BHP delays Jansen project approval
Three months after announcing that a massive potash mine east of Saskatoon could be approved as early as next June and in production by 2023, the world’s largest mining company has again delayed a decision on its Jansen project, the cost of which has been estimated at $14 billion.
BHP — which was known as BHP Billiton until earlier this year — announced on Monday that its board of directors won’t decide whether to approve the already-underway mine this calendar year, and is mulling options including waiting, diluting its interest by bringing on a partner or simply selling it.
“Once we have completed the shafts, we will have totally de-risked the project. We will have dealt with all the difficult parts of it. And, we will only be three years away from first potash when we think it’s appropriate to make the right countercyclical investment,” BHP CEO Andrew Mackenzie told reporters and analysts on a conference call.
“And that’s the big question, which will be determined by how it looks. And we’ve said today that we’ll wait at least another couple of years, and if we need to wait longer, we will wait longer,” Mackenzie added.
The company said on Monday that while the potash market looks “robust” over the long term, with demand set to outstrip supply in the mid-2020s, the mine project is now timed for “a later market window.” BHP chief financial officer Peter Beavan said on the call that while the firm is confident in the market, “it’s good to have options.”
The company began exploring the deposit near Humboldt, around 140 kilometres east of Saskatoon, a decade ago.
It has maintained for years that its directors will only green-light the project if it meets capital allocation tests. The company reiterated that pledge on Monday, when it reported a US$5.9 billion profit, up dramatically from the US$6.4 billion loss it reported last June.
BHP has to date committed US$3.8 billion to the Jansen project. Work on the current US$2.6 billion “spend,” which involves sinking the massive shafts, is now 70 per cent complete, the company said.
In a note to investors, Scotia Capital Inc. analyst Ben Isaacson said he believes the market is likely reading too much into the “so-called Jansen delay.” Work on the shafts is expected to continue through 2019, meaning board approval will not be required for another two years.
“Simply put, we do not think that Jansen is delayed,” Isaacson said.
The mine project is expected to create around 2,500 construction jobs plus 600 permanent ones when it becomes operational. The mayors of Humboldt and nearby Lanigan have said those jobs and other spinoff benefits could have a big impact on their communities and their constituents.