WINNIPEG – Saskatchewan, the world’s richest potash-producing region, will not review how it taxes miners of the crop nutrient until late next year at the earliest as it waits to see if BHP Billiton follows through on plans to develop a huge mine in the Western Canadian province.
“We’re going to monitor the market behaviour, and if there’s change in the market structure we’ll take a look at that,” Kent Campbell, Saskatchewan’s deputy minister of energy and resources, said in an interview with Reuters. “If there’s a whole bunch of production that comes on, that could change the nature of the market.
“The BHP decision is obviously a big one.”
Potash taxes in Saskatchewan are the highest in the world, according to Campbell, with producers Potash Corp of Saskatchewan, Mosaic and Agrium collectively paying hundreds of millions annually.
Those companies are investing billions in mine expansions, while new players such as BHP and Germany’s K+S are doing preliminary digging on Saskatchewan’s first new potash mines in 40 years. With crop prices surging in 2008 and again this year on bullish outlooks for food demand, potash has attracted new interest for its ability to boost crop yields.
Saskatchewan’s royalty system is weighted toward the price of potash, rather than production. If too much new capacity comes to market and pressures prices, Saskatchewan’s revenue could drop.
One of the aims of a revised royalty system would be to give additional weight to production levels, Campbell said.
“That’s one of the things you would want to look at, for sure. One of the weaknesses of the current system is it’s highly reliant on price.”
BHP, the world’s biggest miner, has started construction on an eight-million ton potash mine at Jansen, Saskatchewan. A final go-ahead by its board, however, is not expected until mid-2013.
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