BHP to Consider Future of Jansen Potash Project in 2021

Global mining major BHP (ASX:BHP,NYSE:BHP,LSE:BLT) won’t be making a final investment decision for its Jansen potash project in Saskatchewan anytime soon. It has said it does not plan to bring the project forward for the ultimate decision until the first quarter of 2021.

According to the company’s Q3 2019 financials, the multinational miner plans to invest an additional US$144 million into the potash project in order to support project planning and a port solution.

To date, more than US$2.7 billion has been spent on Jansen, which has encountered several development issues, including a softening potash market.

While the multibillion dollar project is expected to be fruitful in the long run, the World Bank notes that fertilizer prices dropped by 5.4 percent during Q1 2019. However, prices began to recover in Q2 and have remained steady since.

Jansen is 84 percent complete, and preparation work for final shaft lining is currently underway.

“An additional US$201 million in funding was approved to further derisk the project, focusing on the mine’s scope of work, advancing other engineering and procurement activities, and preparation works for underground infrastructure,” reads the announcement from BHP.

Jansen is positioned for success, located in the favorable jurisdiction of Saskatchewan, within the potash-mining capital of world, Canada. Last year, the Great White North produced 12 million metric tons (MT) of the crop additive, with output climbing by 2 million MT from the previous year.

BHP isn’t the only company being impacted by fluctuations in the potash supply and demand cycle.

Nutrien (TSX:NTR,NYSE:NTR), the largest global potash producer and the leading Canadian company in the sector, announced that it will temporarily halt output at three projects in Saskatchewan during the final quarter of 2019.

“Despite the current short-term market conditions, we remain positive on potash demand for 2020, as well as the medium to long-term potash fundamentals,” states Nutrien’s mid-September announcement. “We remain focused on a gradual ramp up of production to meet demand and to ensure we operate the safest, most reliable and efficient potash business in the world.”

Even though potash producers and developers are currently struggling in an oversaturated market, demand for the important crop fertilizer is expected to steadily grow into the next decade as populations continue to balloon and arable land continues to decrease.

These are all factors BHP is banking on.

The company will continue to review the viability of Jansen as it progresses through its development phases. Currently the mine is in Phase 1 of a four phase strategy. It is estimated the total project will cost the diversified miner upwards of US$20 billion by the time it enters production.

Shares of BHP slipped slightly on Thursday (October 1), trading at AU$34.86.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.