Stage 1 of BHP Group Ltd.’s Jansen potash mine project in Saskatchewan is progressing “really well,” with first production now forecast from late calendar 2026, the Melbourne-based mining giant said as part of its financial results posted for the full year ended June 30, 2023, released Aug. 22.
Jansen Stage 1, which is under development 140 kilometers east of Saskatoon, Sask., is currently 26% complete (GM July 28, p. 28). Once fully operational, the facility will have the capacity to produce 4.35 million mt/y of potassium chloride.
In addition, BHP said it expects to have the option to make a final investment decision on Jansen Stage 2 in its current financial year (July 1, 2023-June 30, 2024), following the completion of the ongoing feasibility study for Stage 2.
BHP said all major permits are in place, and it has the necessary port capacity should it decide to proceed. Stage 2 would add an additional 4 million mt/y capacity. First production under an accelerated Jansen Stage 2 scenario would still be in 2029, BHP CEO Mike Henry told analysts at a company earnings call on Aug. 22.
“The timeframe we are thinking of here is 2029 to early 2030. That is going to underpin the returns coming out of a faster Jansen phase 2,” he said, adding that this would be “around the time Jansen Stage 1 will be finishing its ramp-up.”
BHP in February (GM Feb. 24, p. 1) announced that it had accelerated the Stage 2 feasibility study a year earlier than previously expected (GM Sept. 9, 2022).
Responding to an analyst’s question about how the downward correction in potash spot prices might impact BHP’s decision to bring forward Jansen Stage 2, Henry said it would only have a bearing if the drivers of that potash correction are something BHP considers enduring, or if there was a change in the medium- to long-term market outlook.
“What we are really looking at to trigger Jansen Stage 2 is strong underlying fundamental economics around capex and projected returns on that timeframe,” he said.
The second aspect, he said, is continued execution of Jansen Stage 1 in line with or ahead of plan, and “that is what we are seeing.” Henry said the third aspect is the market window or market opportunities opening up.
“Given what has happened in Russia and Ukraine, the views around what that means for medium- to long-term growth out of Russia and Belarus means that market opportunity may indeed be stronger or opening up earlier than was originally anticipated,” he said. “There is no decision yet. The study continues, but we do want to position the company with the option to take an earlier sanction decision in the coming year.”
Despite the elevated steel, fabricated concrete, and fabricated steel structure inflation seen in North America, BHP said it has not seen any cost escalation for the Jansen Stage 1 project above the $5.7 billion capital expenditure previously budgeted.
Henry said the group has a lot of the contracts already in place for Jansen Stage 1, with $3.1 billion in contracts awarded to date. The excavation and lining of the two 1,000-meter shafts were completed in late 2022 (GM Nov. 4, 2022).
BHP on Aug. 22 reported its lowest annual profit in three years, with the group citing lower commodity prices and high inflation, partially offset by strong operational performance. Underlying profits for the financial year ended June 30, 2023, were $13.4 billion, down 37% from the $21.3 billion recorded one year earlier.
Annual revenues were down 17%, to US$53.8 billion from $65.1 billion in FY2022. BHP cut its dividend by almost half, to $1.70 from $3.25 the year before.