By: Martin Creamer
Published on 18th August 2008
The world’s largest diversified mining company BHP Billiton would be considering the investment of “billions upon billions of dollars” into potash mining in the next 12 months, which was “probably the most exciting opportunity of them all”, BHP Billiton CEO Marius Kloppers said on Monday.
Kloppers said BHP Billiton’s specialised products group was working “in a very real way” on the “most exciting” Anglo Potash transaction, which the company announced earlier would give it access to 7 338 km2 of highly prospective exploration permits in the immediate vicinity of existing major potash mines in Saskatchewan, Canada.
He said that this had given the company an opportunity “to enter a new business at scale”.
“We will give an update in a couple of months time on the progress of the potash project,” Kloppers enthused.
In the meantime, Kloppers said, “you will see about $100-million of expense on that project over the next 12 months as we firm up and eventually that could result in billions upon billions of dollars being invested in potash mining”.
BHP Billiton bid C$284-million for the Toronto Venture Exchange-listed Anglo Potash, an offer represented a 34% premium.
Anglo Potash owned 25% in an exploration joint venture with BHP Billiton.
Ninety-five per cent of world potash production is used in fertiliser, with Saskatchewan responsible for a quarter of global potash output.
Fertiliser giant Potash Corporation of Saskatchewan recently reported second-quarter earnings of $905,1-million, its highest ever and more than triple the profit of $285,7-million posted in the same period a year ago.
"We are experiencing strong growth in demand and are capturing the value of higher prices in all three nutrients, especially in potash,” Potash Corp CEO Bill Doyle said at the time.
The looming global food crisis had prompted farmers around the world to strive for optimum yields, which was placing a priority on fertilisation.
BHP Billiton’s diversified rival Rio Tinto also had its eye on the growing potash market, and hoped to start producing the crop nutrient from its first mine by as early as 2012, energy and minerals CE Preston Chiaro said.
The company already had a foot in the door, with assets in Argentina and Canada, and wanted to establish a “strong position”, Chiaro said.
“We think this is a market that will grow in importance in the future, not only as developing countries improve their food supply, but also potentially from biofuels,” Chiaro added.
Demand for potash has surged, driving prices into orbit, after the market spent the last three decades in surplus, which meant that the last new mine was built more than 20 years ago.
Rio Tinto bought PRC as early as 2002 and was currently operating a pilot plant, which would allow it to enter the fray in 2012 at a cost of $3,5-billion.
The group had also staked about 1 200 km2 of prospective property in Saskatchewan, where it is drilling.
South African contractor has won a contract to sink a shaft into one of the world’s largest potash deposits at the Gremyachinskoye mine at Kotel’nikovo, 100 km from the Volgagrad region in Russia.
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