BHP Americas head sees Jansen ‘learnings’ key to limiting costs

[Ben Graham]

BHP (NYSE, LSE, ASX: BHP) wants to use lessons from its maiden foray into potash production to ensure that a subsequent expansion of the facility is completed at or under budget.

The world’s biggest miner in July disclosed a $1.7 billion cost overrun in the development of its Jansen potash mine in Saskatchewan as it pushed first production back by six months to mid-2027.

BHP delays Jansen potash mine, blows budget by 30%

The project’s first stage – known as Jansen 1 – is now expected to cost as much as $7.4 billion, up from a previous target of $5.7 billion. Capital expenditures for a second stage, whose entry into service was delayed by two years to 2031, are still pegged at $4.9 billion, though the amount is under review.

Located about 140 km east of Saskatoon, Jansen is crucial to BHP’s ambitions of building a significant footprint in potash – a new commodity for the mining behemoth. The investment, the largest in Saskatchewan’s history, is part of an effort by BHP to shift its portfolio away from steelmaking materials and towards what executives call “future-facing commodities” such as copper and potash. About 65% of BHP’s capital will be invested in these sectors over the medium term, the company said this year.

“We’ve had a lot of learnings from Jansen 1 in terms of what drove those cost pressures,” Brandon Craig, BHP’s president for the Americas, told MINING.COM’s sister publication The Northern Miner in an interview. “We want to take all of that and apply what we understand about Jansen 1 to Jansen 2.”

Modules

Greater use of modular construction will be key to BHP’s efficiency ambitions for the project’s second stage, Craig said. He likens the process to building a structure with Lego blocks, adding that BHP’s assembly facility in Edmonton will play a key role.

“The more you can push into the module, the less work you have to do on the site itself,” he said. “If you can pre-fit out in a factory a very large amount of the project build and transport it to the site, where you use very large cranes to erect that module, all you have to do is bolt it on site. The less you pre-fit out, the more labour hours you have to consume on the site itself.”

BHP is aiming to disclose an updated capital estimate for Jansen’s second stage by June 30, the executive said. While a two-year postponement will probably result in higher costs, some savings could still materialize, he stressed.

“We want to do the work first to make sure we have a degree of confidence in the accuracy,” he said. “The team is working quite hard at understanding how we can really improve the productivity. Whether that’s sufficient to offset the inflationary effects, we will see.”

Major producer

Stage 1 of Jansen is almost three-quarters complete, while Stage 2 is 13% done, BHP said Oct. 21. Once fully ramped up, Jansen will become one of the world’s largest potash mines, producing about 8.5 million tonnes of the fertilizer annually – equivalent to about 10% of global supply.

Crews reached a key milestone in August with the installation of a new 50-metre-tall steel headframe – the equivalent of a 16-storey building. Most of the steel was made in Canada before being shipped to the mine site.

With major steel construction almost done, focus will now shift to enclosing the structures so that employees can work through the winter by installing electrical cabling and equipment such as pumps and motors.

“You have to wire up the more process-related technologies within these structures. That’s going to be the work of the next calendar year,” Craig said. “Next year we will have fitted out the building with all the electrical equipment and mechanical equipment necessary to process the potash. Then, the six months after that we will be commissioning everything so that we can get first production in mid-2027. All of that is tracking pretty well.”

Escondida

Despite its massive size, Jansen isn’t alone at the top of Craig’s priority list. His focus is also on Chile’s giant Escondida copper mine, which BHP operates and co-owns with Rio Tinto (NYSE, LSE, ASX: RIO). A multi-billion-dollar expansion, which will include new infrastructure, is winding its way through the environmental approval process.

“We have a growth program for Escondida. We have to build new infrastructure, a new concentrator,” Craig said. “Escondida is going through a grade decline and an increasing hardness profile of the ore. It’s the world’s largest mine and probably the world’s best resource.”

With BHP having said last year it plans to invest between $7.3 billion and $9.8 billion in new projects at Escondida starting in 2028, its main goal is “getting that investment maximized in terms of the economic value add that it can bring to BHP and our JV partners, but also what it represents to ensure continued copper production, which we know is essential,” Craig added.

In nearby Argentina, where BHP is looking to advance the Filo del Sol and Josemaria projects as part of the Vicuña joint venture with Canada’s Lundin Mining (TSX: LUN), Craig said he was heartened to see President Javier Milei’s landslide victory in the Oct. 26 midterm elections.

Milei’s performance “has given us renewed confidence in Argentina,” Craig said. “As we drill out Vicuña, we continue to upgrade the quality of the resource. We are very happy with what’s in the ground, which is fundamental. We are working very hard to get to the point where we have completed the technical studies, which we should see in the first quarter of next calendar year. Once we have completed those technical studies, we should have a very good appreciation of when and how to invest.”

Resolution

Further north, BHP is still hoping to advance the Resolution copper mine in Arizona – which has stalled for more than a decade amid opposition from Indigenous groups – sometime next year. BHP has a 45% stake in the project, while Rio Tinto controls 55%.

Resolution is “a world-class ore body in a very good jurisdiction,” Craig said. “We have been fighting the legal battle for 13 years. We know the administration is very supportive of that project, but we need to finish solving the legal challenges. We hope we will be able to do that during the course of the coming months.”

Arizona could also see BHP reopen four long-closed copper mines – acquired in the 1996 purchase of Magma Copper – following policy changes introduced by President Donald Trump.

Trump raises stakes over Resolution Copper project with BHP, Rio Tinto CEOs at White House

The White House’s sense of urgency to secure mineral supplies and reduce reliance on China is a welcome support for the industry, BHP CEO Mike Henry has said.

Technological advances in areas such as copper leaching mean that “what was uneconomic in 2004 is potentially not uneconomic today,” Craig said. “We are doing the work now to understand what is prospective there versus what is not, and we have a bit more work to do. The point is, Arizona still is a copper mining district. We have some interests there and of course we are going to run the ruler over what those look like.”