BHP Billiton (NYSE:BHP, Stock Forum) will invest
US$2.6 billion in the Jansen potash project in
Saskatchewan, but will develop it at a slower pace
than previously expected and with the possible
addition of a partner.
The Anglo-Australian mining company's investment
in Jansen will be spread over a number of years with
completion of two mining shafts expected during
2016.
“We'll direct capital even more selectively towards our
major basins, while continuing with measured
investment at Jansen to de-risk the project and
maintain the flexibility to enter the potash market
only when the time is right,” BHP Billiton CEO Andrew
Mackenzie said in a call with analysts.
Mackenzie said he was confident in the value of
developing Jansen, a project he believes will achieve
low costs of production, especially with the slower
timeline
“Everything we're doing, by giving ourselves more
time, by using our productivity agenda to drive down
capital costs and drive down operating costs, means
we're only going to improve from where we are
today,” Mackenzie said.
Under his predecessor, BHP Billiton attempted in
2010 to buy Potash Corporation of Saskatchewan
(TSX:T.POT, Stock Forum) - Canada's largest producer
- but was blocked by the federal government under
pressure from Saskatchewan Premier Brad Wall.
Among other things, BHP's detractors warned that the
Jansen project would be sidelined if it could be
supplied through PotashCorp's extensive operations
in the province. BHP consistently said there would be
enough demand for Jansen too.
Tuesday's capital investment announcement will take
BHP's total commitment to the site, 140 kilometres
from Saskatoon, to approximately US$3.8 billion.
The plans include completing the excavation and
lining of the production and service shafts, as well as
the installation of essential surface infrastructure and
utilities.
BHP also signalled it would look for partners as the
project moves forward, saying it may “sell a minority
stake to one or more joint venture partners,” which is
consistent with its approach at many of its other
major operations.
“For now, we're looking at a relatively straightforward
arrangement with potential partners who would come
and take a minority share of Jansen and be very much
a partner, like we have in our petroleum ventures,”
Mackenzie said.
The company calls Jansen, a project that is 100 per
cent owned by BHP Billiton, the world's best
undeveloped potash resource and expects it to
produce 10 million tonnes of potash a year for more
than 50 years.
Mackenzie also said he was confident about market
demand, projecting an expected growth of two to
three per cent per annum to 2030, driven by
increasing global population and greater economic
prosperity, which will lead to changing patterns of
food consumption and increased agricultural
demand.
“We have a long-stated preference for transparent
pricing mechanisms that truly reflect the supply and
demand -- the fundamentals of any given commodity
on any given day,” he said.
“In the case of potash, our projections have always
assumed a shift away from the current marketing
dynamic.”
His comments came after Russian firm Uralkali's split
from Belarusian Potash Company last month, exiting
a potash cartel that helps determine prices and
creating fears that the move could lead to a 25 per
cent drop in the price of potash.
The decision sparked a major selloff in the stocks of
potash producers, but the CEO of Potash Corp. played
down concerns at the time, saying such spats have
happened before and are usually resolved.
The project is also going ahead despite weak
commodity prices, which impacted the company's
profits.
BHP Billiton also reported Tuesday that its annual
profit fell nearly 30 per cent on lower prices for
copper, coal and iron ore. Earnings amounted to
$10.9 billion for the year ended June 30, and were
also dented by one-time charges of $922 million.
BHP said record production was offset by lower
commodity prices amid slowing global economic
growth.
BHP has exploration rights to more than 14,500
square kilometres in the Saskatchewan potash basin,
but Jansen is its most advanced project.
Analyst Maxim Sytchev of Dundee Capital Markets
said the announcement was also a positive one for
SNC-Lavalin (TSX:T.SNC, Stock Forum), a Montreal-
based engineering and construction company that
has contracts with BHP for work at potash projects to
be developed and built mainly in Saskatchewan.
