Saskatchewan's fortunes have been tied to potash in recent years, so a proposed hostile takeover of PotashCorp by Australian mining company BHP Billiton is going to inevitably spark controversy. The provincial government has entered the debate, recommending against the proposed takeover.
According to Yorkton MLA Greg Ottenbreit, the main concern is whether or not any takeover would provide a net benefit for the people of Saskatchewan. As the province holds 50 per cent of the world's potash reserves, the management of this resource is something which the province needs to watch closely. Ottenbreit says the issue relates not just to the provincial economy, but also world food security, as the resource is an important fertilizer.
Ottenbreit notes that in Australia, the foreign investment policy dictates that foreign control of a large percentage of a resource is recommended against, and that this is something which should not be allowed when it comes to Canadian resources as well, as it is also in our national interest to control our resources.
"When you go to Australia and look at not only the position former BHP President took on this but also the position the Australian government took, whether it was off shore gas rights or other things. They took the same stance that we are taking," Ottenbreit notes.
The controversy surrounding the bid has caused both companies involved and the province to actively try to convince people that their stance is the best. PotashCorp does not want the takeover to take place, believing the offer is undervaluing the company, and BHP wants to expand their potash operations substantially, using PotashCorp to speed that process.
"PCS doesn't want to be taken over, BHP wants to take them over, and the Provincial government has to do what's best for the province," Ottenbreit says.
While Ottenbreit emphasizes that the province is still open to business and committed to attracting investment, the province also needs to consider whether or not that investment is beneficial.
"We are very open to more business in the province and we are excited about the interest they have in the province, attracting new investment like BHP is a great thing. The challenge comes from taking over an existing company, and basically getting a taxable write off on an existing company that is already paying resources, which ends up cutting right into forecast incomes for the province," Ottenbreit says.
The concern is that billions of dollars of provincial revenue could be lost in the merger, not counting the ways it may affect the expansion plans of other mining operations in Saskatchewan, specifically Agrium and Mosaic.
The provincial government is also not enthusiastic about a conditional offer, Ottenbreit says, as the concern is that control and marketing could be moved out of Canada even with conditions. The worry is that in a few years, with some active lobbying and a change in Industry Canada, there is a risk of the conditions not being backed into the future.
"History has shown that Industry Canada has not been very strong in supporting some of the conditions put on these sales," Ottenbreit says.
One thing that will not be affected by the merger, whether or not it takes place, is BHP's current projects in the province, including the Jansen project and exploration in the Yorkton area, Ottenbreit says.
The final decision on the takeover offer will be made in November.
