September 2, 2010 / 10:33 PM / 7 years ago

Saskatchewan may consider potash royalty change

TORONTO (Reuters) - The government of Saskatchewan may consider changes to its potash royalty system, in the event of a foreign takeover of Potash Corp, the premier of the western Canadian province said in a television interview on Thursday.

“In the long term there are royalty changes that are possible to take the bias away from prices and more toward volumes,” Premier Brad Wall said in an interview with BNN Television.

Wall said that while Saskatchewan was not opposed to Chinese investment in the province, the situation on potash is a little different, because of the strategic importance of the crop nutrient and the fact that Potash Corp controls a vast amount of the province’s reserves.

“We want to be very circumspect about sovereign entities from customer countries and their involvement in all of this,” said Wall.

The prairie province has commissioned an independent look into BHP Billiton’s proposed takeover of Potash Corp, including conditions that Canada could impose on the deal.

China, which buys about 7 percent of the output of Potash Corp, fears a BHP takeover might jeopardize supplies it will require to feed its huge population in coming years.

Chinese sovereign wealth funds and other investors have approached at least one big Canadian pension manager about a possible counter-bid for Potash Corp to rival BHP Billiton’s $39 billion hostile offer.

However, the possibility of Chinese involvement in a valuable Canadian resource has raised concerns in Saskatchewan, which is worried that a takeover by either BHP or other foreign entity could affect jobs and government revenue.

“This is an issue absolutely and we will be analyzing it very, very carefully,” said Wall.

The province has asked the Conference Board, a nonprofit research organization, to examine the effect of a takeover, including the conditions Saskatchewan might ask the federal government to impose on a deal and ways to mitigate risks from BHP’s bid and any others that could come forward.

“We have looked at options around pre-defining what conditions might be put on a deal. In other words, belling the cat a little bit more clearly in terms of any conditions that come with an approval to any deal,” Wall said.

The premier stressed that the province would clearly outline the implications for a foreign buyer that violates any of the conditions that come with an approval.

“At the end of the day there isn’t any potash mined in the province without a license from the province of Saskatchewan and that’s obviously a source of some leverage,” he said

($1=$1.05 Canadian)

Reporting by Euan Rocha; editing by Rob Wilson

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