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Saskatchewan Mining

BHP plans $2.6-billion potash investment in Saskatchewan – by Brent Jang (Globe and Mail – August 21, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VANCOUVER — Australia’s BHP Billiton Ltd. is strengthening its commitment to a multibillion-dollar potash investment in Saskatchewan even as an industry shakeup has increased competition in the market for the key crop nutrient.

BHP announced Tuesday that it will pour another $2.6-billion (U.S.) into its Jansen project over the next three years, earmarking funds to build, with other investors, what might become the world’s largest potash mining operation.

Melbourne-based BHP has already spent $1.2-billion so far on the Jansen mine, about 140 kilometres southeast of Saskatoon. But speculation about the company’s commitment to the Saskatchewan project arose three weeks ago, when one of the potash industry’s two main marketing groups abruptly disbanded, raising the prospect of a prolonged period of low prices for the resource.

Despite today’s gloomy market conditions, BHP chief executive officer Andrew Mackenzie said his company envisages demand growth for potash will average 2 to 3 per cent a year until 2030, bolstered by population growth and the consequent need to bolster food production.

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Wall says he’s ‘pleased’ with Potash on promises – by Joe Couture (Saskatoon StarPhoenix – August 16, 2013)

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

Premier Brad Wall says he’s pleased with PotashCorp’s progress in keeping promises it made to the province at the time of the attempted takeover by BHP Billiton in 2010.

“We get a report from (PotashCorp), and I’ve had a chance to talk to (CEO) Bill Doyle directly about it. We had a conversation about the status of the pledge and I think Saskatchewan people should be pleased. We’re certainly pleased,” Wall said.

“They’re heading toward the exact number they promised for head office jobs. They’ve had so many move up from Illinois.

“They’ve actually exceeded their targets for overall numbers of employees. They’re moving in the right direction in terms of aboriginal employment,” he added. “And from a corporate citizen standpoint, here’s a company that has exceeded their pledge, frankly, I think, and expectations.”

As examples of that, Wall pointed to PotashCorp’s contributions to the STARS air ambulance program and to the new Global Food Security Institute.

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Why cartels collapse – by Jack M. Mintz (National Post – August 16, 2013)

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

The potash cartel collapsed, at least for now, and the oil cartel could be next

Cartels are tough to maintain as we have recently seen with the demise of the Russian-Belarusian duopoly that accounts for over 35% of world potash production. The North American Canpotex cartel accounting for another a third of global output faces a sharp reduction in profits.

The stock and bond markets have responded in kind. Potash Corporation, the leading global producer, has seen its credit rating downgraded by Standard and Poor’s from stable to negative following a steep drop in its stock price from $38 to $30.

Yet, not all cartels fall apart. OPEC has been in operation since 1960, first successfully manipulating global oil prices by reducing supply after the Yom Kippur war in 1973. Today, it is the swing producer, producing 32.4 million barrels per day (roughly 45% of world crude production in 2012). OPEC itself is dominated by Saudi Arabia, which accounts for almost one-third of OPEC production.

If a potash cartel can fall apart, could it happen to OPEC?

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Potash earthquake – (Northern Miner Editorial – Aug 12 – 18, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. 

Like a sudden Saskatchewan thunderstorm, the potash market surprised everyone yet again with its capacity for drama and destruction, as everyone learned just how important the Russian-Belarusian potash cartel had been all this time in supporting the potash market to the benefit of Western producers and juniors alike.

As detailed in these pages, the major North American potash producers and their investors were side-swiped by news in late July that Russia’s Uralkali was leaving the BPC potash cartel it had created with Belarusalkali as a Slavic twin to the long-standing North American cartel Canpotex run by Potashcorp, Agrium and Mosaic.

Uralkali is already the world’s largest and lowest-cost potash producer, and is now vowing to ramp up production and accept lower prices in order to capture new Asian markets.  In retrospect, the fact that two Russian billionaires unloaded their substantial shareholdings in Uralkali in the weeks leading up to the announcement was a sign something was afoot. (Though, for some reason, we’re not expecting any insider trading investigations to get underway in Moscow any time soon.)

