BHP approves $7.7bn expansion of Jansen potash project in Canada

The latest round of investment by BHP is set to double the capacity of its Jansen project in Canada making it one of the world’s largest potash mines.

BHP's Jansen potash project in Canada.

BHP has sanctioned $US4.9bn ($7.7bn) of spending on the second stage of its Jansen potash project in Canada, a move that will double production capacity and boost the mining giant’s exposure to fertiliser minerals for food production.

The global miner, which holds its annual general meeting in Adelaide on Wednesday, has already tipped plenty of money into the project, making a pre-Jansen Stage 1 investment of $US4.5bn and then approving a $US5.7bn deal in August 2021 for stage one of the development located in Canada’s Saskatchewan.

The latest round of investment is set to transform Jansen into one of the world’s largest potash mines, doubling production capacity to approximately 8.5 million tonnes annually, according to the company.

BHP has identified potash as a future facing commodity along with copper and nickel. Potash is a potassium-rich salt used as fertiliser to boost agricultural production.

The first stage of Jansen is about a third complete with first production to be delivered in late 2026. Construction of Jansen Stage 2 is expected to take approximately six years and deliver first production in the 2029 financial year, followed by a ramp up period of three years.

Jansen stage two is expected to deliver approximately 4.36 million tonnes annually of production at a capital intensity of approximately $US1050 per tonne. BHP noted this was lower than Jansen stage one, due to existing and planned infrastructure.

“This is an important milestone that underscores our confidence in potash and marks the next phase of the company’s growth in Canada,” chief executive Mike Henry said.

“We believe Jansen will deliver long-term value for shareholders

and the local community, and will position BHP as one of the leaders in the global potash industry.”

“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,” Mr Henry added.

BHP said the extra $US4.9bn investment for Jansen stage two 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.

Jansen is expected to operate for 100 years with the first phase producing 4.35m tonnes of potash annually. BHP said in 2021 that subsequent phases would lift production fourfold with an 18-20 per cent internal rate of return and four year payback.

BHP said Jansen Stage 2 was evaluated with its usual capital allocation framework and at consensus prices hods an internal rate of return of 15-18 per cent and an expected payback period of approximately six years from first production.

“Underlying EBITDA margins for Jansen Stage 1 and Stage 2 of approximately 65-70 per cent are expected due to a low-cost position of $US105 to $US120 a tonne.”

The miner said Westshore Terminals, in Delta, British Columbia, remains its main port facility to ship potash from Jansen to customers.