BHP Billiton said Jan. 19 that it has approved US$240 million in capital expenditures to support the development of the first stages of the Jansen Potash Project in Saskatchewan, Canada. This expenditure will facilitate the early stage work for the establishment of the production and service shafts.
The Jansen project is being designed to produce approximately 8 million mt per annum of agricultural-grade potash. It represents BHP Billiton’s first production of potash.
The news solidifies BHP’s stance as one of the most likely new greenfield potash projects for Canada, if not the most likely. Sources say that as an international mining giant interested in an entrance into the potash business, BHP has the financial wherewithal to either take the slow road – build its own mine, something that could take five or seven years by most estimates – or take the fast track – buy an existing potash producer. With the recent resurgence of fertilizer industry stocks, the latter option may now be more problematic, as it was for CF Industries Holdings Inc. in its attempt to buy Terra Industries Inc.
In 2008, BHP spent C$284 million to acquire 100 percent control of Anglo Potash Inc. (GM July 14, 2008), a joint venture development project that it established with Anglo in 2006. At the time, BHP executives were quoted as saying that the company would invest up to US$10 billion to become a major potash producer.
BHP said the new funding will be used to start the required ground freezing to allow safe and effective shaft sinking to take place, as well as completing detailed engineering, equipment, and materials commitments and other elements that will allow the shaft sinking to begin once full environmental permits are in place, anticipated in mid-2011. The Jansen project is in the final stages of a pre-feasibility study and is expected to move to the feasibility phase in mid-2010, with a full investment decision expected in late 2011.
“The Jansen project is the first phase of what we expect to be our strong presence in the potash sector,” said BHP Billiton Diamonds & Specialty Products President Graham Kerr. “In conjunction with the Jansen project, we will continue to pursue other potash opportunities that fit within our portfolio of tier 1, long-life, export-oriented assets,” he said. In parallel with the Jansen project, BHP Billiton is also pursuing the Boulder and Young greenfield potash projects in Saskatchewan, as well as advancing work on logistics and a port.
BHP says it holds approximately 7338 km under exploration lease in areas of the Saskatchewan potash basin that are considered to be the most promising for economically viable potash deposits.
While there are several companies talking about developing new potash mines in Saskatchewan, the U.S., and elsewhere, as of the end of October BHP, Athabasca Potash Inc., and Potash One Inc. were the only companies to have actually applied for mining permits, with all awaiting approval, according to Kevin Stone with Natural Resources Canada (GM Nov. 2, 2009, p. 14.) He noted at the time that BHP was poised to start ground freezing in 2010, and suggested their mine could begin production in 2015. According to Stone, the cost to build a 1 million mt potash mine would be $1.5-$2 billion. He added that it takes five years to build a conventional underground mine.
PotashCorp President and CEO Bill Doyle has said that his company may be the next greenfield project in Saskatchewan (GM June 15, 2009, p. 1). All three major Saskatchewan producers have brownfield projects in the works to expand current capacity.
Globally, Stone noted projects advancing at Potasio Rio Colorado in Argentina, Mag Industries in the Congo, and Allana Resources in Ethiopia. Those already in the works include projects in China, Laos, Russia, and Turkmenistan.