TORONTO/NEW YORK: Anglo-Australian mining giant BHP Billiton Ltd is considering selling a 25 per cent interest in its Canadian potash mine project, a stake that could be worth close to $2 billion, people familiar with the matter said.
The move comes as activist investor Elliott Management Corp has been pushing the company for changes.
BHP is working with an investment bank for the potential stake sale in its partly built Jansen, Saskatchewan potash project, the sources said this week.
For BHP, the move will help share the risk of developing the mine and reduce its exposure to the project, said the sources, who asked not to be identified because the deliberations are confidential.
BHP laid out options for the Jansen project in an investor presentation dated on August 22, saying it could wait, find a partner, divest or optimise it. BHP spokeswoman Bronwyn Wilkinson said it was too early in the process for the company to have determined the size of a potential stake sale.
“If you bring in a partner, you can share the capital and risk and, depending on who the partner is, help secure an off-take (supply agreement) or offer expertise,” Wilkinson said.
BHP, which will keep control of the mine, is not tied to the 25 per cent, and the final stake sold could depend on offers, the people said.
BHP’s 4 million tonne mine would cost about $8.5 billion to build, with more than half of that still uncommitted.
The company does not need the cash either, so it is not in a hurry, the people said. The company’s underlying profit surged to $6.7 billion in the recent fiscal year.
BHP’s US-listed shares jumped, rising as much as 4.5 per cent to hit a two-year high of $43.60.
They were up 2.3 per cent at $42.68 in afternoon trading in New York.
The potash mine has become the latest front in the battle between BHP, the world’s top miner, and Elliott, a hedge fund that has challenged some of the world’s biggest companies.
Elliott’s demands include getting BHP to spin off its US oil and gas assets, doing away with its dual-listing structure, and improving shareholder returns.
BHP earlier this week said it would exit the US shale oil and gas business.
In July, BHP potash analyst Paul Burnside made a case for potash, arguing that a counter-cyclical investment would help position the company for rising demand for the commodity over the next few decades.
Elliott attacked BHP’s plans to enter the potash fertiliser market, which is facing over-supply and sluggish prices.
Analysts are cautious about the sector. — Reuters
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