Archive

Posts Tagged ‘Mosaic’

BHP Billiton and Rio Tinto growing in potash

October 6, 2011 Comments off

“Rio Tinto, the Anglo-Australian mining group, is re-entering the potash business through a joint venture with a Russian fertiliser producer which holds extensive exploration permits in the Canadian province of Saskatchewan.

Rio will initially acquire a 40 per cent stake in nine blocks covering an area of 241,000 hectares currently held by North Atlantic Potash, a subsidiary of Russia’s JSC Acron. Under the deal, Rio can eventually raise its stake as high as 80 per cent.”

Source: Financial Times, September 28 2011

“Mining heavyweight BHP Billiton is “aggressively” pursuing potash projects in Saskatchewan along with its Jansen asset, the company said on Wednesday.

“Although these are at an early stage, the data acquired suggests they have the ability to support significant potential developments,” spokesperson Ruban Yogarajah said, adding that the combined properties could “at least” match Jansen’s planned output of eight-million tons a year.

BHP Billiton in June said it approved a further $488-million to develop Jansen, bringing its total investment in the project to $1.2-billion.”

Source: Mining Weekly, September 29 2011

Observations:

  • Approx. 33mln tons of potash are mined annually, with Canada accounting for approx. 30% of global production. With price per ton of around $400-$500 the global market totals $13-17bln annually.
  • Both BHP Billiton and Rio Tinto are planning to move or expand in the Potash industry. BHP Billiton already is operating in Saskatchewan and tried to make a big move by taking over PotashCorp last year. Rio Tinto sold its potash exploration projects in 2009, but tries to re-enter in a JV with a small Russian player.

Implications:

  • The potash market it currently dominated by 2 marketing ‘cartels’: Canpotex (PotashCorp, Mosaic, Agrium) and BPC (Belarusian Potash Company: Silvinit & Uralkali), which control close to three quarters of global sales and typically copy each others pricing agreements with large customers. The rise of the large diversified players in the business (apart from BHP and Rio, Vale is also building its potash business) could break the power of these cartels and might move the market to pricing based more on spot prices.
  • From a technology and production standpoint it makes a lot of sense to have diversified mining companies, specialized in running large scale extraction projects, operate potash mines. Only on the marketing and sales side of the business synergies will be hard to realize, but companies like BHP and Rio Tinto have the experience and size required to set up a strong marketing presence.

©2011 | Wilfred Visser | thebusinessofmining.com

Advertisements

BHP faces potash cartel backlash

August 27, 2010 Comments off

“Mosaic and Agrium, the partners of PotashCorp in Canada’s fertiliser cartel, have launched a campaign defending the industry’s pricing and marketing arrangements in a move that could impede BHP Billiton’s $39bn takeover bid for PotashCorp.

BHP has signalled it plans to use infrastructure such as port and rail facilities that belong to Canpotex, the cartel that comprises PotashCorp, US-based Mosaic and Agrium of Canada. “

Source: Financial Times, August 26, 2010

Observations:

  • The fertiliser cartel, which controls 70% of the global market in cooperation with the Russian cartel and PhosChem, is currently regulating supply in order to keep stable, high prices.
  • BHP is planning to operate PotashCorp’s mines at full capacity and has also indicated it wants to move the fertiliser market to a day-based pricing system.

Implications:

  • BHP will have to play according to the rules of the cartel at least in the first years after the acquisition (if it succeeds). The cartel shares logistical assets that are crucial for the Saskatchewan operations to operate at low costs. Breaking the rules of the game would seriously impede BHP’s access to these assets.
  • BHP’s incentive to break the rules of the game are grounded in the production cost curve. Lowering the global price would force many small operators (including Vale) out of business.
  • The move of BHP into the phosphate business will force the high cost suppliers to lower cost. This is the main reason various players are trying to prevent the acquisition from happening.

©2010 | Wilfred Visser | thebusinessofmining.com

Phosphate: Mosaic in Talks to Buy Mexican Firm

June 15, 2010 Comments off

“Mosaic Co. is in talks to acquire Mexican fertilizer company Grupo Fertinal SA in a deal that could be worth up to $1 billion, people familiar with the matter said. A deal for Grupo Fertinal, one of Latin America’s leading fertilizer makers, would give the publicly traded Mosaic its first footprint in Mexico.

It is unclear if and when a deal could be completed but the parties have been in talks for about six months, the people familiar with the matter said. While Mosaic is seen as the most likely buyer, the people cautioned that the deal may still fall apart. An acquisition of the Mexican fertilizer company would expand Mosaic’s access to the phosphate rock it needs for making fertilizer in North America.

Mosaic, which owns extensive phosphate rock deposits in Florida, produces about 10% of the world’s potash fertilizer and controls 13% of the world’s capacity to make phosphate fertilizer.”

Source: Wall Street Journal, June 15 2010

Observations:

  • Mosaic has over $2 bln in cash. The company wants to use the money to increase access to phosphate deposits.
  • Grupo Fertinal owns a phosphate mine and processing plant in San Juan (Baja California).

Implications:

  • Vale might emerge as a competing bidder for Fertinal. The Brazilians want to expand in the fertilizer business. However, they don’t have a strong foothold in Mexico yet.
  • Mosaic recently announced investments in Peru, indicating the US company wants to expand into South America.

©2010 – thebusinessofmining.com