UPDATE 1-BHP faces $14 bln potash decision as price war looms

Wed Jul 31, 2013 12:16am EDT
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* BHP has already sunk $2 bln into potash push

* BHP would shun North American marketing cartel

* BHP seen postponing full Jansen commitment

By Clara Ferreira-Marques and Rod Nickel

LONDON/WINNIPEG, Canada, July 31 (Reuters) - Miner BHP Billiton's new boss is facing his biggest test to date, weighing the fate of a $14 billion Canadian potash project just as the collapse of a dominant potash cartel puts more pressure on already weak prices.

The Jansen project in Canada's Saskatchewan province was a tough call for BHP Chief Executive Andrew Mackenzie even before Tuesday, with mining investors reluctant to spend on big-ticket projects and most also cool on an oversupplied potash market.

But Russian potash giant Uralkali's decision on Tuesday to break out of its venture with Belaruskali - a move that it said could slash prices of the crop nutrient by 25 percent - could leave Mackenzie with an even tougher choice.

"Jansen is a project that will alter the dynamics of the industry. It is a big bet - you are betting that you will be so low-cost that you can kill the others," said Hunter Hillcoat, an analyst at Investec in London. Jansen, indeed, would produce 8 million tonnes a year - around 15 percent of 2012 potash supply.

"But this is a market with established players, and it will not be easy to be the 800 pound gorilla."   Continued...