BHP Ltd. is likely to take a final investment decision on its Jansen Stage 1 project in August, Bloomberg reported this week, citing a note by RBC Director Australian Metals & Mining Equity Analyst Kaan Peker.
Last month, BHP gave what analysts believed was the mining group’s strongest indication to date that it intends to go ahead with the potash project (GM June 18, p. 1). In a 56-page Potash Outlook investor and analyst presentation and briefing on June 17, BHP laid out the pro-case for the potash project, and for the mining group to a become a major new global supplier of the nutrient.
According to Bloomberg, RBC values the Jansen project at $1.2 billion, based on a long-term potash price of $300/mt, equating to 4 to 5 percent of group EBITDA when Stage 1 is ramped up by the end of the decade. Under current plans, BHP’s Stage 1, should it go ahead, would provide 4.3-4.5 million mt/y of potassium chloride production capacity.
RBC believes the mining group is likely to develop all four proposed stages of Jansen, producing 16-17 million mt/y at full capacity by 2035, for a total capex of $22 billion.
However, BHP told analysts and investors at the Potash Outlook briefing that it wants to have a port solution locked in before it takes the FID for Jansen Stage 1 to its board for approval. The group is considering two options regarding a port. One option is a commercial option in the port of Vancouver at an existing facility. The other is a greenfield option at the port, which, according to RBC, would see BHP joining the development of the proposed West Coast Terminal expansion.
But RBC’s base case is that BHP uses existing port facilities at Vancouver.
According to the Bloomberg report this week, RBC believes a partnership on Jansen with an existing potash operator in Canada, such as Nutrien or The Mosaic Co., “makes sense,” citing operating synergies and marketing benefits. However, Nutrien and BHP both have recently downplayed prospects for collaboration (GM June 25, p. 1).