WINNIPEG, Manitoba (Reuters) - Saskatchewan’s opposition to BHP’s bid for Potash Corp is based on the conviction that a takeover would hurt the Canadian province, its top elected official said on Monday, not on the hope of squeezing concessions out of BHP.
The home province of the world’s largest fertilizer supplier is recommending that the federal government block a $39 billion bid by BHP Billiton, the Anglo-Australian mining giant. It says a takeover would provide no net benefit to the country and will cost Saskatchewan revenue, jobs and strategic influence over a key commodity.
Potash Corp mines most of its potash in Saskatchewan, where it also has a head office.
“This isn’t a bargaining position that we’ve come to,” Premier Brad Wall said in an interview with Reuters. “It’s our position and that’s what we’re going to advocate for.”
Wall dispatched two of his cabinet ministers to Ottawa on Monday to begin lobbying politicians and government officials to reject the deal. Ottawa is scheduled to make a decision on whether to allow the takeover bid to go ahead by November 3.
BHP spokesman Ruban Yogarajah declined to comment on whether the company will make a new approach to Saskatchewan before the deadline or on the government’s review of the deal.
Saskatchewan’s most immediate concern is the potential loss of C$3 billion to C$6 billion ($2.9 billion to $5.9 billion) over 10 years. That’s how much the province says it could lose in taxes and potash royalties if the takeover proceeds. The losses would result from expected changes in how BHP would produce and market potash, and how it could capitalize on the province’s tax laws.
BHP has offered to find ways to ensure Saskatchewan doesn’t lose revenue, but Wall has said that preventing a foreign takeover is also of strategic importance to Canada.
The operational capacity of Saskatchewan potash mines represent almost a third of the global total.
The premier said he has not spoken with Prime Minister Stephen Harper since Wall made a speech last Thursday outlining Saskatchewan’s reasons for opposing the deal.
Wall did not rule out negotiating with BHP if Ottawa approves the deal on the condition that the miner makes moves to appease Saskatchewan.
The province is preparing a contingency plan in case Ottawa approves the bid, including a possible tax on the potash reserves that BHP would acquire, Wall said.
Saskatchewan is doing due diligence on whether it can legally tax BHP differently than the province’s other potash producers, Mosaic Co and Agrium Inc, he said.
The premier said the province would not risk the C$6 billion worth of mine expansions planned by Mosaic and Agrium by changing Saskatchewan’s potash royalty structure.
“We’re not going to mess with that,” he said. “What I don’t want is royalty shock in this province, we want royalty stability.”
Wall took aim at BHP earlier on Monday, issuing a press release that highlighted two-year-old remarks by former BHP Chairman Don Argus that raised concerns about Australia losing control of its resources.
“If we fail to remain competitive, Australia will incur a substantial opportunity cost and, in the worst-case scenario, our resources will fall into overseas hands and we will become a branch office -- just like Canada,” Argus is quoted as saying in the July 21, 2008, issue of Hellenic Shipping News.
Saskatchewan’s most strategic resource is not potash, but its ability to attract international investors, said BHP’s Yogarajah.
“Potash Corp has drifted from its Canadian roots,” he said, repeating BHP’s promise to repatriate top potash jobs to Saskatchewan. “We will return control of the business to Saskatoon from Chicago and our potash team will live, work, pay taxes and raise their families in the city, not just maintain a residence there.”
Shares of Potash Corp rose on Monday more than 1 percent in Toronto and New York, while BHP’s stock gained nearly 2.5 percent in London.
Reporting by Rod Nickel; editing by Peter Galloway