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Saskatchewan Mining

Canada’s ‘strategic asset’ tactic makes for bad foreign investment policy – by Jack M. Mintz (National Post – July 11, 2014)

The National Post is Canada’s second largest national paper.

Jack M. Mintz is the Palmer Chair, School of Public Policy, University of Calgary.

The “strategic asset” argument was deployed to effect in several recent proposed takeovers

Canada’s on and off again love for foreign direct investment has recently come to play with Warren Buffett’s Berkshire Hathaway Energy’s proposed takeover of AltaLink, an electrical company that owns significant transmission assets in Alberta. The acquisition is being opposed in some quarters using the argument that transmission is a “strategic asset” that should remain in Canadian hands.

In Alberta’s regulated and privatized electrical market, it is not entirely clear why a new person on the block, especially one with deep pockets worth $55-billion, would undermine the fundamentals of the heavily regulated market. A strong owner of AltaLink will add competition to a market characterized by several successful electrical generation and distribution players, including TransAlta, Atco, EPCOR, Capital and ENMAX. In most cases, these privatized hefty companies typically invest not only in Alberta but also globally.

Like these other companies, the new AltaLink, which is focused on Alberta, could transform itself into a significant player investing in energy infrastructure assets in Canada. With both capital and managerial expertise offered by Berkshire Hathaway, AltaLink will be able to support the management of transmission infrastructure owned by Warren Buffett’s worldwide empire.

The “strategic asset” argument was deployed to effect in several recent proposed takeovers. Probably the worst involved Quebec blocking the acquisition of the retailer, Rona.

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New Potash Corp. CEO Jochen Tilk stresses continuity despite differences from Bill Doyle – by Peter Koven (National Post – July 9, 2014)

The National Post is Canada’s second largest national paper.

Investors who tired of Bill Doyle’s bombast will probably appreciate Jochen Tilk.

The new chief executive of Potash Corp. of Saskatchewan Inc. could not be more different from his predecessor. While Mr. Doyle was the ultimate stock promoter, Mr. Tilk is a quiet and conservative mine operator. While Mr. Doyle rarely got through an interview or conference call without saying something outrageous, Mr. Tilk has dodged the limelight his entire career.

What Mr. Tilk does know how to do is operate mines as efficiently as possible. That is what Potash Corp. needs at this stage of the cycle, experts said, and that is one of the things he stressed on Tuesday.

“I believe, as most operators believe, there’s always an opportunity to get better,” the 50-year-old said in an interview from Saskatoon.

Mr. Tilk, who took over last week upon Mr. Doyle’s retirement, is only the third CEO in Potash Corp.’s history. He acknowledged that he has very big shoes to fill after Mr. Doyle’s wildly successful 15-year run, and he stressed continuity of his predecessor’s longstanding strategies — including the famous price-over-volume strategy — rather than any serious overhaul.

“When you look at the evolution of Potash Corp. from its origins to where it is today, you have to give [Mr. Doyle] credit for that. I certainly do,” said Mr. Tilk, who was formerly CEO of copper miner Inmet Mining Corp.

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Excerpt from Potash: An Inside Account of Saskatchewan’s Pink Gold – by John Burton

To order a copy of Potash: An Inside Account of Saskatchewan’s Pink Gold, click here: http://www.uofrpress.ca/publications/Potash

John Burton grew up on a farm in Saskatchewan, studied at the University of Saskatchewan and the London School of Economics, was elected to Parliament, and played a major role in Saskatchewan’s 1975 decision to acquire potash-producing facilities. He was a member of the Board of Directors of the Crown-owned Potash Corporation of Saskatchewan from 1975 to 1982.

CHAPTER 2: Beginnings and Development

Tommy Douglas, political leader of the CCF (Co-operative Commonwealth Federation), led the party to a massive election win on June 15, 1944. He had a strong complement of competent and dedicated people to choose from in selecting a Cabinet for his government. One of those people was Joe Phelps, a dynamic, aggressive, action-oriented man. He was a fiery speaker known for his excitability, verbosity, and temper. Douglas appointed him minister of natural resources but with some misgivings. His mandate was to diversify the economy, and Phelps produced results with a wide variety of initiatives, some of which got the government into trouble. He and his officials constantly looked for new opportunities.

