BHP buys Athabasca Potash for $341 million

BHP Billiton, the worldÔÇÖs largest mining company, has agreed to buy Canadian potash developer Athabasca Potash Inc. (API) for C$341 million ($320 million).  The deal follows news of Brazilian miner Vale's $3.8 billion acquisition on Tuesday of food conglomerate Bunge's Brazilian assets, which are primarily focused on phosphate and fertilizers. BHP signaled its interest in the potash sector by its acquisition of Anglo Potash in 2008. It now has plans to invest $240 million in 2010 to develop its Jansen potash project in CanadaÔÇÖs potash-rich province of Saskatchewan. Potash Corp. and Mosaic, the two major Canadian potash companies, are also frequently mentioned as acquisition targets for cash-rich BHP. Traditionally, potash has been a commodity produced primarily by companies with sole interests in the nutrient; however, the major mining conglomerates have now started to express interest. API's Burr project in Saskatchewan is adjacent to BHP's Jansen project. API also owns several exploration properties in the region, and holds one of the largest exploration permit areas in the Saskatchewan basin, covering approximately 6,900 square kilometres. Commenting on the deal, BHP Billiton Diamonds and Specialty Products president, Graham Kerr, said: "Today's announcement is consistent with BHP Billiton's strategy of building a strong potash resource position. ÔÇ£We continue to pursue opportunities that fit within our portfolio and are aligned with our strategy of developing Tier 1, long life, low-cost, expandable assets. This acquisition fits well with our existing projects and land positions in the Saskatchewan potash basin." Dawn Zhou, APIÔÇÖs executive chairman, said: "API's Board of Directors has reviewed and explored a number of possible strategic options and it has concluded that BHP Billiton's offer is in the best interests of API's shareholders. ÔÇ£API would like to thank all shareholders for their support. I am proud of what the API team has achieved and delighted to see such a successful outcome to the strategic review process we initiated last year." Potash, a crop nutrient, began to attract attention several years ago when high grain prices and low potash supplies drove prices above $1,000 a tonne from below $150 a tonne. Prices have now fallen back to around $350 to $400 a tonne as the credit crisis and falling grain prices have caused a drop in demand for the nutrient. However, analysts are expecting demand to rise once again this year as farmers begin to replenish soil nutrient levels. A major recovery is predicted from April, when the planting season begins. Suppliers of the nutrient are reportedly sold out for FebruaryÔÇöan indication of rising demand.