BHP offer on PotashCorp too little: Sask.

A proposal for Saskatchewan to receive a one-time payment of $370 million to support a takeover bid of PotashCorp by BHP Billiton is not good enough for the province, says a government official.

The Saskatoon-based mining company, a major source of royalty revenue for Saskatchewan, is currently the focus of a hostile takeover bid by the Australian firm BHP Billiton.

According to the official, Saskatchewan had been seeking financial compensation to make up for projected revenue lossesexpected to result from new ownership.

"At the heart of any 'net benefit' calculation is the people of Saskatchewan being compensated for the $3 billion in revenue Saskatchewan will lose over the next 10 years as a result of a BHP Billiton takeover of PotashCorp," the official told CBC News on Tuesday. "This would need to happen before we would even consider supporting the deal."

The official said BHP "offered a $370 million one-time payment into an infrastructure fund" and noted it "doesn't even come close to offsetting the province's revenue loss."

Saskatchewan sought a minimum $1 billion for the fund and was insisting on other unspecified measures to make up for the $3 billion in projected revenue losses.

The official added that new taxes were not part of the discussions.

Estimates differ

The province's calculations on losses are higher than thosein a report prepared by the Conference Board of Canada, which suggested a $2-billion loss on potash revenues to Saskatchewan over 10 years, in the event of a takeover.

Saskatchewan believes the board understated the minimum effect of a takeover.

The Conference Board also said the loss to Saskatchewan could be as a high as $5.7 billion, depending on what happens to potash prices.

An official from BHP Billiton declined to speak to CBC News about discussions with the province. However, on Tuesday evening the company issued arelease addressing the topic of potential loss of resource revenues for Saskatchewan.

"BHP Billiton is confident it can address this concern," the statement said.

"BHP Billiton is willing to commit substantial resources to a province and a country that it believes is a welcome place to invest," Andrew Mackenzie, a senior executive with the company is quoted in the release as saying.

The statement said the company had already promised to move manymanagement functions ofpotash mining operations to Saskatchewan, keepa corporate office in Saskatoon andmaintain current jobs.

The note also said,"Additional significant undertakings and contributions will be the subject of ongoing discussions with the IRD," referring to the federal government's investment review process.

The government official saidSaskatchewan is determined to ensure revenues from the resource benefit the province.

"The potash resource doesn't belong to any company," the official said. "It belongs to the people of Saskatchewan. We will protect the economic and strategic interests of the people of Saskatchewan."