World’s Largest Miners [Rio Tinto, BHP-Biliton and Vale] like Potash – by Richard (Rick) Mills (Aheadoftheherd.com – November, 2011)

Richard Mills is host of www.aheadoftheherd.com and invests in the junior resource sector.

As a general rule, the most successful man in life is the man who has the best information 

Miners are looking to enter the potash business, or expand existing operations, as they look for increased demand from developing nations such as China, India and Brazil. 

BHP Billiton – In the spring of 1869 a German Chemist named Charles Rasp immigrated to Australia for his health. Unable to find work in his chosen trade Charles learned to ride a horse and began wrangling sheep. One day, while out riding his horse at Broken Hill, he discovered mineralized rock. He took out a mining lease, punched holes in the ground and eventually found rich veins of silver. The Broken Hill Proprietary Company – BHP – was incorporated in 1885 while mining silver and lead at Broken Hill in western New South Wales. 

Billiton was a mining company that got its start in September 1860 when the articles of association were approved by a meeting of shareholders in the Groot Keizerhof Hotel in The Hague, Netherlands. Shortly afterwards the company acquired the mineral rights to the tin-rich islands of Banka and Billiton off the eastern coast of Sumatra. 

BHP Billiton – also known by the nickname “the Big Australian” – is the world’s largest mining company. It was created in 2001 by the merger of Australia’s Broken Hill Proprietary Company and Anglo-Dutch Billiton. Today BHP produces – oil, natural gas, bauxite, aluminum, copper, silver, lead, zinc, uranium, diamonds, coal, titanium, well, you get the idea, they’re miners, they pull “stuff” out of the ground and sell it. 

BHP, seeking to benefit from surging demand for fertilizer made a $40 billion hostile bid for Potash Corp. of Saskatchewan Inc. Yielding to political pressure, Canada’s Federal government nixed the deal.

BHP paid $341 million, C$8.35/share, to acquire Saskatoon’s Athabasca Potash (TSX: API). This acquisition will give BHP Athabasca’s Burr Project, which is located next to BHP’s Jansen Project. 

BHP Billiton announced on 24th June 2011, a further investment of US$488 million to support development at its Jansen Potash Project. This piece of additional capital will fund site preparation and the procurement of long lead time items during the project’s feasibility study. This funding will also enable BHP to develop the first 350 meters of the production and service shafts.

The announcement takes BHP Billiton’s investment in Jansen to, so far, $1.2 billion.

BHP likes big stories, the unfolding potash story is one of the biggest and in this author’s opinion it can only get bigger. 

Vale S.A. – Formerly known as Companhia Vale do Rio Doce (CVRD) was founded by the Brazilian Federal Government in June 1942. The company was privatized in 1997 when the Brazil Consortium bought just over 40% of the Federal Government’s stock. 

Even though Vale has operations in the energy and logistics sectors both sectors combined contribute less than ten percent to Vales total revenues. Vale is a miner and controls the Brazilian iron ore industry owning all Brazilian iron ore exporters. 

In recent years, in an attempt to diversify its operations, Vale has made a string of purchases getting into copper, kaolin, nickel and coal. In October 2006 Vale bought Canada’s second largest mining company, Inco, for $18.9 billion. Vale also produces manganese, ferroalloys, bauxite, potash (Sergipe mine in Brazil), alumina and aluminum. 

Vale S.A. has moved into the fertilizer business in a big way: 

In January of 2009 Vale bought Rio Tinto’s potash assets in Argentina and Saskatchewan Canada for US$850.

In January 2010 Vale announced it would acquire all the shares of Bunge Participacoes e Investimentos S.A. (BPI). Vale will pay $1.65 billion US for BPI – for its wholly owned phosphate mining operations in Brazil – and another $ 2.15 billion US for its 42.3 percent in Fertilizantes Fosfatados S.A. (Fosfertil) – a leading Brazilian fertilizer company.

For the rest of this article, please go to the Ahead of the Herd website: http://aheadoftheherd.com/Newsletter/2011/Worlds-Largest-Miners-like-Potash.html

 

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