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BHP Billiton Ltd still likes giant Saskatchewan potash project, but not in any hurry to develop

BHP Billiton's Jansen potash mine shaft in Saskatchewan. BHP is in the midst of a US$2.6-billion investment to build production shafts at the Jansen project.

The world’s biggest mining company says it’s still keen to construct the earth’s biggest potash mine, despite a severe bear market within the crop nutrient.

But it sure doesn’t seem to be in a hurry.

Andrew Mackenzie, BHP Billiton Ltd.’s leader, told investors on Tuesday that he doesn’t expect the potash market to make a serious recovery before the early 2020s.

“It’s a long way off,” he said on a conference call to discuss half-year earnings.

Melbourne, Australia-based BHP is in the midst of the US$2.6-billion investment to construct production shafts at its Jansen project in Saskatchewan. Jansen will be a game-changer in the industry, as BHP is aiming to produce eight million tonnes of potash a year, which may amount to nearly 15 percent of worldwide supply.

However, it may need a lot more vast amounts of dollars to really bring the work to production. Analysts and investors are skeptical that BHP’s board will approve Jansen in the near future, or indeed if it ever will. At current potash prices, nobody thinks the mine makes sense.

Mackenzie said BHP is moving at a “relatively slow rate” at Jansen, and can ‘t be ready for any push to production until the potash market recovers. Given that BHP doesn’t observe that happening until the 2020s, production remains a long way away.

The shaft sinking, which was approved in August 2013, was 54 per cent complete after December.

“Shaft sinking at the project continues, though BHP seems to continue the go-slow track at Jansen it has been on for years,” said Joel Jackson, analyst at BMO Capital Markets.

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