One official picked up a report supposed to be kept hush-hush that some stuff called “potash” had been found near Radville by one of the companies drilling for oil in 1942. The informant had to emphasize that the “stuff” was much more important than any of several salts found on the surface.

This information was of interest since there was no knowledge of the find until then. Other indications of potash came to light subsequently, and by 1946–47, potash was identified as a resource with significant potential for Saskatchewan. The province had endured more than a half century of struggles and problems during its early development phase, with many harsh times that often tempered the dreams of its pioneers. Thus, the prospect of new opportunities was greeted eagerly and created new hope for the struggling province.

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Rio Tinto looks to catch up in potash – by Emiko Terazono (Financial Time – July 3, 2014)

http://www.ft.com/home/us

Miner’s Canadian joint venture is latest in oversupplied market

Dark clouds are gathering over the potash industry again. Last week, Rio Tinto and its partner, Russian fertiliser group Acron, said they would push ahead with the development of the Albany project in Saskatoon, Canada.

In its first disclosure of the size of the asset, north Atlantic Potash, the 50-50 joint venture between Rio and Acron, said the project area contained 1.4bn tonnes of assumed potash resources, a key fertiliser ingredient, of which 329m are estimated to be recoverable.

The announcement does not bode well for an already oversupplied sector where several other major developments, the biggest being BHP Billiton’s Jansen mine with its 5.3bn tonnes of measured resources and 1.3bn tonnes of inferred potash, are also on the drawing board.

Rio, which invested in the joint venture in 2011, has not disclosed how much it has spent on the project, but it sees it as a “tier one” exploration asset.

According to last week’s announcement, the next steps for Rio and Acron are a continuation of the environmental assessment and the pre-feasibility study.

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K+S Plans Specialty, Salt Growth to Add to Canada Potash – by Sheenagh Matthews (Bloomberg News – July 3, 2014)

http://www.businessweek.com/

K+S AG (SDF), the German potash producer that’s developing a $4 billion mine in Canada, is looking beyond the biggest investment in its history and plans to expand its specialty-fertilizer and salt businesses.

The salt unit has a target of doubling operating profit to 250 million euros ($342 million) by 2020, Chief Executive Officer Norbert Steiner said at a press conference at K+S’s Hattorf mine on the Werra River in central Germany. The company also plans to boost the proportion of sales from higher-margin fertilizers that have magnesium and sulfur content.

“We have ideas” for growth outside of potash, Steiner said. In salt, “we’re only in mature markets. We aren’t global yet.” Southeast Asia and eastern Europe are regions where the company is under-represented, he said, without specifying countries where Kassel-based K+S may expand.

K+S is still pouring the bulk of financial resources into development of the Saskatchewan mine dubbed Legacy. The potash producer cut its annual dividend 82 percent and sold 1 billion euros of bonds in December to help pay for the project. Some investors had called for a delay or cancellation of work on Legacy after an industry cartel breakup a year ago led to a 24 percent slump in potash prices.

The end of an export agreement between potash companies in Russia and Belarus in July 2013 roiled the industry, sending stock prices of fertilizer makers around the world down as much as 24 percent in a day.

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Rio Tinto, Acron JV pushes ahead with Canadian potash project – by Silvia Antonioli and Karen Rebelo (Reuters U.K. – June 27, 2014)

http://uk.reuters.com/

LONDON/BANGALORE – (Reuters) – Global mining company Rio Tinto and Russian fertiliser producer Acron OAO are moving ahead with the development of the Albany potash prospect in Saskatchewan, Canada, Acron said on Friday.

