertilizer business could fetch.

The unit accounts for about 6 per cent of Vale’s revenue from operations. Asked whether Vale is considering selling its potash assets, a spokeswoman for the company said it previously announced it was looking for strategic partners for potash and phosphate projects.

The outlook for the crop nutrient is murky, with new potash production coming onto the market and the dominant North American and Russian fertilizer players no longer able to influence prices the way they used to. Vale and its rival BHP Billiton Ltd. appear unsure about how to proceed with their respective potash development projects in Saskatchewan; neither has given a clear signal if and when they will go ahead.

Vale is still studying whether it would be economical to build its mine, called Kronau, after the nearby town. BHP has been vague on when it might build its Jansen mine, even though it has committed $3.8-billion to sink shafts into the earth – in preparation for the mine.

If developed, both projects have the potential to upend the potash market, which has long been controlled by three North American producers and, until 2013, a Russian-Belarus potash cartel. BHP’s Jansen would be the biggest potash mine in the world and Vale’s Kronau would be a medium-sized producer. The mines would be an economic boon to Saskatchewan. Though their potash output could further depress prices, which took a hit in 2013 when Russia’s Uralkali killed the Russian-Belarus cartel.

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