Canada Mining

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. Editor John Cumming MSc (Geol) is one of the country’s most well respected mining journalists. jcumming@northernminer.com This editorial is reproduced with permission of The Northern Miner and is from the November 22-28, 2010 issue.

BHP Billiton formally withdrew its hostile, US$40-billion cash offer for Potash Corp. of Saskatchewan on Monday after the Canadian government had rejected it two weeks earlier on the grounds that it did not provide a “net benefit” to Canadians, heeding the loud protestations of Saskatchewan Premier Brad Wall and a groundswell of opposition in the province.

Of paramount concern to the provincial government was BHP Billiton’s indifference to the long-established Canpotex export-sales cartel, and the company’s willingness to drive down potash prices as it maximized mine output.

The federal government had left open for BHP a 30-day window to improve its bid, but that was just a formality, as BHP had already made many substantive concessions relating to increased taxes, vows to maintain employment levels, and commitments to remain in Canpotex for five years, and to centre its potash business in Saskatchewan.

Clearly, BHP Billiton execs spent too much time with their noses in their spreadsheets and were unable to grasp the enduring strength of Prairie populism in Canada. And BHP paid a full price for its lesson, tallying US$350 million in transaction costs for the failed bid, of which US$250 million will be recognized in the half year ending Dec. 31.

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The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. This editorial is reproduced with permission of The Northern Miner and is from the November 8-14, 2010 issue.

The last week of October was a satisfying one for Canadian miners, with Canada’s parliament voting to defeat the anti-mining Bill C-300 by an unsettlingly close 140-to-134 margin.

As Canadian miners are well aware, Bill C-300 was a private member’s bill sponsored by backbench Liberal Member of Parliament John McKay, representing Toronto’s suburban Scarborough riding.

Superficially innocuous, Bill C-300, had it become law, would have given the federal ministers of foreign affairs and international trade new responsibility to hold Canadian resource companies accountable for their corporate social responsibility (CSR) practices in developing countries by submitting annual reports to the House of Commons and Senate for review.

The ministries could then sanction delinquent companies by keeping money from lending arms such as the Export Development Canada and the Canada Pension Plan.

However, the bill was so naively constructed that, as law, it would have led to a flood of frivolous, obstructionist and defamatory complaints coming in from all corners of the world from anti-capitalist agitators, shakedown artists and covert foreign mining competitors.

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The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. This editorial is reproduced with permission of The Northern Miner and is from the November 1-7, 2010 issue.

BHP Billiton’s $40-billion hostile bid for Potash Corp. of Saskatchewan entered a critical period in late October, as the broadly free market-friendly Saskatchewan Premier Brad Wall and his government set aside years of “Saskatchewan-is-open-for-business” talk and came out strongly against the deal.

Wall said the deal fails to provide a “net benefit” to the people of Saskatchewan and Canada in three key areas: jobs and investment, Canadian control of an important Canadian resource, and provincial revenues. He also voiced concern over the fate of the Canpotex potash-export marketing arrangement if BHP succeeds in its bid.

“Do we want to add PotashCorp to that list of once-proud Canadian companies that are now under foreign control?” asked Wall, who cast doubt on the ability of federal authorities to enforce restrictions should approval be granted with specific conditions.

“In the past decade, promises about maintaining jobs, corporate headquarters and future investment have all been broken,” said Wall. “We simply cannot take that risk with this valuable resource that belongs to the people of Saskatchewan.”

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The Toronto Star is the largest circulation broadsheet in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion. This column was originally published November 16, 2010.

“But it is not reciprocity to allow Vale to buy Inco. The Brazilian government has the absolute right to stop any takeover of Vale. Reciprocity would mean that if Vale has the right to buy Inco, then Inco would have the right to buy Vale. Similarly, it is not reciprocity to allow BHP to buy Potash. As part of the BHP-Billiton merger, the Australian government imposed draconian restrictions on BHP, meaning that BHP can go hunting internationally but it can never be hunted.” – Roger Martin, November/2010

Roger Martin is dean of the Joseph L. Rotman School of Management at the University of Toronto and chairman of the Institute for Competitiveness & Prosperity.

Sadly, the federal government’s decision to block the purchase of Potash Corporation by BHP Billiton Ltd. is likely to hurt the future competitiveness of Canadian companies.

This does not imply that Canada has no right or cause to challenge foreign takeovers of Canadian companies. Far from it. The problem is with the “net benefit” theory and rationale used by our government to block the takeover.

This approach to foreign direct investment is in stark contrast to the approach to merchandise trade, the traditional focus of trade policy, where the theory is reciprocity: you let us send you our BlackBerrys without tariffs or restrictions and we will let in your GE MRI machines.

We need to move policy from net benefit to reciprocity as the defining criterion.

If net benefit was used in merchandise trade, there would never be a lowering of trade barriers because every single industry or company that is adversely affected would wrap itself in the protective flag of net benefit.

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Eric Reguly is the European Business Correspondent for the Globe and Mail, Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media.

Eric Reguly

BHP Billiton’s $39 billion (U.S.) bid for Potash Corp. is unofficially dead. Ottawa’s rejection of the offer has triggered a flurry of half truths, outright falsehoods and general hysteria from the usual political, business and media quarters. Herewith are some of the myths, and my responses to them.

Ottawa’s (tentative) rejection of the deal sucks because BHP was making a big, fat “investment” in Canada:

No investment is created equally. The best investments are the ones that bring fresh capital, and fresh thinking, to the deal. In this case, BHP’s proposal to buy Potash Corp. was not an investment per se; it was merely substituting one bucket of capital (BHP’s) for another (Potash Corp.’s). The Canadian company doesn’t need BHP’s capital any more than Potash Corp. boss Bill Doyle needs to stuff another $100-million into his holiday fund. Potash Corp. has never had any trouble raising capital; no company with a killer product and a decent business plan does. It became the top fertilizer player on the planet all by itself and ownership by BHP would not necessarily accelerate its growth plans; on the contrary, it might slow them down because BHP has zero fertilizer experience or working fertilizer assets, meaning it could not offer management expertise or synergies.

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