Not all the $142 billion company’s divisions are downscaling – back in June, Mackenzie announced a shift in investment strategy away from products like iron ore and coal in high demand during China’s infrastructure and industrial boom towards more consumer-oriented commodities such as copper and potash.
BHP’s plans to build the world’s largest potash mine called Jansen in Saskatchewan, Canada received an unexpected boost last week when Uralkali’s massive Solikamsk-2 mine in Siberia was flooded, instantly removing 3% of the world’s potash supply.
Mackenzie told Bloomberg on Monday “no major new mines have begun production since the 1970s” and Solikamsk-2 disaster is a sign of the vulnerability of supply of the soil nutrient.
“These sorts of factors, combined with continued economic growth and demand for potash all conspire, if you like, to bring toward us the time when a new mine is required,” Mackenzie said in an interview in Sydney. “We have the lowest cost mine that would be useful to bring into the market at that stage.”
“We do know we have to wait for the market to come towards us, but once those shafts are complete, we are only three to four years — at most — from first potash,” Mackenzie said yesterday in the interview.
BHP may not pull the trigger on Jansen before the end of decade given its current belt-tightening, and only three months ago Mackenzie said market conditions may be scaring potential partners.
The firm has already allocated $3.8 billion to bring the project to the feasibility stage and has undertaken some construction and in September dispatched its top project manager to run the site.
Jansen has the potential to become the world’s biggest potash mine and could cost as much as $16 billion to construct.
The mine could bring an additional 8 million tonnes per year onto the market with an estimated 70-year mine life.
The greenfield project was considered by some the response of ex-BHP CEO Marius Kloppers to Canada’s blocking of its hostile takeover bid for Potash Corp.
Global demand for potash is between 55–60 million tonnes per year and could grow as much as 7% this year, but price have come down to the low $300s per tonne from $400 a year ago and nearly $900 in the run-up to the financial crisis.