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Marius Kloppers' hopes of salvaging his takeover of Potash Corp. have dwindled after a federal cabinet minister described the company's assets as strategic to Canada, a hint that the government won't change its mind about blocking the deal.

Publicly, BHP Billiton said little Thursday about the stunning ruling by the Harper government that the takeover does not benefit the country, as required under Canadian takeover law. Privately, BHP executives hold little confidence that any appeal of that move would be successful, according to sources familiar with the matter.

Under the Investment Canada Act, BHP still has 30 days to convince Ottawa that the deal would be a "net benefit" to Canada. But comments made yesterday in the House of Commons by Agriculture Minister Gerry Ritz suggest that BHP will have a very challenging task.

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Mr. Ritz said the government rejected BHP's bid in part because it decided that the mineral is a "strategic resource" in the global food supply. The Saskatchewan-based minister said the province's world-leading potash reserves give Canada an influential position in the marketing of a key agricultural commodity.

The minister said that as demand from China and India for Canadian commodities continues to rise, Ottawa will need to defend the resource sector's national interest as the developing world requires more oil, metals and fresh water.

"We're going to have to come to grips with that growing demand to [invest]in and even to buy our resources," he said.

The suggestion that Potash Corp.'s assets are a "strategic resource" echoes arguments made by Saskatchewan Premier Brad Wall in urging Ottawa to firmly reject the bid. While Mr. Wall has conceded that BHP could conceivably make undertakings that would preserve jobs and government revenue, the Australian mining giant would not be able to compensate for the loss of control of such an important natural resource, the premier has said.

Sources close the company say its executives were blindsided by Industry Minister Tony Clement's announcement late Wednesday that the takeover would not be approved. BHP boss Marius Kloppers and his right-hand man on the bid, Andrew Mackenzie, were "shocked and surprised", according a top executive at one of the world's largest resource companies, speaking on condition of anonymity.

Mr. Clement has offered to meet company executives to explain where BHP came up short on the net benefit test. As of late Thursday, BHP had not responded to the minister's invitation, according to media reports.

On Thursday, the Saskatchewan Financial Services Commission postponed a hearing set for Monday and Tuesday in Regina on Potash Corp.'s shareholder rights' plan. Because BHP still faces a regulatory hurdle, in the form of Investment Canada approval, the delay was expected and came by mutual agreement by the parties.

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BHP believed it had made ample concessions and promises to meet Investment Canada's net benefit requirement. It promised to make Saskatoon its global potash headquarters and expand the office. It said it would invest in infrastructure in the province.

But BHP's desire to pull out of the Canpotex group, which is controlled by Potash Corp., Mosaic Co. and Agrium Inc., and has a monopoly on Saskatchewan's overseas potash exports, rankled the Saskatchewan government. It feared a BHP takeover would cost the province billions in lost revenue. Several other provincial governments supported Mr. Wall's opposition and so, eventually, did the federal government.

While Ottawa's rejection of BHP's hostile bid has lessened the likelihood of a rival offer coming to fruition, a Russian company is understood to be considering wading into the battle.

PhosAgro, Russia's largest phosphate producer, is working on a plan to launch a bid for Saskatoon-based Potash Corp., according to media reports from Moscow.

An investment banking source close to the Potash situation said there is "some validity" to the reports, although he cautioned the likelihood of a successful bid as low. PhosAgro hopes to include Canadian investors in a bid, presumably Canadian pension funds, the banker said.

PhosAgro is much smaller than Potash Corp., but is lobbying the Russian government to gain the financial backing of domestic banks. Vladimir Litvinenko, Phosagro's chairman, is a former mentor to Russian Prime Minister Vladimir Putin. Mr. Litvinenko oversaw Mr. Putin's doctoral thesis at the St. Petersburg state mining institute.

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A potential Russian-led bid for Potash Corp. would be sure to generate controversy but may be more politically palatable to Ottawa because Russia is a major producer of potash and not a customer. China's Sinochem was considering leading a consortium bid for Potash Corp., but has since pulled back. Saskatchewan's Premier had raised concerns over the possibility of a bid from a company from China, as the country is the world's largest consumer of potash.

On the assumption that Potash Corp. is no longer on the table, analysts are speculating on BHP's next move. The company has about $12.5-billion in cash, which it could lever up for a big-bang acquisition or deploy for a share buyback.

Some mining executives think BHP will go after copper and possibly launch a bid for Freeport McMoRan, one of the world's largest copper and gold companies.

Others think it's more likely that BHP will go after some of the assets being shed by BP, the British oil company that is raising funds to pay the clean-up and claim settlement costs from its Gulf of Mexico oil well blowout. Mr. Mackenzie, the chief executive officer of BHP's non-ferrous activities and the man who is directing the Potash Corp. bid, spent much of his career at BP.

In a note published last week, Morgan Stanley said that BHP may spend as much as $25-billion (U.S.) buying back shares in the next two years if its Potash Corp. takeover attempt were to fail. Nomura Holdings said in September that a buyback would provide much greater returns for shareholders than a takeover of Potash Corp.

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