BHP Billiton may 'mothball' Jansen mine in Sask. if potash prices don't rebound
Mining CEO says a decision will come after 2018-2019
Despite heavy losses and stagnant potash prices BHP Billiton, the world's largest mining company says its continuing ahead with its Jansen potash mine in Saskatchewan — but that doesn't mean the company will start mining potash as soon as it can.
The mining giant's CEO Andrew Mackenzie said the development of the mine, located about 140 kilometres east of Saskatoon, continues with two shafts roughly about 600 metres into the ground, with another 300 to 400 metres left to go.
Mackenzie added they're coming in under the $2.6 billion budgeted for that phase of the project.
"We'll finish the shafts around 2018-2019 and at that point we'll face a decision as to whether we actually start to construct an operation around those shafts and start to enter the market," Mackenzie said.
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Pulling the plug on the Jansen project would be a mistake as far as I'm concerned.- Sylvain Charlebois, professor at Dalhousie University
But whether or not BHP will mine potash from the Jansen site will depend on whetherpotash prices rebound.
Last year producers dug out $6.7 billion worth of potash, and this overproduction has left the market flooded with supply. The flooded market has led to a steep drop in prices with PotashCorp reporting an average price of US$154 per tonne, compared to a peak of around US$900 per tonne in 2008.
Mackenzie said if prices don't look favourable for BHP to enter the market, the company may not start extracting potash immediately.
"The decision to go forward on this mine is about a year or two away, probably more like two and possibly more and it's perfectly possible if at that time if the market is not going to be ready for potash in three years subsequently, that we could mothball the shafts once we've completed them and properly lined them," he said.
If BHP suspends development of the mine it would be a huge mistake, according to Sylvian Charlebois, a professor at Dalhousie University in Nova Scotia.
"I actually think the potash prices will eventually go up," Charlebois told CBC News.
"Pulling the plug on the Jansen project would be a mistake as far as I'm concerned … the mine— it's already at 60 per cent and to just retract and not move ahead with this project would be a mistake because eventually the world will need more potash."
Charlebois added the potash industry needs to find a different approach in terms of marketing potash because right now, the gap between supply and demand is distorted by the Canpotex cartel which excludes BHP but includes the other major potash producers: Mosaic, Agrium and PotashCorp.
For the 2015-2016 fiscal year, BHP reported a $6.4 billion loss the worst full-year result in the company's history. BHP said the result came from a 31 per cent fall in revenue to $30.1 billion amid weak commodity prices, write downs of U.S. oil and gas assets and a disaster at a Brazilian mining joint venture.
Once complete and operational, the Jansen mine is slated be one of the world's largest potash mine, producing about eight million tonnes a year.
With files from Radio-Canada and The Canadian Press