September 9, 2010 / 8:53 PM / 7 years ago

Saskatchewan to wait on any changes to potash royalties

* Saskatchewan to consult miners on any changes-official

* Province not pressured by BHP takeover timeline

By Rod Nickel

WINNIPEG, Manitoba, Sept 9 (Reuters) - Saskatchewan won’t change how it taxes potash production until well after any takeover of Potash Corp (POT.TO) (POT.N), fearing a hasty move could jeopardize mine expansion, a top official of the Canadian province said on Thursday.

Saskatchewan, with its rich reserves of potash, usually collects hundreds of millions of dollars per year in royalties from Potash Corp, Mosaic Co (MOS.N) and Agrium Inc (AGU.TO). It is worried that those revenues will shrink if BHP Billiton’s (BHP.AX) (BLT.L) takeover bid succeeds.

BHP, the world’s biggest miner, traditionally runs production flat-out in contrast to Saskatchewan miners’ carefully timed approach to support global prices. Under its complex royalty formula, Saskatchewan benefits more greatly from high prices than high production.

Changing how it calculates royalties “is not something we take lightly,” said Kent Campbell, Saskatchewan’s deputy minister of energy and resources. “It’s one of government’s ultimate levers. It’s something we would prefer not to have to do, but if we see changes in market structure that ... isn’t providing a fair return, then we would look at it.”

The government would do extensive consultations with potash producers, Campbell said, and doesn’t feel pressure to make changes prior to the potential takeover.

BHP’s $38.6 billion hostile takeover bid, which Potash Corp has rejected, expires on Oct. 19.

All three big potash companies are planning major expansions based on the current royalty structure and Saskatchewan doesn’t want to put those in jeopardy, Campbell said.

“We wouldn’t want there to be any surprises,” Campbell said.

Mosaic spokesman Brad DeLorey said the company concluded talks with Saskatchewan leading to royalty changes last year, adding, “we are pleased with the royalty structure that is in place.”

A spokesman for Agrium declined to comment. (Editing by Frank McGurty)

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