* Says exploring possible sale of the company
* Shares soar 42 percent in early trade
(Adds dateline, details on proposal, background; In U.S.
dollars, unless noted)
By Euan Rocha
TORONTO, July 16 Athabasca Potash Inc API.TO,
said on Thursday it is exploring a possible sale of all or part
of the company, sending its shares soaring 42 percent.
Saskatoon, Saskatchewan-based Athabasca said in March it
had sufficient funds to complete a pre-feasibility study of its
Burr project in Saskatchewan, but was seeking a strategic
alliance to develop the project further.
Analysts estimate that a new potash project that produces
about 2 million tonnes annually, can take 5 to 7 years to
construct and cost about $2.5 billion, a prohibitively high
cost for an junior exploration company.
"The company has expanded the scope of transactions it is
considering from joint ventures and other forms of direct
participation...to include potential mergers or potential
acquisitions of all or a portion of the company or its
business," it said.
Athabasca shares rose 42 percent C$5.80 in early trade on
the Toronto Stock Exchange on speculation that the announcement
could prompt a bidding war.
Global interest in potash, a key crop nutrient, has risen
sharply in the last couple of years, as a very small group
controls about 75 percent of global supplies of potash and its
price has until recently remained stubbornly high.
Possible bidders for Athabasca could include mining giant
BHP Billiton (BHP.AX) (BLT.L), which has been looking to expand
into the potash arena and has proposed building the Jansen mine
in Canada's western province of Saskatchewan.
Analysts now expect BHP to seek more acquisitions after
sealing an iron ore venture with Rio Tinto (RIO.AX) (RIO.L).
Brazilian mining giant Vale (VALE5.SA) is also reportedly
looking to expand its presence in the fertilizer sector and has
been linked with a bid for Mosaic Co (MOS.N). [ID:nN16402123]
China, the world's largest potash importer, has been
steadily acquiring natural resource assets across the globe, as
valuations have plummeted amid the economic downturn. Analysts
believe China may also want to secure potash assets to avoid
being held hostage by exorbitant pricing demands.
Germany's K+S SDFG.DE, one of the world's largest
suppliers, has also expressed interest in expanding its potash
assets, and fertilizer producers in Russia and India have also
been scouting for assets.
Analysts believe Saskatchewan's three established potash
miners -- Potash Corp (POT.TO), Mosaic and Agrium Inc (AGU.TO)
may also want to expand their own portfolio of potash assets.
Athabasca has retained CIBC World Markets and Genuity
Capital Markets as financial advisors and has formed a
committee to look at the proposals.
The company has said many parties have shown interest in
the project and it has signed confidentiality agreements with
some of them, providing them data that will let them conduct
due diligence on the Burr Project, which has a measured and
indicated mineral resource of 425 million tonnes.
Athabasca said it does not expect to make any further
announcements regarding its strategic review process unless and
until a definitive agreement is reached.
(Additional reporting by Ashutosh Joshi in Bangalore; editing
by Janet Guttsman)