A Potash Auction?

The giant Anglo-Australian mining concern BHP Billeton (LSE: BLT) -- which has a stock symbol that reminds me of a sandwich -- has bid $38.6 billion for Potash Corp., of Canada, and has also put on something of a charm offensive, seeking to persuade Canadians that locals will continue to run the place.

Canadian regulators have taken a permissive attitude of late toward foreign companies who want to take over the mining concerns of the Great White North. Xstrata, of Switzerland, bought Falconbridge (a nickel miner) without a fuss, for example.

Anyway, the key question here is: how much will Potash go for? Can the incumbent board set off an auction? You need more than one bidder for a good auction. Potash is apparently in discussions with a couple of Chinese concerns: the Sinochem Group and Hopu Investment Management.

As you can see from the chart, the course of BHP's stock price has been pretty rocky since April. Nonetheless, the company has deep pockets, and analysts are convinced it can sweeten its offer if it has to.

Indeed, Marius Kloppers, the CEO of BHP, has referred to the bid -- which stands at US$130 per share, as "full and fair." If he had wanted to say "last and best," he would have done so.

China v. Four Rio Tinto Execs

On July 5, 2009, four Rio Tinto employees, one of whom is a citizen of Australia, were arrested in Shanghai for corruption and espionage. The Rio Tinto Group is a diversified, British-Australian, multinational mining and resources group with two headquarters -- one in the UK, the other in Melbourne, Australia. Rio Tinto was founded in 1873, and is named for the site of its first mine, on the Rio Tinto river, in Huelva, Spain.

The four defendants are to be put on trial this week. Their names: Liu Caikui, Ge Minqiang, Wang Yong, ands the Australian citizen, Stern Ho. They were initially charged with stealing state secrets, which is a capital offense. Perhaps in response to diplomatic protests from Canberra, that charge was dropped, and they stand accused now of taking bribes and related acts of corruption.

Foreign businesses will be looking carefully at the trial as an object lesson in the risks of doing business in the People's Republic.

Question: is this trial really just revenge for the failure of the Chinalco deal? Chinalco is the major Chinese state controlled mining enterprise that offered in early 2009 to make a major infusion of cash into Rio Tinto in return for ownership interest in certain assets. Stockholders in Rio Tinto didn't think they were getting a fair shake, and the deal never went through.

Hell hath no fury like a dragon scorned?