In its first disclosure of the size of the discovery, Acron said the project area contained 1.4 billion tonnes of inferred resources within the mining caverns at an average grade of 31 percent potassium chloride (KCl). The company put the recoverable amount at 329 million tonnes of KCl.

“The next steps for the project include continuation of the environmental assessment and the pre-feasibility study,” Acron said in a statement.

Rio’s rival BHP Billiton has invested in a larger potash project in Canada, the $14 billion Jansen development, but has pushed back production until at least 2020, looking for the right time to enter the currently oversupplied market..

BHP’s Jansen has 5.3 billion tonnes of measured, or proven, resources with 25.7 percent potassium oxide and 1.3 billion tonnes of inferred, or assumed, resources.

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Canpotex leads to fewer jobs in Sask. mining – by Kai Xue (Saskatoon StarPhoenix – June 26, 2014)

http://www.thestarphoenix.com/index.html 

Xue is a corporate lawyer in Beijing and food security activist. This is his personal opinion. To create jobs in Saskatchewan and help the hungry in poor countries, the province should reconsider its support for Canpotex.

The Saskatoon-based export cartel is composed of PotashCorp, Mosaic and Agrium, with each potash producer holding a fixed share in its sales. Canpotex and another cartel in Eastern Europe formed by Russia and Belarus controlled most of the world’s potash reserves and were able to until recently dictate the world price.

Canpotex is a legal cartel that aims to raise prices outside of Canada and is therefore exempt from enforcement under the Competition Act.

Saskatchewan strongly supports Canpotex, stemming from the belief that what is good for PotashCorp is good for the province. This conclusion is a mistake, based on assumptions about the economic benefit of the cartel in tax revenue for the province, jobs for locals, and the ownership of Potash-Corp.

By raising potash prices, Canpotex is assumed to create mining jobs. After all, in the mining of other minerals, a higher price leads to expansion of operations and more jobs. However, Canpotex raises prices not because farmers want to buy more potash but because its members cut off supply and artificially inflate the world price.

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Excerpt from Potash: An Inside Account of Saskatchewan’s Pink Gold – by John Burton

To order a copy of Potash: An Inside Account of Saskatchewan’s Pink Gold, click here: http://www.uofrpress.ca/publications/Potash

John Burton grew up on a farm in Saskatchewan, studied at the University of Saskatchewan and the London School of Economics, was elected to Parliament, and played a major role in Saskatchewan’s 1975 decision to acquire potash-producing facilities. He was a member of the Board of Directors of the Crown-owned Potash Corporation of Saskatchewan from 1975 to 1982.

Chapter 1 – Introduction

“Potash! What’s that?” would have been the likely response of most Saskatchewan residents upon hearing the word any time before 1950. That would certainly not be the case now. Virtually everyone in the province knows what potash is today and recognizes the vital role it plays in the provincial economy as well as in the Canadian economy.

Potash1 is a naturally occurring mineral created during the evaporation of ancient seabeds. Ninety-five percent of commercial potash production is used for fertilizer, while the remainder is utilized in industrial production. Potash is vital for plant and crop growth, but there is a wide variation in the natural occurrence of potassium in soils throughout the world. For example, an adequate amount of the mineral occurs naturally in most Saskatchewan soils, but in the US Midwest it is very much needed to promote greater yields of corn.

When potash was first found in the province in 1942, there were only a limited number of potash mines in operation around the world. Major producers were in New Mexico, Spain, France, East and West Germany, and Russia. The Europeans had formed a cartel long before 1940, but during and after the war, US influence and control increased and helped to keep prices high. Potash became increasingly important following World War II, as the need to increase world food supply in order to meet the demands of a growing world population was recognized.

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Jochen Tilk taking over as Potash Corp CEO just as its cartel model crumbles – by Richard Warnica (Canadian Business Magazine – June 4, 2014)

http://www.canadianbusiness.com/

For years, Potash Corp. has helped pump prices by limiting supply. That may have to change

As the president and CEO of Inmet—a Canadian copper miner with global operations—Jochen Tilk dealt with everything from illegal strikes in Papua New Guinea to runaway costs in Panama and environmental protestors in Spain. But when he takes over as CEO of Potash Corp. this summer, Tilk will be facing a whole new set of problems.

