Bloomberg News

Mosaic Says It Will Be Independent After Cargill Resolution (1)

May 15, 2013

Mosaic Co. (MOS:US), the second-largest North American producer of potash, said it sees itself remaining an independent company once it resolves the ownership of about $8 billion of stock previously held by Cargill Inc.

BHP Billiton Ltd., Rio Tinto Group and Vale SA -- the world’s largest mining companies -- aren’t in a position to make a bid after markets for their main commodities weakened, Chief Executive Officer Jim Prokopanko said yesterday in an interview at Bloomberg headquarters in New York. Antitrust concerns would probably block a combination with one of Mosaic’s largest competitors, he said.

“There’s probably not room for consolidation amongst potash producers,” Prokopanko said.

Mosaic, also the world’s biggest phosphate-fertilizer producer, recently completed a five-yearly “deep dive,” in-depth review, which affirmed its strategy of focusing on phosphate and potash, he said. The Plymouth, Minnesota-based company plans to grow through joint ventures, expanding existing mines, and may make acquisitions.

“We didn’t find anything more attractive than crop nutrition,” Prokopanko said. “Potash and phosphate, that’s the center of the fairway for us.”

Still, there may be acquisitions in the industry involving smaller companies, according to the Mosaic CEO. He cited Denver-based Intrepid Potash Inc. (IPI:US) and Australia’s Incitec Pivot Ltd. (IPL) as companies of the size that might prove to be attractive.

“If we want to do a large deal we can just do it,” he said.

Share Buyback?

Mosaic was split off from closely held Cargill about two years ago. It plans to start talks with charitable trusts associated with Cargill’s founding family and family member about buying the 129 million Mosaic shares that they acquired in the split.

Negotiations can start May 26 under the terms of an accord agreed to by all the parties involved. Buying back those shares is “one possibility we would welcome,” Mosaic Chief Financial Officer Larry Stranghoener said in the interview.

Mosaic said May 13 it has $5 billion of surplus cash and available debt capacity to be used for share repurchases and other uses.

Potash prices have dropped since surging in 2008 and 2009 as producers increased capacity. Potash most recently fetched $410 a metric ton in Vancouver, a major export port for the commodity, according to data from Green Markets. That’s 19 percent lower from a year earlier.

Jansen Project

Prokopanko said prices aren’t high enough to justify developing so-called greenfield projects, the industry term for new mines at sites previously untouched. That includes the Jansen potash mine in Canada, which BHP is considering building, he said. Brownfield projects, meaning expansions at existing sites, are still viable at current prices, he said.

In 2010, BHP made an abortive $40 billion takeover bid for Potash Corp. of Saskatchewan Inc., the largest North American potash producer.

“By the end of the decade, when the world’s growing potash demand has been satisfied with brownfield projects, prices will have to move up to $600 a ton to justify new money coming into these projects,” Prokopanko said.

Mosaic dropped 0.4 percent to $61.37 at 10:09 a.m. in New York. The stock has climbed 8.3 percent this year.

To contact the reporters on this story: Simon Casey in New York at scasey4@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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Companies Mentioned

  • MOS
    (Mosaic Co/The)
    • $47.27 USD
    • -0.07
    • -0.15%
  • IPI
    (Intrepid Potash Inc)
    • $15.04 USD
    • -0.01
    • -0.07%
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