Category Archives: potash
Which industry best creates wealth and reduces poverty in Canada? Resources (as usual)
Mark Milke: What’s in the ground helped produce a dramatic increase in living standards over the last decade
Special to Financial Post
October 24, 2017
7:30 AM EDT
With the recent cancellation of TransCanada’s Energy East pipeline — after the company spent $1 billion in attempts to jump through ever-changing regulatory and political hoops — it is time to remind ourselves as Canadians where much of our country’s recent economic uptick originated.
Answer: In resource exploration and extraction.
This was illustrated again recently, just before the TransCanada announcement, with Statistics Canada’s recent release of key census data. The data revealed how median Canadian household income rose to $70,336 by 2015, up almost $6,900 from $63,457 in 2005 or nearly 11 per cent.
The provincial breakdowns are even more revealing than the national figure. Median income went up by $20,161 in Saskatchewan (37 per cent), $18,151 in Alberta (20 per cent) and $15,068 in Newfoundland and Labrador (29 per cent).
In contrast to these booming provinces, manufacturing in Central Canada took a hit
As Statistics Canada noted, “An important factor in the economic story of Canada over the decade was high resource prices.” The agency further observed how “that drew investment and people to Alberta, Saskatchewan and Newfoundland and Labrador, boosted the construction sector, and more generally filtered through the economy as a whole.”
In contrast to these booming provinces, manufacturing in Central Canada took a hit. Incomes there barely rose: Quebec saw a modest $4,901 rise (8.9 per cent) and Ontario was a national laggard with incomes increasing by a paltry $2,753 between 2005 and 2015 (only 3.8 per cent higher).
Which is where a caveat should be added to the Statistics Canada commentary that “high resource prices” explain significantly increased incomes. High resource prices — be they for oil, gas, lumber or minerals — help, but only if a province or region allows its resources to be explored, extracted and then shipped to market.
The Maritimes mostly sat out the boom in resource prices
The Maritimes mostly sat out the boom in resource prices because, for example, Nova Scotia and New Brunswick banned onshore exploration and extraction of natural gas. That was unlike Saskatchewan, Alberta and northern British Columbia.
Unsurprising then, New Brunswick’s median income in 2015 was $59,347, the lowest among all provinces. It did record 15-per-cent growth over the decade, but that statistic looks less impressive given New Brunswick’s low point in 2005 and its still-lowest ranking today. As a comparison, New Brunswick’s median income in 2015 was almost $8,000 lower than in Newfoundland and Labrador, where incomes soared by almost double that of New Brunswick. A lack of private sector investment in a profitable energy resource sector will do that.
Quebec provides other examples, both of foregone opportunities and the potential for income growth, when governments say “oui” to Canada’s comparative advantage in resources instead of “non.”
Quebec missed much of the benefit of higher resource prices because of political opposition to oil and gas
Quebec missed much of the benefit of higher resource prices because of some local and political opposition to oil and gas development. But of note, when the resource sector was allowed to thrive in Quebec, it did. As Statistics Canada observed “several metropolitan areas in resource rich areas had relatively higher income growth.” They include Rouyn-Noranda (+20.4 per cent), Val D’or (+18.0 per cent) and Sept-Îles (+13.4 per cent). That’s more “green” in the pockets of workers.
The lesson should be obvious: One comparative economic advantage for Canada is in natural resources. And this matters not just for faster-growing median incomes but also for drops in poverty. For example, resource-friendly Newfoundland saw the St. John’s low-income rate fall to 12 per cent from 16 per cent. Saskatoon’s low-income rate fell to 11.7 per cent from 15.2 per cent.
In contrast, Ontario, affected by the loss of 300,000 manufacturing jobs, recorded dramatic increases in poverty rates. That includes London (where low-income rates rose to 17 per cent by 2015 from 13.3 per cent in 2005) and Windsor (up to 17.5 per cent from 14 per cent).
It is clear from the data that resources are a critical driver of employment and incomes
Some people would still respond to all this with the old line that Canadians should seek to be more than “hewers of wood and drawers of water” (a phrase that wrongly depicts the forestry and hydro sectors as backward). That notion makes little sense because Canadians can and do invent, run and expand businesses in every sector, from hi-tech, to green sectors to tourism and finance, in addition to resources. But it’s clear from the data that resources are a critical driver of employment and incomes in Canada.
Insofar as politicians overlook resource advantages and hobble the sector with endless, ever-changing regulation, they ignore how what’s in the ground helped produce a dramatic increase in Canada’s living standards over the last decade.
To belittle or even attack Canada’s comparative advantage in resources is to neglect the positive effect this sector has on Canadian living standards. Snubbing opportunities in developing natural resources comes at the expense of additional jobs and better incomes for the poor and the middle class.
Mark Milke is an author and energy analyst.
