BHP delays $14 billion Canada potash push as profit drops

Tue Aug 20, 2013 2:56pm EDT
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By Sonali Paul and Clara Ferreira-Marques

MELBOURNE/LONDON (Reuters) - Miner BHP Billiton mapped out a cautious approach to expanding into potash on Tuesday, keeping a $14 billion Canadian project alive but delaying production at the giant deposit until at least 2020.

In its first set of results under new Chief Executive Andrew Mackenzie, BHP outlined its plan to keep options open alongside a 15 percent drop in half-year profit. The world's largest miner missed forecasts largely due to Australian mining tax adjustments and other non-operational items.

BHP and Glencore Xstrata wrapped up the results season for the world's big five miners, with BHP holding up slightly better than its peers as it stepped up output of iron ore, copper, coal and oil and slashed $2.7 billion in costs in the face of sliding commodity prices.

Major miners have come under pressure to rein in spending, sell off underperforming assets and tackle debt after years of rampant spending on new mines and acquisitions as prices rose.

Reflecting the sector-wide austerity drive, BHP said it plans to invest $2.6 billion over the next four years digging shafts at the Jansen potash project in Canada to keep its options open, delaying production by at least five years while inviting offers for stakes in the mine.

Mackenzie said he wanted to retain flexibility to enter the market a time that was right for shareholders.

"We are very confident the market is going to need a new greenfield mine sometime in the next decade, but the exact timing is not clear," Mackenzie told reporters.

Spending on Jansen currently accounts for just 5 percent of BHP's capital budget, Mackenzie said, but a forecast drop in prices for the fertilizer ingredient had raised questions over the future of the mine, the last of BHP's three mega-projects.   Continued...

A man walks into the head offices of BHP Billiton in central Melbourne in this file photo from July 22, 2009. REUTERS/Mick Tsikas/Files