BHP Billiton buys further into Sask. potash

The world’s second-largest mining firm plans to dig deeper into Saskatchewan’s potash industry with a $341 million cash deal to buy Athabasca Potash.

Australian mining giant BHP Billiton said Thursday that its friendly agreement to buy the Saskatoon-based junior potash firm for $8.35 per share “is consistent with (its) strategy of building a strong potash resource position.”

Athabasca’s main asset is its Burr Project, now in the pre-feasibility study stage for a low-operating-cost conventional potash mine on property next to both PotashCorp’s Lanigan, Sask. mine and Billiton’s own recently-proposed project at Jansen, Sask.

Athabasca (API:TSX) also holds one of the biggest exploration permit areas in Saskatchewan’s potash basin, with 23 permits covering about 1.7 million acres.

Athabasca’s founder and executive chairman Dawn Zhou said Thursday that the company’s board “reviewed and explored a number of possible strategic options and it has concluded that BHP Billiton’s offer is in the best interests of API’s shareholders.”

The agreement follows Billiton’s announcement last week that it has budgeted $240 million for advance work at Jansen, a project that’s also considered to be in the pre-feasibility study stage. The company completed exploration at Jansen last April and started a pilot hole drilling program there in October.

Billiton in 2008 also bought out its partner in another project in Saskatchewan’s potash basin, paying $284 million for Calgary-based Anglo Potash.

From farmers’ perspective, market observers see Billiton’s advances in Saskatchewan as eventually putting pressure on the “oligopoly” of a few major players handling the province’s potash resource.

The API deal is still subject to approvals from Athabasca’s shareholders, who are expected to vote on the deal in March, and from Canadian courts, Billton said.