BHP bets on $10.6B Jansen mine to build potash footprint

[Redator]

The biggest private investment in Saskatchewan history is nearing the finish line.

BHP (NYSE, LSE, ASX: BHP) is more than 60% of the way towards completing stage one of the $10.6 billion Jansen project in Saskatchewan, with first production scheduled for late 2026. By the early 2030s, Jansen is projected to 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.

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 is part of an effort by the company 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 earlier this year.

CEO Mike Henry likens Jansen to another key BHP asset – its Western Australia Iron Ore (WAIO) operations. Despite depressed prices, WAIO remained the world’s lowest-cost iron ore producer in 2024, BHP said in February.

“We are excited to be entering a new commodity with attractive long-term fundamentals – potash,” Henry told investors at a Bank of America Securities conference in Barcelona in May.

“If I look across our portfolio, Jansen has many of the strengths of iron ore. It’s a bulk commodity, it will have a low-cost position driving high margins across a long-life asset, and it has expansion potential. Like WAIO, Jansen is a world-class asset, it’s in an investment friendly jurisdiction and it’s expected to generate cash at all points in the cycle.”

Potash demand

Structural factors such as improving living standards, changing diets and a rising global population look poised to fuel a 70% surge in potash demand by 2050, according to a BHP forecast released in August. Demand for the fertilizer has historically exceeded both crop production and global population growth, company data show.

“Potash is going to be increasingly required for agricultural use as a growing population seeks more and better food production from constrained farmable land,” Henry said in Barcelona. “So the multi-decade market opportunity here is significant, and we already have (memorandums of understanding) in place with buyers around the world to cover sales as Jansen ramps up. Jansen will position BHP among the leading players in the global potash industry.”

BHP envisions a seven-year payback period for Jansen following first production, according to a 2021 slide presentation. The first stage’s internal rate of return should range between 12% and 14%, BHP said in the document.

Jansen will enter the market in the bottom quartile of the global cost curve – a position that will make Jansen competitive through the commodity cycle, BHP predicts. Operating costs for Jansen’s first phase are expected to range from $105 to $120 a tonne, according to a BHP presentation posted online in May.

Peak spending for the construction of Jansen’s first stage will occur in 2025 and 2026, BHP says. While about 600 people will work at the mine once production starts, the facility will be remotely operated from a command centre in Saskatoon to maximize efficiency.

2029 start

Construction of Jansen’s second stage is anticipated to take about six years. BHP is targeting first production in 2029, followed by a three-year ramp-up period.

Jansen also has the potential for two further expansions to boost ultimate production capacity to as many as 17 million tonnes per year, subject to studies, according to a BHP presentation. Based on estimated reserves of about 6.5 billion tonnes, Jansen could potentially support 55 to 57 years of operation, BHP says.

Automation, continuous conveyance and larger-sized borers will all be part of Jansen operating system – a prototype of which has been tested for several years in a salt mine in Heilbronn, Germany – in a bid to increase output. A 60% smaller fleet compared with older mines will result in operating cost savings of 10%, BHP estimates.

BHP expects Jansen to produce about 50% fewer CO₂ emissions per tonne of product compared with the average Saskatchewan potash mine. More than 80% of the mine’s underground and support fleet will use electrical energy sources instead of diesel.

To export potash, BHP has signed an agreement with Westshore Terminals to use its facilities in Delta, BC, about 2,000 km from Jansen. The deal covers output from Jansen’s first two stages, with potential for further expansion.

“We are refurbishing what is now a thermal coal port into a new potash export facility, but we are capped at 9-10 million tonnes with that volume,” BHP potash asset president Karina Gistelinck told The Northern Miner in March. “Any growth beyond that will require significant investments in logistics infrastructure. That should be the focus for Canada for the years to come.”

Canada “is a strategic jurisdiction for BHP,” Gistelinck added. “The largest investment in BHP history is a real sign of that. We’re looking forward to building a real legacy here.”