BHP has approved an investment of $4.9 billion (C$6.4 billion) for stage two of the Jansen potash project in Saskatchewan, Canada.
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This follows BHP’s approval of US$5.7 billion (C$7.5 billion) for stage one of the Jansen potash project (Jansen Stage 1) in August 2021 and a pre-Jansen Stage 1 investment of US$4.5 billion (C$4.9 billion).
The stage two investment advances BHP’s strategy to increase its exposure to commodities positively leveraged to the global megatrends of population growth, urbanisation, rising living standards and decarbonisation. Potash, used in fertilisers, will be essential for food security and more sustainable farming.
This additional investment will transform Jansen into one of the world’s largest potash mines, doubling production capacity to approximately 8.5 million tonnes per annum (Mtpa).
Jansen Stage 1 is 32% complete and progressing in line with its schedule.
First production from Jansen Stage 1 is expected to be delivered in late CY2026. Construction of Jansen Stage 2 is anticipated to take approximately six years, and is expected to deliver first production in FY2029, followed by a ramp up period of three years.
Jansen Stage 2 is expected to deliver approximately 4.36 Mtpa of production at a capital intensity of approximately US$1,050/t, lower than Jansen Stage 1, due to the leveraging of existing and planned infrastructure.
In October 2022, BHP approved an initial funding commitment of US$188 million to procure long lead equipment and commence process plant foundation works.
The additional US$4.9 billion investment for Jansen Stage 2 will be used for the development of additional mining districts, completion of the second shaft hoist infrastructure to handle higher mining volumes, expansion of processing facilities and the addition of more rail cars.
Westshore Terminals, in Delta, British Columbia, remains BHP’s main port facility to ship potash from Jansen to customers.
The Jansen Stage 2 investment includes funding to increase storage facilities at the port. BHP will not be initiating a formal capacity extension for the Westshore port terminal at this time and will evaluate closer to Jansen Stage 2 reaching first production.
Jansen has been designed with a focus on social value and sustainability and is expected to have approximately 50% less operational (Scopes 1 and 2) greenhouse gas emissions per tonne of product and use up to 60% less fresh water when compared to the average potash mine in Saskatchewan.
Jansen Stage 2 was evaluated utilising BHP’s Capital Allocation Framework and at consensus prices has an internal rate of return of 15% to 18% and an expected payback period of approximately six years from first production.
Underlying EBITDA margins for Jansen Stage 1 and Stage 2 of approximately 65% to 70% are expected due to a low-cost position of US$105 to US$120/t4.
Transitioning to Jansen Stage 2 during the construction period of Jansen Stage 1 is expected to bring a number of operational benefits.
These include leveraging the experience of the integrated Jansen project team, continued use of existing contractors, reduced overheads and savings on mobilisation and demobilisation costs. Potential synergies of US$0.3 billion have been embedded into Jansen Stage 2's economics.
Longer term, Jansen has the potential for two additional expansions to reach an ultimate production capacity of 16 to 17 Mtpa (subject to studies and approvals). ■