NEW YORK (Reuters) - BHP Billiton Ltd’s (BHP.AX) BLT.L Canadian potash mine will use advanced, cost-saving technology, giving it a competitive edge in a currently over-supplied fertilizer market, the executive in charge of the business said on Thursday.
Australia-based BHP aims to start potash production at Jansen, Saskatchewan in 2023, the company said this week, eventually producing 4 million tonnes annually.
The mine is already under construction but requires BHP’s board to approve another $4.7 billion to bring Jansen into production. That decision may happen as early as June 2018.
By the time Jansen opens, potash supply and demand are likely to be in balance, said Giles Hellyer, vice president of operations for potash, in a phone interview from Saskatoon, Saskatchewan.
BHP’s tentative plan to proceed with Jansen shocked some analysts, who have said that the market may be oversupplied for the foreseeable future as new mines from K+S AG (SDFGn.DE) and EuroChem start up.
“We’re a company which looks at large, long-life, low-cost assets,” Hellyer said. “We take a long-term view.”
Jansen would be the first potash mine globally to use highly efficient boring machines supported by a system to convey ore that allows the machines to run longer and at larger volumes without interruption, Hellyer said.
That system, other digital technology and minimal use of diesel equipment will raise efficiency and reduce energy costs, giving Jansen a competitive edge, he added.
“It’s going to have a very different look and feel to it,” he said of the mine.
The industry will struggle to absorb four mines from competitors that are starting in 2017 and 2018, let alone Jansen, BMO analyst Joel Jackson said in a note on Tuesday. Some analysts thought BHP would abandon its potash ambitions years ago, after the Canadian government blocked its 2010 takeover bid for Potash Corp of Saskatchewan POT.TO.
In the lead-up to Jansen’s possible opening, potash prices are likely to remain low, pressuring higher-cost producers and possibly taking capacity out of the market, Hellyer said.
He declined to comment on how BHP sees Jansen’s future potash sales breaking down between the United States and outside North America.
BHP, under pressure from activist investor Elliott Management for an independent review of its petroleum division, remains open to taking on a partner in Jansen, Hellyer said, but there are currently no ongoing talks.
BHP has completed more than two-thirds of Jansen’s mine shafts and has another couple of years’ worth of work to go, Hellyer said.
Reporting by Rod Nickel in New York; Editing by Steve Orlofsky