BHP Billiton Ltd., the world’s biggest mining company, is continuing preparatory work at its Jansen potash project after delaying a final decision on whether to proceed with the multibillion-dollar Canadian mine.
BHP is developing two underground shafts that would support production of at least 8 million tons a year in Saskatchewan, the world’s largest potash-producing region, Chief Executive Officer Marius Kloppers said at an analyst briefing in London today. BHP is still working on a final design and is securing titles and permits for the operation, he said. The project may cost $5 billion to $10 billion, according to a February estimate from Citigroup Inc.
“We have enough money preapproved to take us through this financial year” ending June 30, Kloppers said. “We are not in a position today to approve the full project.”
BHP doesn’t expect to approve any spending on major projects this fiscal year, the Melbourne-based company said earlier today. That includes an expansion at Olympic Dam in Australia that would create the world’s largest uranium mine. BHP today posted a 58 percent decline in second-half profit after metal prices declined and mining costs rose.
The company is still correct to target potash as a “key commodity,” Kloppers told reporters.
While it produces commodities including iron ore and copper, the company doesn’t yet mine potash, a form of potassium used to strengthen roots and help plants resist drought. BHP’s $40 billion hostile bid for Potash Corp. of Saskatchewan Inc., the world’s biggest producer, was blocked in 2010 by the Canadian government.
“Food will be a material issue for the world by our estimation over the next decades and potash is our way to play into supplying the world with food,” he said.
BHP said in June 2011 that it expected to seek final board approval for Jansen’s full development by the end of this year. The mine was expected to start production from 2015. The company has already committed to spend $1.2 billion on the project, BHP spokesman Ruban Yogarajah said today by e-mail in response to questions. He declined to comment on how much money BHP has spent so far.
“We must be absolutely certain that our engineering is right because it’s a new product,” Kloppers said today. “We don’t want to have a technical hiccup.”
“You need money, you need people, you need resource and you need all of your permits,” he said. “We haven’t got all of the permits in place here to give us complete title and 10-year security over what will be a very substantial commitment.”
Saskatchewan Premier Brad Wall said today he will assign more workers at provincial departments and agencies to find ways of speeding up the permitting without undermining his government’s commitment to protect the environment.
“We are, in fact, deploying more resources where needed to make sure the relationship is solid and that we’re facilitating the kind of investment we want to see,” Wall said in a telephone interview.
Wall said he was “encouraged” by BHP’s decision to continue developing the project.
BHP shares fell 0.3 percent to A$33.16 at the close in Sydney.