BHP Billiton Ltd. is continuing to look at the possibility of “some form of sell down or joint venture” for its Jansen potash project in Saskatchewan, according to CEO Andrew Mackenzie this week. “It has been our experience to date that without a clear route to sanction, which we are unwilling at this stage to provide until we really understand the economics and the market. … it is difficult to attract a large number of potential buyers. [But] we certainly remain open for business,” Mackenzie told investors and analysts on the company’s half-year earnings call Feb. 21.
BHP said it is mindful of the impact of the proposed Potash Corp. of Saskatchewan Inc. and Agrium merger and “some of the other alliances that are emerging in the marketplace,” and “what that does for supply,” but Jansen remains one of the company’s “important growth options” the CEO said, on a more optimistic note than in recent earnings’ reports.
As recently as last summer, Mackenzie said the company could “mothball” Jansen after completing the production and service shafts, currently under construction, if things weren’t looking more optimistic for the potash market (GM Aug.19, 2016).
“Our preference long term is to grow in oil and copper, then possibly potash,” said Mackenzie.
“We are going well in the construction of our shafts,” he added. “So, we’re now through the difficult part, the Blairmore aquifer, and so on. And we’re very close to coming through into the bottom part of the shaft construction where we’re beyond the free zone, so we’re into really hard and consolidated rock. The technology is working well in both the two shafts that we’re sinking. And in line – and parallel with that, we continued to work on what kind of investment we would make, obviously, at the bottom and the top of the shafts, when they’re completed, in order to start to develop a mining operation.
“We are trying to find ways of breaking up [the Jansen project expenditures] into the smallest possible modules, but also with the most respectable forms of capital productivity,” he said. “But it’s going well.”
BHP has so far committed US$3.8 billion to Jansen, of which US$2.6 billion currently is being spent on sinking and lining the two production and service shafts, and building essential surface infrastructure and utilities at the site. This work was 64 percent complete as of Dec. 31, 2016, and is anticipated to be finished around 2018/19 (GM Feb. 3, p. 14). The production shaft is about 60 percent complete, and in fourth-quarter 2016, BHP awarded the engineering contract for feasibility studies for Stage 1 of the project (GM Feb. 3, p. 14).
Still, BHP has yet to take a final investment decision on Jansen, which would produce upwards of 8 million mt/y of potash. Analysts have said it could cost as much as $14 billion to bring the mine to production.