BHP Billiton Ltd. last week said that while work continues to progress on its Jansen potash project in Saskatchewan, final approval by the BHP board of directors is still to come and may be later than initially expected.
“We are not in a position today to approve the full project,” Marius Kloppers, BHP CEO, told analysts Aug. 22. He said the company does not have all of its permits in place, and he did not want to signal a target date for approval. “Clearly that project is seeing some drift-out of a couple of months and so on as we have looked at additional engineering, as perhaps the permitting process has been slightly slower than expected.” He also said the company has lost a couple of months in setting up the shaft excavation due to very wet weather. Kloppers did say there is enough money preapproved to take the project through this financial year.
To date, BHP says two underground shafts that will support an 8 million mt/y potash mine are well advanced, with their excavation scheduled to be completed before the end of the 2014 financial year. It said the shaft collars are both excavated and lined to nearly 50 meters. The shaft sinking head frames are being erected, and boring machines are to soon be installed. BHP says at its fully expanded state, Jansen should operate at the bottom of the cost curve and generate strong investment returns. Existing pre-commitment funding will enable the project to advance in the 2013 financial year as the company works through the final engineering design and mining lease conversions before the decision is taken to the board. BHP said in the wider Saskatchewan basin, it completed more than 25 kilometers of exploration drilling in the 2012 financial year.
In general, BHP noted that it will allot future money to those projects that maximize value while considering the balance between short and long-term returns.
One thing at the back of BHP’s mind might be its earnings, released on Aug. 22. Profit attributable to the members of the BHP Billiton Group were off 34.8 percent for the year-ending June 30, 2012, to US$15.4 billion from the year-ago $23.6 billion. Revenues, however, were up 0.7 percent, to $72.2 billion from $71.7 billion.
The major driver on lower earnings was weaker commodity prices. BHP also reported exceptional items, including a $1.8 billion impairment on its investment in the Fayetteville Shale dry gas assets.
Going forward, BHP expects the macroeconomic environment to stabilize before improving in the first half of the 2013 financial year. It said this recovery will provide support for commodity demand and pricing in the short-to-medium term. For specific commodities, it said the industry will find it difficult to develop new supply quickly enough to satisfy the expected increase in demand. He said this would particularly be the case for industries where barriers of entry are high, such as potash.