SASKATOON, SASK. - BHP Billiton is punting on its Jansen potash mine project near Saskatoon. In its year-end results, the company's analysts explained that the market window is later than anticipated and the project will not be brought to its board in 2018.
"We are considering multiple ways to maximize the value of the project, from improvements in capital efficiency, to better timing first production," said BHP CEO Andrew Mackenzie in a speech to investors.
"Through these actions, we will both reduce risk and improve returns. But, the project will only proceed if it passes our capital allocation framework."
Mackenzie explained that progress has been made. Excavation and lining of the shafts are steadily progressing. Both shafts have been safely excavated and lined through the Blairmore aquifer.
Despite the delay, BHP is considering multiple options to maximize its value, including further improvements to capital efficiency, further optimization of design and diluting the company's interest by bringing in a partner, a release explained.
The company has spent around US$3.8 billion on the project so far and analysts anticipate the entire project would cost close to US$14 billion.
In the release, the company stated that potash demand has been strong in the calendar year to date, which has put a floor under prices.
Higher utilization rates at existing operations and additional greenfield supply will inhibit price inflation in the near term. Over the long-term, BHP analysts expect annual demand growth of between two and three per cent, with the demand outstripping supply in the mid-2020s.