BHP Ltd. CEO Mike Henry has brought in external consultants to review all aspects of the Jansen potash project in Saskatchewan, Canada, according to a Bloomberg report this week, citing a UBS AG note of Feb. 23. The note followed a sell-side roundtable with the CEO and BHP CFO David Lamont.
Henry is reported not to be happy about some aspects of the mining group’s decade-long road to develop Jansen, according to the report.
“The fact that we’ve got $4.5 billion sunk into Jansen and the time it has taken us to get here is something that I’m certainly not pleased with,” Bloomberg cited the CEO as telling analysts following the group’s fiscal first-half earnings announcement last week (GM Feb 19, p. 33).
Stage 1 of the Jansen project is due to be presented to the mining group’s board for a final investment decision in the middle of this calendar year. Stage 1 would provide 4.3-4.5 million mt/y of potassium chloride production capacity and will require another US$5.3-$5.7 billion to be completed, according to BHP.
According to the report, UBS sees finding a port solution for the project as one of the outstanding issues, although Henry said there were options.
Morgan Stanley analysts, including Rahul Anand, said in their note following the roundtable cited by Bloomberg that BHP wants to make sure all assumptions including capital and internal and external inputs are “stress tested well.”
Anand sees two options for the mining group in its upcoming investment decision whether to proceed with Jansen Stage 1 – either to proceed with the project, or, if the economics do not stand up, put the project on ice for five years and wait for the fundamentals to improve.
However, Shaw & Partners Ltd. mining analyst Peter O’Connor puts the chance of BHP moving ahead with Jansen at “above 50 percent.”
“This is a multi-generational asset – a little like iron ore was in the 1960s and 1970s, and the market’s fixation with the next few years shouldn’t be relevant,” Bloomberg cited O’Connor as saying. He believes BHP Chairman Ken MacKenzie should take a multi-decade view.
Despite the ongoing recovery in potash prices from their tumble to 10-year lows in April 2020, some analysts are skeptical that Jansen would be profitable in the current market, according to the Bloomberg report.
“Potash prices still remain at levels that could challenge the economics of the project, but the BHP board might be prepared to take a longer-term view, and
[we suspect]
BHP could pursue Jansen as an avenue for growth,” the report cited a UBS resources analyst Glyn Lawcock note of Feb. 17.