Australian newspaper reporters are doing their best Thursday to entice BHP Billiton into spending the $6.3-billion it just raised from bond sales on a bid for Potash Corp. of Saskatchewan.
BHP, the world's largest mining company, has raised eyebrows by topping up its coffers without a clear use for the cash - the prospectus on these financings uses the catch-all phrase of "general corporate purposes.”
The Australian, a reputable national paper down under, devoted considerable space Thursday to speculating on just what BHP might be up to. The cash isn't needed to fund capital spending, so an acquisition seems likely.
The opening guess is that BHP brass don't have a clear target, they just want to be ready to chase any opportunity in commodity plays that opens up as the recession plays out. Door number two was another possible try for Rio Tinto.
Then The Australian moved to BHP's potential plans for Canada. The company made an initial, $250-million investment in a Saskatchewan potash property last year, and is now looking for provincial government approval on a mine that is scheduled to come on stream by 2015. Given this interest in the region, The Australian said BHP might take a run at Potash, which sports a $31.5-billion (Canadian) market cap. The newspaper said this price tag was “pretty attainable.”
The view from abroad is that Potash is attractive because it's an “efficient operator of high-margin generating, tier-one assets, it is the biggest player in a highly strategic resources market (potash is a fertilizer) and it has a depth of brownfields growth opportunities which delivers it tremendous flexibility to grow more efficiently and at a lower cost than competitors.”
There is no sense in Canada that rivals are contemplating any sort of a bid for Potash, but someone seems to be paying attention. Potash stock is up $4.59 to $106.98 on Thursday, during a session that's seeing a solid rise in the S&P/TSX benchmark.
