BHP Group Ltd. reported on Oct. 31 that it has approved an investment of $4.9 billion for Stage 2 of its Jansen potash project in Saskatchewan. Stage 2 would add another 4.36 million mt/y of potassium chloride capacity to Stage 1’s 4.35 million mt/y capacity currently under development. First production for Stage 1 is targeted for the end of calendar year 2026 (GM Aug. 25, p. 24).
BHP expects construction of Jansen Stage 2 to take approximately six years, with first production in fiscal year 2029 followed by a ramp-up period of three years. The company in February (GM Feb. 24, p. 1) announced that it had accelerated the Stage 2 feasibility study a year earlier than expected (GM Sept. 9, 2022).
The latest investment decision follows BHP’s approval of $5.7 billion for Stage 1 of the Jansen potash project in August 2021 (GM Aug. 20, 2021)and a pre-Stage 1 investment of $4.5 billion.
“Today’s additional investment will transform Jansen into one of the world’s largest potash mines, doubling production capacity to approximately 8.5 million tonnes per annum,” said BHP CEO Mike Henry. “This is an important milestone that underscores our confidence in potash and marks the next phase of the company’s growth in Canada. We believe Jansen will deliver long-term value for shareholders and the local community and will position BHP as one of the leaders in the global potash industry.”
Jansen Stage 1 is 32% complete, up from 26% as of June 30 (GM July 28, p. 28) and progressing in line with its schedule. BHP said Jansen Stage 2 is expected to deliver its approximate 4.36 million mt/y of production at a capital intensity of about $1,050/mt, “lower than Jansen Stage 1 due to the leveraging of existing and planned infrastructure.”
BHP said the new investment for Stage 2 will be used for the development of additional mining districts, completion of the second shaft hoist infrastructure to handle higher mining volumes, expansion of processing facilities, and the addition of more railcars.
BHP said Westshore Terminals in Delta, B.C., remains the company’s main port facility to ship potash from Jansen to customers, and the Stage 2 investment includes funding to increase storage facilities at the port. The company cautioned, however, that it will not be initiating a formal capacity extension for the Westshore port terminal at this time and will evaluate closer to Stage 2 reaching first production.
BHP said Stage 2 was evaluated utilizing BHP’s Capital Allocation Framework and “at consensus prices has an internal rate of return of 15-18% and an expected payback period of approximately six years from first production.”
The Stage 2 internal rate of return range is post-tax, nominal, and reflects average 2029-2039 prices of $369/mt and $466/mt. The company expects underlying EBITDA margins for Stage 1 and Stage 2 of approximately 65-70% due to low-cost production of $105-$120/mt.
Longer term, BHP said Jansen has the potential for two additional expansions to reach an ultimate production capacity of 16-17 million mt/y, subject to studies and approvals.