BHP presents united front against activist Elliott
OCTOBER 19, 2017 / 11:23 AM / UPDATED AN HOUR AGO
By Barbara Lewis and Zandi Shabalala
LONDON, Oct 19 (Reuters) – The new chairman of BHP , the world’s biggest miner, threw his weight behind his CEO on Thursday after attacks from activist investor Elliott Advisers prompted speculation that the end of Andrew Mackenzie’s tenure was imminent.
Pressure has mounted on BHP and its chief executive since Elliott went public in April with its criticisms of the miner’s strategy.
“Any suggestion there is a set timeline around Andrew’s tenure is simply false and without merit,” Chairman Ken MacKenzie told reporters after his first AGM since taking office at the start of September.
Asked by a shareholder whether it was Elliott or the BHP board that was running the company, the chairman replied that “MacKenzie and Mackenzie” were running BHP, though he did not specify the order of the pair who share the same names but with slightly different spelling.
At least five representatives from Elliott Advisors, which holds 5 percent of BHP, attended the London meeting but did not ask questions from the floor.
Elliott declined to comment on Thursday, though it has welcomed the new chairman’s appointment.
Chairman MacKenzie said he had met more than 100 shareholders across eight countries, which he said gave him confidence, though he added that there are areas where the company needs to sharpen its focus.
He reiterated that work is in progress to sell shale assets, which is one of Elliott’s main demands, and that further action would take place to refresh the board of directors.
“We recognise that the board needs to continue to evolve to take into account the rapidly changing environment in which we operate. So we will undertake a review of the board’s skills and experience requirements during this financial year,” he said.
BHP’s London share price has risen nearly 7 percent since the start of the year, about half as much as that of its main rival Rio Tinto.
Both the chairman and the CEO said they were striving to maximise shareholder value and that meant that shale assets would be sold only at the right price.
“We will be both urgent and patient as we examine all the options,” CEO Mackenzie said. “We have to get the timing right to maximise shareholder value.”
BHP’s big rival Rio Tinto suffered a setback this week when the U.S. Securities and Exchange Commission (SEC) charged the company and two of its former executives with inflating the value of coal assets in Mozambique and concealing critical information. The company said it would defend itself vigorously against the allegations.
Chris LaFemina, a mining specialist at Jefferies bank, said he had preferred Rio over BHP for the past two years.
“While our preference has not changed, BHP’s competitive position has modestly improved,” he said in a note.
“New chairman Ken MacKenzie seems willing to push for significant strategic changes at BHP … after years of unacceptable underperformance of its share price versus Rio‘s.” (Editing by Elaine Hardcastle and David Goodman)
BRIEF-Agrium and Potashcorp receive regulatory approval in India
Oct 18 (Reuters) – Agrium Inc:
* Agrium and Potashcorp announce receipt of regulatory approval in India
* Potash Corporation of Saskatchewan Inc and Agrium Inc expect to close transaction by end of Q4 of 2017
* Regulatory review and approval process continues in U.S. and China for proposed merger with Potashcorp Source text for Eikon: Further company coverage:
SEP 20 2017
PotashCorp Potash Production Downtime
Consistent with PotashCorp’s strategy of matching supply to market demand and fully utilizing our lowest cost Rocanville facility, we have announced the following potash inventory adjustment shutdowns:
- Allan will curtail production for 10 weeks, beginning Nov. 19, 2017
- Lanigan will curtail production for eight weeks, beginning Dec. 3, 2017
The number of temporary layoffs associated with these inventory adjustments has not been determined, as the company is assessing opportunities for reassigning employees during these shutdown periods to essential services, capital projects, and maintenance activities.
In BHP’s 2017 Annual Report released last night – available here – on page 19 of 296 under item 3 they write:
We are also continuing to investigate one of the best undeveloped potash resources in the world in Jansen in Canada. There are many ways we could realise the value of this project, but Board approval will be sought only if the project passes our strict investment hurdles and is in the best interests of our shareholders.
On page 64 of 296 they write:
Potash is a potassium-rich salt mainly used in fertiliser to improve the quality and yield of agricultural production. As an essential nutrient for plant growth, potash is a vital link in the global food supply chain. The demands on that supply chain are intensifying; there will be more people to feed in future, as well as rising calorific intake comprised of more varied diets. The strains this will place on finite land supply mean sustainable increases in crop yields will be crucial and potash fertilisers will be critical in replenishing our soils.
However, in the near term, overcapacity is likely to get worse. In the 10 years to 2016, the industry added nearly 27 Mt of annual ’nameplate’ capacity. Further greenfield supply will come on-stream over the next five years. As a result, potash prices are currently at their lowest levels in a decade and are likely to get worse before they get better. Although the near-term outlook may be sombre, we expect the peak of oversupply to occur within the next few years. Positive underlying demand fundamentals, assisted by affordable pricing, should see consumption catch up to capacity in the 2020s. Our projections are that demand for potash will continue to grow at a rate of about two to three per cent per year (compound annual growth rate) and that, even taking into account new projects and latent capacity in the industry, demand will outstrip supply within the next decade.