For years, Potash Corp. has been the gem of the Saskatchewan economy—and one of Canada’s most profitable companies, with net income of $1.8 billion and EBITDA of $3.3 billion last year. But recently it has run into trouble. The company sold less potash in 2013 than it did in 2012, even as the price for a tonne of the fertilizer dropped—by about 30% in major markets. In December, its stock languishing near a four-year low, the company laid off 1,045 employees—about 18% of its total workforce.

Around the world, global potash demand has been flat since 2007, while global production capacity has increased. Making matters worse, India, one of the world’s largest fertilizer customers, has cut the potash subsidies it pays to local farmers. China, another large customer, has increased domestic potash production. New competitors, including Australia’s BHP Billiton, are lurking on the sidelines. And perhaps worst of all, the export cartel model, the one that all but made the Canadian potash business what it is, is in danger of falling apart.

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Saskatchewan and the politics of pink gold: An insider’s account of the potash world – by Will Chabun (Regina Leader Post – June 2, 2014)

http://www.leaderpost.com/index.html

An insider’s account of potash world

Within a few days of reporting for work in Saskatchewan’s Industrial Development Office, John Burton heard about this fabulous pink mineral that supposedly was going to make Saskatchewan rich.

That was back in 1951. This shows potash is not something new – and that Burton has been around it, on the policy and political side, on and off, for most of his adult life.

It’s a professional interest that has turned into a book, Potash – An Inside Account of Saskatchewan’s Pink Gold (University of Regina Press). Surprisingly, it is the first book on Saskatchewan and potash, Burton believes.

It’s no academic tome, but a lively little volume with a history of the industry’s development. It’s studded with gossipy anecdotes about how flooding almost wrecked the potash industry (until engineers beat it by freezing the water-bearing rock formation) and how Regina’s Hill family was approached to be part of a consortium to buy the government’s potash corporation in the mid-1980s.

But that’s getting ahead of Burton’s story, which begins with Imperial Oil’s discovery of potash during oil exploration drilling in the Second World War.

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Developing mines in Northern Saskatchewan requires strong partnerships (Regina Leader-Post – May 24, 2014)

http://www.leaderpost.com/index.html

In the past several years, more than 315 agreements have been signed across Canada between resource companies and First Nations and Métis people to provide secure benefits to the communities.

According to Sean Willy, the director of corporate responsibility at Cameco, the partnerships in Northern Saskatchewan have been a benchmark for other companies across the country. “Saskatchewan has always been one of the leaders in Aboriginal engagement. Our model is emulated across the country and around the globe,” he said.

The Saskatoon-based company is one of the world’s largest uranium producers. He said that signing an agreement with both the English River First Nation and the northern Village of Pinehouse in Northern Saskatchewan simply helped solidify an already-strong 25-year relationship.

“They asked if we’d be interested in signing an agreement, and we said, ‘Sure, if you think it would be in the best interests of your communities,'” said Willy. “We wanted to recapture everything we were already doing as partners – basically, we just needed to codify the formal relationship.”

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SIMSA aims to promote Saskatchewan [mining supply] industry – by Rachelle Odnokon (Regina Leader-Post – May 24, 2014)

http://www.leaderpost.com/index.html

The Saskatchewan Industrial & Mining Suppliers Association Inc. (SIMSA) is a non-profit organization consisting of Saskatchewan-based companies in the industrial and mining sectors. Founded one year ago by a small group of companies in response to opportunities arising from the province’s boom, SIMSA has been working tirelessly to promote Saskatchewan to potential investors.

As SIMSA president and general manager Tom Foster explained, the organization was created with the hopes of representing the diverse interests of the various individual companies within the sector, as well as promoting industry in Saskatchewan as a whole.

