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bnn.ca /Source/2013-10-08
BHP to invest $2.6 billion in Jansen project, seeks partners
The world's largest miner BHP Billiton ( BHP-N ) plans to invest $2.6 billion US in the Jansen potash project in Saskatchewan and is open to partnerships on the $14-billion plus mine, Graham Kerr, BHP's chief financial officer, tells BNN.
Kerr says the company has gainfully partnered in other areas of its businesses to help reduced costs.
"We have major businesses in iron ore and copper…and on all those businesses we have partners," he says. "Partners can add value to the project. We'll adopt a similar approach to Jansen."
Getting the infrastructure in place takes time, but the company will be watching the potash market very closely, he adds.
There have been growing concerns over price uncertainty in the potash market following the withdrawal of Russia's Uralkali, the world's largest potash producer, last month. The move effectively dismantled one of the world's major potash cartels leading to a steep fall in global potash prices.
Kerr says the price uncertainty in the global potash market is unlikely to affect BHP's Saskatchewan potash project.
"Jansen is still years away from being in a position to produce," he says. "BHP believes in fair and transparent market places. There's nothing in the recent [cartel] announcement that causes alarm," he says.
BHP had originally set 2015 as the start-up of the Saskatchewan mine, located 140 kilometres east of Saskatoon. But on Tuesday's earnings conference call, CEO Andrew Mackenzie pegged 2020 as the production date.
When asked whether Jansen was delayed, chief financial officer Kerr sidestepped the question, saying the company's $2.6-billion investment allows it "flexibility."
"The single biggest barrier to getting into the potash industry is sinking the shafts because of the time it takes," he says. "And that's what the $2.6 billion basically covers. What it does is gives us flexibility"
Once the mineshafts are in place, "we can go faster or slower depending on the market demand and maximize value for our shareholders," he adds.
It has already invested $1.2 billion in Jansen and the timing of its entry has been closely watched by the world's major producers, led by Potash Corp of Saskatchewan, which BHP tried to take over in 2010.
Its $39-billion bid was blocked by Ottawa on fears that potash prices and royalties would drop as BHP planned to split from the North American cartel. Now Russia's Uralkali has given potash producers a taste of what could happen as it recently quit the Belarusian Potash Co cartel.
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