Mining rivals spend up large on fertiliser firms

MELBOURNE: BHP Billiton and Vale, the world's two biggest mining companies, agreed to spend US$4.9 billion ($6.94 billion) this week on separate fertiliser acquisitions as they vie to secure supply to benefit from forecast surging demand.

Vale plans to buy a 16 per cent stake in Fertilizantes Fosfatados for US$785 million and Melbourne-based BHP agreed to acquire Canada's Athabasca Potash for about C$341 million ($453 million).

Rio de Janeiro-based Vale yesterday said the buy depended on completion of its US$3.8 billion deal to buy Bunge's fertiliser assets in Brazil.

Potash of Saskatchewan says fertiliser sales may climb in the next few years as global demand rebounds. The United Nations has said the global population will swell to 9.1 billion in 2050 from 6.8 billion, increasing the need for food.

"It is smart diversification for BHP and Vale," said Mark Pervan, senior commodity strategist at ANZ Banking Group in Melbourne. "We see a lot of stronger growth coming through for agriculture products and clearly potash is going to be a major beneficiary."

A Morgan Stanley report this month said global potash demand might rebound 50 per cent this year.

Bank of America Merrill Lynch said this week that it was expecting a recovery in usage in 2010 and 2011.

It's cheaper to buy existing operations than build new mines, Potash's president and chief executive William Doyle said yesterday after BHP announced the Athabasca Potash deal.

BHP said Athabasca had one of the largest exploration permit areas in the so-called Saskatchewan basin, covering about 6900sq km.

The deal would give BHP access to a total exploration area of more than 14,000sq km in the so-called Saskatchewan potash basin.

Vale said it would acquire 100 per cent of Bunge Participacoes e Investimentos, which owns phosphate rock mines and assets in Brazil, and Bunge's 42.3 per cent stake in Fosfertil.

BHP Billiton, the world's largest mining company, has approved US$1.93 billion of capital spending to speed expansion of its Australian iron ore business.

- BLOOMBERG