“A small group of companies were concerned about the new international companies and engineering firms coming to Saskatchewan and not being aware of or appreciating the capabilities of Saskatchewan’s design, manufacturing and construction support infrastructure.

Saskatchewan has developed a worldclass manufacturing base that supports the broad industry requirements ranging from forestry, mining, oil and gas to power and steel production, and Saskatchewan-based companies have the ability to not only compete for these projects, but also partner with each other when the scope is too large for an individual company,” Foster said.

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NEWS RELEASE: Harper Government Supports Increased Global Competitiveness for Canadian Companies

SASKATOON, SASKATCHEWAN–(Marketwired – May 27, 2014) – Western Economic Diversification Canada

The Saskatchewan Industrial and Mining Suppliers Association (SIMSA) will promote Saskatchewan solutions for the global resource industry thanks to support from the Harper Government.

The Harper Government, through Western Economic Diversification Canada (WD), is investing $20,000 to help SIMSA upgrade interactive features on its website, including adding a searchable member database that will provide information on equipment types, services, and company certifications, as well as an online membership registration tool, and an events section.

These upgrades will mean that companies are better connected to new opportunities in the global marketplace, which will contribute to the strength and continued growth of the economy.

Quick Facts

SIMSA’s eight founding members contributed a total of $40,000 to set up and expand the Association.
SIMSA currently has a diverse membership of 30 companies, representing more than 1800 employees with combined sales of over $1 billion annually.

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Q & A with Pam Schwann executive director of the Saskatchewan Mining Association – by Robyn Tocker (Regina Leader-Post – May 24, 2014)

http://www.leaderpost.com/index.html

Saskatchewan’s mining industry is an important part of the province’s economy. Pam Schwann, executive director of the Saskatchewan Mining Association (SMA), answered what everyone wants to know about the province’s mining industry.

What does Saskatchewan’s mining industry produce? Saskatchewan produces a diversity of minerals that ultimately help feed and fuel the world.

Potash is produced from the Prairie Evaporite Formation at ten mines in central and southern Saskatchewan, including eight conventional underground operations and two solution mines. In 2013, uranium was produced from two underground mines in the Athabasca Basin of northern Saskatchewan with a third, the Cigar Lake mine, coming into production in the 1Q of 2014. Gold was produced from two mining operations in the Precambrian Shield of northern Saskatchewan in 2013, although currently, only one gold mine is in production.

Coal is mined from three open pit mines in southern Saskatchewan. Other minerals including salt, sodium sulphate, silica sand, bentonite and clay are also produced in Saskatchewan. Deposits of diamonds and rare earth elements have been identified, but have not yet been developed. Historically, Saskatchewan has also produced copper, zinc, platinum, palladium, nickel and silver.

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Mining in Saskatchewan helps feed the world (Regina Leader-Post – May 24, 2014)

http://www.leaderpost.com/index.html

Potash mining in Saskatchewan is more than a proud tradition. It fuels Saskatchewan and Canada’s economic engine and provides thousands of career opportunities in science and technology. Perhaps most importantly, potash fertilizers help grow crops to feed families all over the world. While recent market conditions have resulted in reduced global demand for potash, the investments made in both expansion (brownfield) and new start-up (greenfield) projects by mining companies in Saskatchewan will ensure that these operations are able to respond quickly to future market demands.

Potash Corporation of Saskatchewan Inc. (PotashCorp) In 2003, PotashCorp embarked on a major expansion initiative that includes projects at each of their operating mines. By its anticipated 2015 completion, this approximately $8.3 billion expansion program is expected to increase PotashCorps’s sustained output capacity to 18.1 million tonnes. All but one of PotashCorp’s Canadian operations are in Saskatchewan.

The Rocanville expansion is the largest of all PotashCorp projects and, because of its close proximity to the US border, it will play an instrumental role in serving PotashCorp’s North American customers’ needs. This expansion will add a new shaft at Scissor’s Creek, approximately 15 km from the existing site as well as a new mill to process the additional ore.

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