BHP takes out JV potash partner

VANCOUVER — BHP Billiton (BHP-N, BLT-L) is moving decisively into the potash business by acquiring its joint-venture partner Anglo Potash (AGP-V, AGPOF-O) in an all-cash deal worth $284 million.

Anglo Potash’s only asset is its 25% interest in the Saskatchewan potash project. BHP holds the remaining 75% and has operated the project since 2006. To earn its interest, BHP Billiton is required to spend up toUS$40 million and complete a bankable feasibility study before the end of 2011.

The takeover, expected to close in July, would make BHP Billiton the project’s sole owner.

The joint venture is one of the world’s largest potash landholdings, with 32 exploration permits covering 7,338 sq. km adjacent to existing Saskatchewan potash mines. The project area has seen more than 250 historic drill holes. Since Anglo Potash took the project over in 2005, the company has re-logged historic core, reanalyzed historic data, and completed 2-D and 3-D seismic surveys.

Two resource estimates for a small portion (6-7%) of the project, some 20 km east of the producing Lanigan mine, resulted in an impressive resource. Together, the reports estimate 479 million tonnes of measured and indicated extractable potash resource plus 981 million tonnes of inferred potash. The tonnage was estimated net of a 25% deduction for unidentified mining-level anomalies and the application of a 40% extraction ratio.

BHP is offering $8.15 per share, which represents a 34% premium over Anglo Potash’s closing price on May 9 and a 36% premium based on the volume-weighted average price of common shares over the 60 days prior to May 12.

Anglo Potash’s board has unanimously approved the acquisition. The junior’s president and directors have entered into lock-up agreements ensuring 26% of Anglo Potash’s outstanding common shares are voted in favour of the deal. To pass, the transaction must receive approval from 66.7% of votes cast by Anglo Potash security holders and a simple majority of votes cast by shareholders.

BHP has the right to match any superior proposal; Anglo Potash is liable for a $10-million break fee if the definitive agreement is terminated.

News of the takeover agreement boosted Anglo Potash $1.99, or 33%, to close at an all-time high of $8.06 on a record 6.8 million shares traded. The company’s share price has climbed steadily from the 75- mark in early 2007. Anglo Potash has 31.7 million shares issued.