BHP cost blowouts and delays hit CEO Mike Henry plan to step down

BHP is staring down the barrel of a $2.5bn cost blowout and delays on its big bet on potash that complicate leadership succession plans.

BHP's Jansen Potash project in Canada. Picture: Supplied

BHP has suffered a cost blow out of $2.5bn and a delay in its Jansen potash project that injects fresh uncertainty into the succession planning for chief executive Mike Henry.

The mining giant said on Friday that the price tag on stage 1 of Jansen had increased to a range of $US7bn to $US7.4bn ($10.77bn to $11.39bn) including contingencies, and that first production would be pushed back to mid-2027.

It was previously a $US5.7bn project.

BHP had expected Jansen to start producing fertiliser for the agriculture market by the end of 2026. Jansen has been one of Mr Henry’s pet projects during his time as CEO and first production was speculated as a possible milestone to coincide with a leadership handover.

Jansen stage 2, originally slated to double production to about 8.5 million tonnes a year, is now under a cloud. However, BHP appears committed to potash as a long-term investment despite the latest setbacks and increasingly global supply.

BHP has poured $US4.5bn into Jansen stage 1 in Mr Henry’s homeland of Canada and $US400m into stage 2 to date.

Stage 1 was 68 per cent complete, it said in revealing the cost blow out and delay in first production in its June quarter results on Friday.

BHP blamed the result on inflation, higher than expected input costs and design development and scope changes. It also lowered productivity expectations.

The company said it would update the market on Jansen stage 1 timing and expenditure before December 31 with stage 2 now officially under review.

BHP chief executive Mike Henry with CFO Vandita Pant.

BHP is considering delaying stage 2 by two years from fiscal 2029 to fiscal 2031 “given potential for additional potash supply coming to market in the medium term”.

Attention has turned to BHP’s leadership plans now that Rio Tinto has locked in West Australian Simon Trott as its new chief executive.

A successor for Mr Henry is being discussed after former National Australia Bank boss Ross McEwan became BHP’s new chair in March.

Mr Henry is into his sixth year in the job. Chief commercial officer Ragnar Udd, BHP president Australia Geraldine Slattery – who was part of prime minister Anthony Albanese’s visit to China – and chief financial officer Vandita Pant are considered top internal contenders.

Potash, and the Jansen mine being developed about 130 kilometres east of Saskatoon, Saskatchewan, and copper, represent BHP’s two big bets on “future facing commodities” as it seeks to reduce a heavy reliance on iron ore mines in WA’s Pilbara and coal in Queensland.

Some analysts predicted last year that BHP would put development of Jansen stage 2 on hold because of the weak potash prices.

BHP had earmarked $US4.9bn for spending on stage 2 in 2023.

Canada is already a large potash producer along with large volumes that come out of Russia and Belarus.

Jansen is currently the responsibility of BHP Americas president Brandon Craig, who is based in Santiago, Chile and led the copper mines in the region.

Mr Craig is considered a rising star at BHP and a long-shot chance for the top job. He previously led the company’s WA iron ore business for four years. He also ironed out teething problems with the company’s newest mine in the Pilbara, South Flank.

BHP said on Friday that South Flank exceeded nameplate capacity of 80 million tonnes in 2024-25, its first year of full production.

It helped BHP deliver record 2024-25 iron ore production on top of record copper production. The results were at the higher end of its guidance for both commodities, but the company was subdued in its outlook.

Copper production lifted to 2.02 million tonnes (mt), up 8 per cent on last year and within its guidance of 1.85mt to 2.05mt, driven by strong performances across all operated copper assets, including a 16 per cent increase at its Escondida operations, record production at Spence and a June quarter boost from the copper mines in South Australia.

Record iron ore production of 263mt was up 1 per cent on FY24 and within its 255mt–265.5mt range.

It said the Pilbara operations had been able to overcome cyclones that hit the region in the March quarter. The ramp up of the second concentrator ahead of schedule at the Samarco iron ore operations it owns in partnership with Vale also contributed.

FY26 guidance for copper is now 1.80mt–2mt, while iron ore is forecast at 258mt–269mt.

The group said it remains on track for full year unit cost guidance at Escondida, Spence, Copper SA and WA Iron Ore, and revised guidance at the BMA coal business in Queensland.

Group capital expenditure for FY26 and FY27 will remain at $US11bn.

On its mothballed WA nickel operations, the group is now estimating a loss of up to $US300m in earnings before interest, tax, depreciation and amortisation. BHP intends to review the decision to suspend the operation by February 2027.

The closure heightened tensions between BHP and the Albanese government over industrial relations changes and other policies Mr Henry has warned are detrimental to investment.

In comments published by BHP on Friday, Mr Henry said demand globally had remained resilient so far in 2025 as China adapted to the US tariff regime and other trade restrictions.

“That resilience largely reflects China’s ongoing ability to grow its overall export base despite a significant decline in exports to the USA, and its ability to deliver robust domestic demand despite the dislocation in the property sector,” he said.

“Copper and steel demand have benefited from a sharp acceleration in renewable energy investment, electricity grid build out, strong machinery exports and EV sales. While slower economic growth and a fragmenting trading system remain potential headwinds, stimulus efforts by China and the US would help to mitigate the near-term impact.”

Originally published as BHP cost blowouts and delays hit CEO Mike Henry plan to step down