BHP covers added costs for potash project

“Challenges” in completing the shafts for its Saskatchewan potash project have led the world’s biggest mining company to top up the project budget by 10 per cent.

BHP, in an operational review document released Tuesday for its quarter ending Sept. 30, said its board has approved another $272 million to complete the watertight concrete and steel shaft linings for its “Stage 1” potash mining project at Jansen, Sask., about 65 km southeast of Humboldt (all figures US$).

The added funding, which brings the total budget to $3 billion, comes as the project “remains on track” to be presented to the company’s board for a “final investment decision” sometime in mid-2021.

The budget boost, BHP said Tuesday, is “a consequence of the challenges encountered earlier with placement of the shaft lining and then the more recent impacts from our COVID-19 response plan.”

BHP earlier this year had cut back its final shift lining work to focus on one shaft — “as part of our COVID-19 response plan to reduce our on-site interprovincial workforce,” the company said — but resumed work on both its 1.005-km-deep service shaft and 975-metre production shaft at Jansen in June.

While the board’s final decision is yet to be made, BHP said the Jansen operation “remains well positioned with attractive medium- to longer-term commodity fundamentals, and is set to be a high-margin, low-cost, long-life asset with multiple basin-wide expansion opportunities.”

That said, “as always, we will be disciplined about our entry into the market and it must pass our strict capital allocation framework tests.”

BHP said it’s also still choosing a port option somewhere on North America’s west coast, from which it would export potash produced at Jansen.

The Jansen project, which BHP has had on its radar since 2009, has been due to go to BHO’s board for final approval as far back as 2013. The company had said in October 2019 it expected to present the project to its board around February 2021.

If granted, such an approval would see an estimated $17 billion spent to fully develop the Jansen mine.

BHP, in making a business case for the mine, had projected in May last year that the world’s excess potash supply capacity will be used up by the middle of the next decade.

The Jansen site is one of five major projects BHP has underway, also including petroleum, copper and iron ore operations, with combined development budgets of $10.9 billion. — Glacier FarmMedia Network