Potash has the potential to create significant value and provide BHP with an opportunity to capture long-term growth and diversification benefits. Our investment in the Jansen Potash Project presents an opportunity to develop a multi-decade, multi-mine business; a potential fifth major commodity offering for BHP. It is consistent with our strategy to own and operate large, expandable assets that deliver value. However, the Project will be presented to the Board for approval only if it passes our strict Capital Allocation Framework tests.
Jansen Potash Project
BHP holds exploration permits and mining leases covering approximately 9,600 square kilometres in the province of Saskatchewan, Canada. The Jansen Potash Project is located about 140 kilometres east of Saskatoon. We own 100 per cent of this Project. Jansen’s large resource endowment provides the opportunity to develop it in stages, with anticipated initial capacity of 4 Mtpa.
Key developments during FY2017
Over the year, our focus was on the safe excavation and lining of two 7.3 metre diameter shafts. Both shafts were safely excavated through the Blairmore formation (which lies about 450 metres below the surface), with steel tubbing in place to prevent water inflow and provide structural support. By the end of FY2017, the production shaft had reached a depth of approximately 730 metres of the design depth of 975 metres and the service shaft had been excavated to approximately 710 metres of its eventual one-kilometre depth. Capital expenditure in the Jansen Potash Project in FY2017 was US$162 million. During the year, we awarded the detailed engineering design contract studying the feasibility of Jansen Stage 1 to Hatch Bantrel, which formed a joint venture partnership to complete this work.
Jansen is in the feasibility study phase and we continue to assess how we can reduce risk and unlock value. The current scope of work was 70 per cent complete at the end of FY2017. Work on the shafts will continue in FY2018. Once shaft excavation is complete, the shafts will be connected underground and shaft infrastructure will be installed. This falls within the current approved scope of work.
Construction beyond the current scope of work will require Board approval. With a later market window now anticipated, the Jansen Potash Project will not be brought to the Board in CY2018. In the meantime, we are considering multiple options to maximise the value of Jansen, including further improvements to capital efficiency, further optimisation of design and diluting our interest by bringing in a partner. Board approval will be sought for the project only if it passes our strict Capital Allocation Framework tests.
SEPTEMBER 20, 2017 / 7:21 AM / UPDATED 35 MINUTES AGO
BRIEF-Encanto Potash secures commitment for C$100 mln funding facility
Sept 20 (Reuters) – Encanto Potash Corp :
* Has secured a commitment for a CAD $100 million funding facility
* Under funding agreement GEM Investments America, LLC and GEM Global Yield LLC SCS undertake to invest up to CAD $100 million over next 3 years
* Proceeds will be used to commence engineering, design phase of mine in anticipation of a shovel-ready construction date of Sept 2019
* Upon a drawdown notice issued from company shares will be issued at a price 90% of market price subject to a $.05 per share minimum Source text for Eikon: Further company coverage:
Canada competition watchdog will not challenge Agrium, Potash merger
Sept 11 2017
OTTAWA (Reuters) – Canada’s competition watchdog said on Monday it will not challenge a proposed merger between Agrium Inc (AGU.TO) and Potash Corp (POT.TO), saying the transaction was unlikely to substantially lessen competition in the fertilizer industry.
The Competition Bureau said it had issued a “no action” letter to the two companies, which announced their plan to combine last year in an all-stock merger valued at $25 billion.
Reporting by Leah Schnurr; Editing by Sandra Maler
NDP confident Agrium will maintain Alberta presence after Potash merger
JAMES WOOD, CALGARY HERALD
Published on: September 6, 2017 | Last Updated: September 6, 2017 5:14 PM MDT
Agrium president and CEO Chuck Magro speaks, during the company’s annual general meeting in May 2014. LARRY MACDOUGAL /THE CANADIAN PRESS
Alberta’s NDP government says it’s confident that Calgary is the place to be, as the issue of head office jobs related to the proposed merger of Agrium and Potash Corp. of Saskatchewan again comes to the fore.
Under terms of the merger, which is still under regulatory review, Saskatoon will be the location of the “registered head office” of the newly-formed Nutrien, while Calgary will also retain a substantive corporate office.
However, Chuck Magro, the CEO of Agrium who will become Nutrien’s chief executive, will continue to live and work in Calgary while maintaining a secondary residence in Saskatoon.
In recent days, Premier Brad Wall has been banging the drum on the issue, saying the Saskatchewan government wanted to ensure that Saskatoon is “indisputably the head office” and that it had “the maximum number of head office jobs.”
Speaking to reporters in Regina on Wednesday, Wall said his government would “look at every option” to ensure Saskatoon was the true head office of the company.
