PERTH (miningweekly.com) – Diversified miner BHP on Tuesday admitted to an overspend at the Jansen potash mine, in Canada, but CEO Andrew Mackenzie has argued that the project remains an attractive asset.
The mining giant has already spent $2.7-billion on the potash project, east of Saskatoon, Saskatchewan, and will have to invest another $5-billion to finish construction, which started six years ago.
“As our thinking around the project’s initial scope has evolved, I acknowledge we over-invested to date. However, Jansen remains an attractive option for BHP given its strategic fit, risk-return metrics and the longer-term optionality the initial investment would create,” Mackenzie said in a speech delivered at the Bank of America Merrill Lynch Global Metals, Mining and Steel conference in Barcelona.
He added that BHP continued to study the Jansen Stage 1 project and to finalise the shafts to optimise returns and de-risk this multi-generational potash project.
The Stage 1, four-million-tonne-a-year project is likely to require a capital investment of $5-billion. Three more stages of equal sizes will take the project to an ultimate 16-million-tonne-a-year capacity.
Meanwhile, Mackenzie told delegates that BHP’s focus for the year would remain on increasing the value and returns from its portfolio of assets.
“First, we will unlock the next wave of productivity through transformation and technology.
“Our transformation office, established last year, will help us simplify the way we work, take work away, lift the capability of our workforce and establish strategic and innovative partnerships.”
Mackenzie said that BHP’s first “innovation mine”, located at Eastern Ridge in Western Australia, would test new solutions and mining innovations, and would develop workforce capability so that the company could readily respond to the technological changes ahead.
“The combination of these transformation and technology initiatives will create more stable and predictable operations and could unlock value worth tens of billions of dollars.”
Mackenzie noted that BHP’s broad suite of options within its portfolio provided further ample choices to grow value.
“In copper, we have debottlenecking and latent capacity opportunities in Escondida and Spence, the brownfield expansion option at Olympic Dam and the longer-term Resolution project in Arizona.
“In nickel, a commodity we will now retain in our portfolio, Nickel West offers numerous development options and potential enhancements to its resource position through exploration and processing innovation.
“In petroleum, we have close to 30 brownfield projects and seven major projects with strong internal rates of return.”
The company also has a range of exploration programmes, which Mackenzie said could generate significant value to the company.
“As always, we will be guided by our capital allocation framework, which means we will only invest in the best of these options. Combined with our focus on capital efficiency we expect annual capital and exploration expenditure to remain below $8-billion in the 2020 financial year.”