Thursday, August 26, 2010

Potash: Below The Surface

When BHP Billiton, the Australian mining giant, announced its $39 billion bid for Potash Corporation of Saskatchewan last week a lot of wheels were set in motion.  Early on, the talking heads of CNBC had to learn how to pronounce "Saskatchewan" in the first place so that they could even discuss one of the biggest hostile takeover bids in history.  (Don't ease their pain by telling them that most of us call it "Saskabush" anyway.)  The next item was the hand-wringing of our politicians as another Canadian corporate icon is up for grabs and an extremely important one strategically - the whole world needs fertilizer to feed its burgeoning population.  The third was Potash Corp's appeal for a white knight to rescue it - followed quickly by Rio Tinto's announcement that it would not be making a bid, and ...  Hmmm, I thought to myself, where are the Chinese in all of this?  BHP makes gazillions selling iron ore to China, while Big Red itself has been spreading its evil tentacles into all sorts of places (Africa, the Tar Sands) to hasten its emergence from the Stone Age and pacify its growing consumer middle class in a vain attempt to prop up communism.  I hate to say (see) it, but Sinochem - even Sinofin - could emerge as BHP's competition for Potash in the coming weeks.  In light of that, I hope CEO Kloppers of BHP has deep enough pockets or Canadian farmers will be buying fertilizer from Saskatchewan via a Beijing middleman - unless China decides to keep all the potash for itself.