Potash Corp CEO says looking to buy, not for buyer
Mon Jun 4, 2007 1:34pm ET
WINNIPEG, Manitoba, June 4 (Reuters) - The chief executive of Potash Corp. said on Monday he is not concerned that his company, the world's largest fertilizer and potash producer by capacity, will become a takeover target for one of the major base metal miners.
"These are big companies and we respect them all, and clearly the potash industry has a lot of the characteristics that they like, but I don't worry about them," Bill Doyle told Reuters.
Top world miners such as BHP Billiton Plc and Rio Tinto Plc, along with Companhia Vale do Rio Doce, are actively working on potash mining projects around the world, as well as spearheading consolidation in the mining sector.
Doyle said Potash Corp. has not been approached by any of the base metal giants.
"If that (a takeover) happens, I can tell you one thing: it won't be cheap," Doyle said.
Potash Corp. has a market capitalization of $22.9 billion, according to Reuters Research.
The company, which is also the world's fourth-largest nitrogen producer and third-largest phosphate producer, hopes to expand by acquiring other fertilizer companies, Doyle said.
"We're a consolidator, we're not a consolidatee," he said.
Potash owns stakes in fertilizer firms in Israel, Jordan, and Chile, as well as China's largest fertilizer distributor, Sinofert.
"We've said probably that we'd like to own all those companies. I think in time we will," Doyle said.
"We're very patient, we won't overpay, we're a little bit cheapskates," he said.
Potash stock, which rose 79 percent during 2006, was up 24 Canadian cents at C$77.26 on the Toronto Stock Exchange on Monday.
The stock has surged because of booming demand for crops for food and biofuels that has propelled bellwether U.S. corn prices to 10-year highs.
Based on U.S. futures markets, Doyle said he expects grain prices to stay strong through 2009.
"We've never had two (strong crop years) in a row, and quite honestly, I think you're going to have at least three in a row," he said.
That gives farmers around the world -- including Potash Corp.'s key markets of China, India and Brazil -- the incentive to maximize yields with fertilizer.
Total demand for potash in 2007 is forecast at 54 million tonnes, up more than 12 percent from last year, Doyle said.
Canpotex, the export marketing arm for potash producers in the province of Saskatchewan, has projected record shipments of 9.2 million tonnes in 2007, up from over 7 million tonnes last year. Potash is the largest supplier to Canpotex.
"My guess is we're going to be a little stronger that that (9.2 million tonnes)," Doyle said.
Demand for potash is forecast to rise on average 3 to 4 percent per year until 2015.
Potash Corp. has plans to revive idled capacity to produce 15.7 million tonnes by 2015 -- or perhaps earlier, Doyle said -- more than double what the company produced last year.
After that, the world will need new capacity, and Doyle said he thought his company had the expertise and heft to put it first in line to build a new mine.
But prices would have to rise significantly and hold to justify a $2 billion greenfield project, he said.
"The decisions wouldn't be made for I think at least another three years," Doyle said.
Other companies have said they are looking at building new mines, but they are unlikely to go ahead, Doyle said, including a Rio Tinto proposal in Argentina.
"It's a bad neighborhood. We wouldn't take that project to our board," Doyle said, noting the deposit has a relatively short life, poor ore grade, and high operating costs that depend on natural gas supplies from Argentina and Bolivia.
"You need stability," Doyle said.
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