But Alberta Economic Development Minister Deron Bilous said Wall is “desperate to show his residents he’s standing up for Saskatchewan,” but he suggested Magro’s continuing presence in Calgary is a strong indication that the city will be key to the company.
“I’m going to leave it to Albertans to see the writing between the lines, that you’ve got the CEO staying in Calgary,” Bilous said in an interview Wednesday.
“They may decide to open an office to meet some of Saskatchewan’s requirements. But, again, I’m confident that we’re going to continue to see . . . a number of positions will remain in the province.”
Bilous said Calgary’s status as an international hub and Alberta’s lower taxes make it a natural fit for what will be a global player in Nutrien.
“When you look at all the facts, our province stacks much higher than the province of Saskatchewan,” he said.
Richard Downey, Agrium’s vice-president of investor and corporate relations, said most of the work integrating the two companies is on hold while the deal remains under regulatory review in a number of jurisdictions.
But he said both cities will have “significant corporate offices, post-merger.”
“Nothing’s really changed,” said Downey.
“We’re a global company and there will be senior management at both Calgary and Saskatoon locations.”
Downey declined to put numbers on the current complement of employees in the PotashCorp headquarters in Saskatoon or the Agrium head office in Calgary.
He acknowledged there will be “some reduction in corporate office positions.”
The $36-billion deal by the new companies announced nearly a year ago was touted as a “merger of equals” that would create the world’s largest nutrient company and the third-largest natural resource company in Canada.
Under Saskatchewan legislation, the head office of PotashCorp — originally created in the 1970s as a Crown corporation — must be located in the province. Wall has pointed to a pledge made by PotashCorp in 2011, after the federal government blocked a hostile takeover by BHP Billiton, that the company would maintain a “strong and vital corporate headquarters” in Saskatchewan, with 11 of its 14 senior executives living and working in Saskatoon.
The Saskatchewan premier said Wednesday that having a CEO split time between cities — as former PotashCorp CEO Bill Doyle did — is “not optimal” but the overall number of head office jobs is the bigger issue.
He said Saskatchewan legislation provides a more favourable royalty rate for companies with head office jobs in the province.
“If we were able to provide that incentive, we could also move the other way,” said Wall.
Wall pledges to look at ‘every option’ to enforce 2011 PotashCorp pledge
ALEX MACPHERSON, SASKATOON STARPHOENIX
September 6, 2017 | Last Updated: September 6, 2017 6:12 PM CST
Premier Brad Wall says his government won’t rule out using legislation or the province’s potash royalty structure to maximize the number of corporate headquarters jobs in Saskatchewan once the US$26 billion merger of Potash Corp. of Saskatchewan Inc. and Agrium Inc. closes later this year.
Wall, who last week spoke out about former PotashCorp CEO Bill Doyle’s 2011 pledge to maintain a “strong and vital corporate headquarters” in the province, told reporters on Wednesday that potash mining companies currently receive incentives based on head office jobs in Saskatchewan.
“If we were able to provide that incentive we could also move the other way,” the premier said, adding that while Chuck Magro’s decision to maintain his primary residence in Calgary after taking over as CEO of the post-merger firm Nutrien Ltd. is “not optimal,” he is more concerned about maximizing the number of jobs in the province.
Echoing previous comments, PotashCorp spokesman Bill Cooper said in an email that the merger will create benefits for all of the combined companies’ shareholders and that PotashCorp’s “operations and workforce in Saskatchewan will remain core to the combined company.”
The merger, which remains under regulatory review, was announced in September 2016. It is expected to create a company with six of the province’s 10 potash mines, other assets around the world and about 20,000 employees. The company has said its “registered head office” will be in Saskatoon with corporate offices in Saskatoon and Calgary, where Agrium is based.
Alberta NDP economic development minister Deron Bilous said in a statement that Alberta has the lowest overall taxes in the country and Calgary is “one of Canada’s best cities for international operations.” Agrium has kept his government briefed on the merger, and it understands it will be “business as usual” for that company’s 2,000 workers in the province, Bilous added.
Agrium vice-president of investor relations Richard Downey declined to put numbers on the current complement of employees in PotashCorp’s Saskatoon headquarters or the Agrium head office in Calgary. He said both cities will have “significant corporate offices, post-merger,” following some reductions, with senior managers at both locations.
Under Saskatchewan legislation, PotashCorp — which was created in the 1970s as a Crown corporation — must have its head office in the province. Doyle made his pledge to the province in 2011, after the federal government, which was under pressure from Wall, blocked BHP Billiton’s attempted $40 billion hostile takeover.
“The spirit and the letter of the pledge that PotashCorp made to the province after the merger failed, after we intervened on the merger, we’re going to look to uphold (it) and we’re going to look at every option to do that,” Wall said.