TORONTO (miningweekly.com) – Bill Doyle, the CEO of Potash Corporation of Saskatchewan, was characteristically scathing on Tuesday, in commenting on what he calls a "grossly inadequate" $38,6-billion takeover offer from the world's biggest mining company.

“I'm not saying we're opposed to a sale, but what I'm saying is we're opposed to a steal of the company,” Doyle said.

BHP Billiton has offered $130 a share for Potash Corp, the Anglo-Australian group confirmed separately. The group said it continues to review its options "and will make a further announcement in due course".

Potash Corp, which is the top potash producer in the world, has flatly refused to enter into talks with BHP Billiton, but decided it was best to inform shareholders of the “aggressive” and "opportunistic" move by the bigger company, Doyle said on Tuesday.

BHP is trying to take advantage of Potash Corp's relatively low market value, as demand for its products is only in the early stages of recovery after a sharp decline during the global economic downturn, he said.

Some analysts questioned why the company did not at least agree to some discussions, and at what point it might be persuaded to hold negotiations.

Doyle said he would not speculate on an offer price at which the board would agree to enter talks.

But the BHP offer, which valued Potash Corp at about $38,6-billion, “so grossly undervalues the company, it is so far beyond opportunistic, that it really was not a constructive basis for a negotiation,” he stated.

A number of analysts said on Tuesday that a sweetened offer from BHP Billiton was likely, given the bigger group's financial muscle and clear interest in the sector. There have been rumours for more than a year that a bid for Potash Corp was in the offing.

Shares in Potash Corp jumped 28% on Tuesday, to over $143 apiece in New York, indicating that investors are expecting a higher offer. The stock traded as high as C$244 a share in June 2008, at the height of the commodity boom. Other stocks in the sector also rose on the news.

The offer for Potash Corp, which was submitted last week after a meeting between Doyle and his counterpart at BHP, Marius Kloppers, on August 12, is the first sizeable move by BHP Billiton since its failed attempt to merge with smaller rival Rio Tinto in 2007 and 2008.

BHP chairperson Jac Nasser said in the offer letter that the company has fully negotiated financing facilities with its banks, and was confident it could get regulatory approvals for the deal.

BHP has been clear that it wants to get into potash, and Kloppers told journalists in February that Saskatchewan potash was attractive because it presented the opportunity for a "basin" approach, with multiple mines and investments in one region, similar to the group's coal assets in eastern Australia.

The company had said it will produce saleable potash from its Jansen project in Saskatchewan by 2015, and has a handful of other assets in the region, including the Burr project that it bought earlier this year by acquiring junior Athabasca Minerals.

But pundits have suggested for some time that the smaller acquisitions were a prelude to the firm making a play for a larger producer like Potash Corp.

Doyle said he also did not believe that BHP was serious about developing the greenfield projects.

“I do think that the Jansen project has been a smoke screen, a charade,” he told analysts on Tuesday. "We clearly saw through it and we think now our shareholders will see through it as well."

Saskatchewan-based Potash Corp produces potash, as well as nitrogen and phosphate products.

Demand for crop nutrients, and potash in particular, fell sharply after the financial crisis, as farmers postponed the use of fertiliser.

Producers, including Potash Corp, were caught off guard by how long it took buyers to return to the market, but Doyle said last month that potash buyers in most regions were purchasing volumes at “near prerecession levels".

The market is at an "inflection point" and demand for crop nutrients will rise as the need to feed the world's growing population becomes more urgent, he said on Tuesday.

Potash Corp expects demand for the crop nutrient to rise to 55-million tons in 2011, compared with a low of 30-million in 2009, although the forecast could be conservative if buyers' appetite for restocking returns, he said.

'UNIQUELY VALUABLE ASSET'

Doyle argued on Tuesday that the BHP offer, which represents a premium of just 16% to its closing price on Monday, does not take into account the strategic position Potash Corp holds in the industry, nor the potential to grow production as consumption rises.

Although the company curtailed production levels to match weaker demand over the last couple of years, it continued to invest in expansions and increased capacity at its mines.

This means that the group is well positioned to benefit from expected demand growth for fertilisers, and even more so given the difficulties facing new entrants into the sector, Doyle said.

There are only 12 countries that produce potash and the construction of a greenfield mine in Saskatchewan will take at least seven years and billions of dollars, according to Potash Corp.

It has been more than three decades since a new potash mine started production in Canada.

There are also no product subsitutes for potash, Doyle said. “We are, simply put, a uniquely valuable asset."

The company also announced on Tuesday it will adopt a shareholder rights plan to protect against hostile takeover offers.

Read analyst comments on the BHP offer here.

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