North American juniors in the potash space have always had a tough time, given that potash projects are so vast in cost and scope that developing them on their own is never a realistic option.

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Potash Corp. Says Uralkali-Belarus Dispute Won’t Last – by Christopher Donville (Bloomberg News – August 8, 2013)

http://www.bloomberg.com/

Potash Corp. of Saskatchewan Inc., the largest North American producer of its namesake fertilizer, said it doesn’t expect a dispute between two producers in the former Soviet Union to last and that forecasts of a price slump are overdone.

Chief Executive Officer Bill Doyle said yesterday the duration of the disagreement between Russia’s OAO Uralkali and its Belarusian rival will be “shorter rather than longer.”

The comments were his first since Uralkali last week quit Belarusian Potash Co., a marketing venture with Belaruskali. Shares of potash producers around the world plunged after the Russian producer said it will start selling the crop nutrient freely in the market for the first time in eight years.

“Logic tends to prevail,” Doyle said in a interview broadcast live on the company’s website. “I don’t find too many people who self-destruct intentionally.”

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Potash Corp chief plays down price plunge – by Peter Koven (National Post – August 8, 2013)

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

As Bill Doyle sees it, last week’s shocking turn of events in the potash industry is nothing to worry about. “I would just urge people to take a deep breath, relax, and everything’s going to be just fine,” the chief executive of Potash Corp. of Saskatchewan Inc. said in a unique question-and-answer webcast on Wednesday.

Mr. Doyle is eager to put shareholders’ minds at ease following the stunning news that Russian producer OAO Uralkali has broken up a cartel-like trading company and plans to max out its potash production to seize market share. It made the move after its partner Belaruskali sold product outside their arrangement.

Investors assumed that the days in which potash producers withheld production to maintain high prices are now coming to an end. But Mr. Doyle disagrees completely.

He said that there have been numerous spats like this one in the past between the Russians and Belarusians, and all of them were eventually resolved.

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BHP CEO says taking long view on potash – by Sonali Paul (Reuters Canada – August 7, 2013)

http://ca.reuters.com/

MELBOURNE (Reuters) – BHP Billiton’s new boss on Wednesday shrugged off Russian potash producer Uralkali’s exit from one of the world’s two big potash cartels, saying BHP (BHP.AX: Quote) (BLT.L: Quote) was taking a long-term view on its planned entry into the industry.

In the wake of Uralkali’s (URKA.MM: Quote) surprise move, there has been speculation it may make more sense for BHP to take over U.S. potash producer Mosaic Co (MOS.N: Quote) instead of building a $14 billion potash mine in Canada, up for a decision this year.

“We think very long term. This is something that’s happened short term,” BHP CEO Andrew Mackenzie told reporters, when asked whether the company may delay development of Jansen with potash prices expected to slump.

“We’ve always said that potash is a business which will lose some of its cartel-like structure and become in time globally traded like everything else, so we, to some extent, predicted what’s happened,” he said. Mackenzie said he would have more to say about the outlook for potash and Jansen at the company’s results on August 20.

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Potash news a wake-up call for government: NDP – by Scott Larson (Saskatoon StarPhoenix – August 1, 2013)

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

The jolt experienced in the potash industry should be a wake-up call for the provincial government, NDP Opposition Leader Cam Broten says.

“A wake-up call that shows that we need long-term savings, that we need investments in infrastructure while we can, and a wakeup call to this government that we need to diversify the economy,” Broten said.

Shares in potash companies like Saskatoon-based PotashCorp, Mosaic and Agrium have plunged over the last couple of days after Russia’s potash giant OAO Uralkali said it would exit the export marketing group Belarusian Potash Co. and increase output to full capacity.