Read more at
http://www.stockhouse.com/news/business-
news/2013/08/20/bhp-locls-in-$2-6b-investment-
in-saskatchewan-pota#bwJXSQIJ9XLMghHk.99
US$2.6 billion in the Jansen potash project in
Saskatchewan, but will develop it at a slower pace
than previously expected and with the possible
addition of a partner.
The Anglo-Australian mining company's investment
in Jansen will be spread over a number of years with
completion of two mining shafts expected during
2016.
“We'll direct capital even more selectively towards our
major basins, while continuing with measured
investment at Jansen to de-risk the project and
maintain the flexibility to enter the potash market
only when the time is right,” BHP Billiton CEO Andrew
Mackenzie said in a call with analysts.
Mackenzie said he was confident in the value of
developing Jansen, a project he believes will achieve
low costs of production, especially with the slower
timeline
“Everything we're doing, by giving ourselves more
time, by using our productivity agenda to drive down
capital costs and drive down operating costs, means
we're only going to improve from where we are
today,” Mackenzie said.
Under his predecessor, BHP Billiton attempted in
2010 to buy Potash Corporation of Saskatchewan
(TSX:T.POT, Stock Forum) - Canada's largest producer
- but was blocked by the federal government under
pressure from Saskatchewan Premier Brad Wall.
Among other things, BHP's detractors warned that the
Jansen project would be sidelined if it could be
supplied through PotashCorp's extensive operations
in the province. BHP consistently said there would be
enough demand for Jansen too.
Tuesday's capital investment announcement will take
BHP's total commitment to the site, 140 kilometres
from Saskatoon, to approximately US$3.8 billion.
The plans include completing the excavation and
lining of the production and service shafts, as well as
the installation of essential surface infrastructure and
utilities.
BHP also signalled it would look for partners as the
project moves forward, saying it may “sell a minority
stake to one or more joint venture partners,” which is
consistent with its approach at many of its other
major operations.
“For now, we're looking at a relatively straightforward
arrangement with potential partners who would come
and take a minority share of Jansen and be very much
a partner, like we have in our petroleum ventures,”
Mackenzie said.
The company calls Jansen, a project that is 100 per
cent owned by BHP Billiton, the world's best
undeveloped potash resource and expects it to
produce 10 million tonnes of potash a year for more
than 50 years.
Mackenzie also said he was confident about market
demand, projecting an expected growth of two to
three per cent per annum to 2030, driven by
increasing global population and greater economic
prosperity, which will lead to changing patterns of
food consumption and increased agricultural
demand.
“We have a long-stated preference for transparent
pricing mechanisms that truly reflect the supply and
demand -- the fundamentals of any given commodity
on any given day,” he said.
“In the case of potash, our projections have always
assumed a shift away from the current marketing
dynamic.”
His comments came after Russian firm Uralkali's split
from Belarusian Potash Company last month, exiting
a potash cartel that helps determine prices and
creating fears that the move could lead to a 25 per
cent drop in the price of potash.
The decision sparked a major selloff in the stocks of
potash producers, but the CEO of Potash Corp. played
down concerns at the time, saying such spats have
happened before and are usually resolved.
The project is also going ahead despite weak
commodity prices, which impacted the company's
profits.
BHP Billiton also reported Tuesday that its annual
profit fell nearly 30 per cent on lower prices for
copper, coal and iron ore. Earnings amounted to
$10.9 billion for the year ended June 30, and were
also dented by one-time charges of $922 million.
BHP said record production was offset by lower
commodity prices amid slowing global economic
growth.
BHP has exploration rights to more than 14,500
square kilometres in the Saskatchewan potash basin,
but Jansen is its most advanced project.
Analyst Maxim Sytchev of Dundee Capital Markets
said the announcement was also a positive one for
SNC-Lavalin (TSX:T.SNC, Stock Forum), a Montreal-
based engineering and construction company that
has contracts with BHP for work at potash projects to
be developed and built mainly in Saskatchewan.
Read more at
http://www.stockhouse.com/news/business-
news/2013/08/20/bhp-locls-in-$2-6b-investment-
in-saskatchewan-pota#bwJXSQIJ9XLMghHk.99