BHP Group, Melbourne, is in talks with Nutrien Ltd., Saskatoon, about a potential partnership in its Jansen potash mine in Saskatchewan as the world’s largest mining company moves closer to a final decision on the project, according to Bloomberg.
The pair are discussing multiple options, including Nutrien becoming the operator and selling the potash through its existing channels, or the Canadian company taking a stake in the Jansen mine, according to sources familiar with the matter. There is no guarantee the talks will lead to a deal, said the sources, who asked not to be identified as the discussions are private.
A deal would offset BHP’s financial and operational risk, said Gavin Wendt, Founding Director and Senior Resource Analyst at Mine Life Pty. “It’s a large-capex project and BHP is new to the potash space. It makes sense for it therefore to utilize Nutrien’s industry knowledge, where it is the world’s biggest fertilizer distributor.”
BHP has struggled with the Jansen project for years. Despite spending about US$4.5 billion and digging two 1,000-meter (3,300-feet) deep shafts, it has yet to approve construction and has faced investor opposition. The miner has said it will decide around mid-year on whether to approve a further $5.7 billion in spending to bring Jansen into production. Completion is expected to take five years, and Stage 1 would bring on 4.3-4.5 million mt/y.
Major potash producers could expect greater price certainty if a BHP-Nutrien deal goes ahead, “and keep new tons marketed within the existing global structure,” said Bloomberg Intelligence Industry Analyst Jason Miner. “A potential Nutrien deal could lift the cloud BHP’s Jansen mine has long cast over this market.”
BHP has repeatedly said it was open to bringing a partner into the project, especially one with expertise in the fertilizer market or potash. While that is a product it currently does not mine, BHP sees potash as a potential cornerstone of its future business, helping to feed a growing global population as the pressure on agricultural land increases.
Spokespeople for BHP and Nutrien declined to comment.
“We continue to like potash. We think the long-term demand and supply fundamentals for potash are attractive,” BHP CEO Mike Henry said at a conference last week when asked about the project. “We’ve always said we’re open to partnering, but the project doesn’t need a partner to proceed,” (GM May 21, p. 1).
Analysts had speculated that the departure of Nutrien President and CEO Chuck Magro in April (GM April 23, p. 1), a major critic of Jansen, “could open the door for an 11th hour deal between the two companies.” New President and CEO Mayo Schmidt has been more conciliatory, and his recent reference to BHP as being “disciplined” was seen as a “potash peace pipe.”
BHP’s willingness to explore partnership options with an established producer such as Nutrien would indicate that it is working to limit potential market disruption that could be caused by Jansen, RBC Capital Markets Analyst Andrew Wong said in a note. That’s “incrementally positive to the longer-term potash market outlook,” he said.