Experts say potash prices could fall by 25 per cent, which would impact the royalties the province takes in from the industry. “(That) has the potential to be significant, if you look at the contributions it makes to the provincial coffers as well as the thousands of jobs, the homes that are purchased and the spinoff industries,” Broten said.

“What we’ve seen with this government is an approach to have all of the eggs in one basket.

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Saskatchewan potash can be billed as the Porsche of fertilizers – by Les Mapcherson (Saskatoon StarPhoenix – August 3, 2013)

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

There was a time not so long ago when the Russians threatened us with nuclear annihilation. That they now are only threatening our potash revenues is a big improvement. This, we can handle.

Stuck with piles of surplus potash, the Russians have withdrawn from an international producers’ cartel that helped stabilize prices. They now will unload their potash for a lower price, compelling producers elsewhere to do likewise.

In Saskatchewan, it’s a swift kick right in the potash revenues. The precipitous drop in share prices for Saskatchewan potash producers could foretell the future for provincial royalties.

Potash Corp. of Saskatchewan shares fell overnight by 25 per cent, Mosaic shares, likewise. If provincial potash revenues are similarly reduced, we’ll have to turn in our New Saskatchewanembroidered silk underwear and go back to the old, cotton flour bags with the corners cut off for our legs to go through. Good thing we saved them.

Don’t panic, counsels Premier Brad Wall. Of course, urging us not to panic is the premier’s job. When the time does come for panic, Wall still will be saying don’t panic.

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Changing potash landscape a boon for China, India – by Brenda Bouw (Globe and Mail – August 1, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

China and India are poised to gain greater control over global potash pricing now that the oligopoly that controlled the majority of trade in the crop fertilizer, a key Canadian export, has been dismantled.

This week’s breakup of Belarus Potash Co. (BPC), a joint venture between Russia’s Uralkali and Belaruss’s Belaruskali, puts the world’s two most populous countries in a much stronger position after years of resistance to prices set by both BPC and Canada’s Canpotex Ltd.

Until now, the two groups controlled more than two-thirds of global potash sales. Saskatoon-based Canpotex is owned by Potash Corp. of Saskatchewan, Agrium Inc. and Mosaic Co.

The new landscape is expected to lower potash prices, which would increase demand and crop yields, particularly in high-demand countries such as China, India and Brazil. That in turn could help contribute to lower global food prices, which economists say are falling on expanded crop planting.

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Down with [potash] cartels, comrade – by William Watson (National Post – August 1, 2013)

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

The hungry of the world, who clearly would benefit from a 25% lower price of a key fertilizer, shouldn’t count their cheaper meals before they’re grown

Belarus’s President Alexander Lukashenko, Europe’s last remaining dictator, seems an unlikely devotee of Adam Smith. Yet his Decree Number 566 last December — decrees are a large part of his leadership style — is what so annoyed his Russian partners in the Eurasian half of the world potash cartel that they announced Tuesday they would be letting their exports rip, as they claim the Belarussians have already done in sales to China and India.

The other third of this Putin-Lukashenko troika is, ahem, us. We run the North American half of the cartel through Canpotex, the Saskatchewan potash export consortium formed in 1972, just about the time in fact that we were also putting together domestic cartels over milk, cheese, eggs and poultry. Trudeau times, recall, were managed-economy times.

The consensus view seems to be that this jolt of Smithian competition into the long-cartelized world market will bring potash prices down from above US$400/tonne to something more like US$300.

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Toward less of a potash oligopoly – Editorial (Globe and Mail – July 31, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The breakup of Belarus Potash Co., one of two international potash cartels, is good news for consumers and farmers across the world, which carries a promise of less expensive fertilizer and (as a result) cheaper food. It is hard to see how BPC’s North American equivalent, Canpotex International Pte. Ltd., the marketing organization shared by Potash Corp. of Saskatchewan Inc., Agrium Inc. and The Mosaic Co., will be able to maintain potash prices at their previous levels. The raison d’être of Canpotex is likely to be in question. Without the quasi-duopoly of Canpotex and BPC, the potash market will be substantially more competitive.

OAO Uralkali, the Russian member of BPC, has accused its former Belarussian partner, Belaruskali, of selling potash outside BPC. Indeed, last December, the dictatorial President of Belarus, Alexander Lukashenko, issued a decree cancelling BPC’s exclusive right to market and export Belarussian potash; maybe Belaruskali was just being obedient.

But Uralkali may have another motive, too; it has the advantage of being able to ship potash directly by rail to China, a country with a great appetite for fertilizer. Uralkali appears to have decided to seek buyers by offering attractive prices, rather than by restricting supply.

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Russia’s potash breakup a ‘game-changer’ for Canadian industry – by Brenda Bouw (Globe and Mail – July 31, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The dramatic breakup of the world’s largest potash oligopoly promises to reshape the industry and send prices tumbling, threatening the profit-making power of the marketing group that sells Saskatchewan potash to global customers.

Russia’s Uralkali said it is walking away from its Belarus Potash Company (BPC) joint venture with partner Belaruskali in order to sell potash on its own to hungry markets in China and India. The move is expected to shatter the industry’s supply-demand picture and spur a global potash price war.

It’s also a serious blow for Canpotex Ltd., the potash marketing group made up of Potash Corp. of Saskatchewan Inc., Mosaic Co. and Agrium Inc. The shares of all three companies were hit hard; combined, they lost nearly $9-billion in stock-market value. Potash Corp., one of Canada’s biggest mining companies, fell 16 per cent to $32.66. Analysts warn Canpotex’s pricing leverage could soon disappear, clobbering profits for each public company.

“This is a game-changer,” said John Chu, an analyst at Alta-Corp. Capital Inc.

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Saskatchewan economy can weather potash storm – by Claudia Cattaneo (National Post – July 31, 2013)

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

CALGARY – Saskatchewan will feel the impact of a global potash price war triggered by Russia, but the blow will be lessened by industry efficiencies and continuing growth in other sectors such as oil and uranium. “We remain extraordinarily bullish,” Kent Windsor-Smith, executive director of the Greater Saskatoon Chamber of Commerce, said Tuesday.

“We don’t foresee anything slowing us in 2013. We are expecting to see a modest slowdown in the growth rate in 2014, but that was probably in the cards already and it related to the fact that a number of these capital projects are winding down and moving toward completion.”

Saskatchewan’s potash sector, which produces about a third of the world’s supply of the crop nutrient, spent heavily in recent years to modernize operations and reduce costs, making it well-positioned to weather pricing pressures, he said, while “producers in other parts of the planet may not be as cost competitive.”

Meanwhile, the province’s diversified economy, which has been growing at a blistering pace, will continue to be supported by spending in oil and uranium, and a stable agriculture base.

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UPDATE 4-Potash sector rocked as Uralkali quits cartel; price slump seen – by Polina Devitt and Natalia Shurmina (Reuters India – July 30, 2013)

http://in.reuters.com/

MOSCOW, July 30 (Reuters) – Russia’s Uralkali has dismantled the world’s largest potash cartel in a move that it expects to slash prices by 25 percent, heralding a reshaped industry and pummelling shares of companies that produce the key fertiliser ingredient.

The break-up of the Belarus Potash Company (BPC), a joint venture with Belarussian partner Belaruskali, could cause a price war and leaves North America’s Canpotex as the dominant potash export venture.

It could also lead to cancellations of projects by rivals as the industry weighs the effect of lower prices, but may feed through to better deals for farmers and ultimately consumers. U.S.-listed shares of the Canpotex owners – Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc – plummetted, cutting their market value by nearly $15 billion.

BPC and Canpotex had accounted for 70 percent of global trade in potash, and the duopoly had set identical prices in key markets such as China and India.

“In the last few years, BPC and Canpotex … succeeded by raising potash prices much above their production cost,” a senior official at a major Indian potash firm said, asking not to be identified because of the sensitivity of the matter.

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