IGO to record impairment against nickel assets in strategy shift
IGO has been undertaking a strategic review in an attempt to revaluate its resources.
BHP (ASX, NYSE:BHP) (LON:BLT), the largest mining company by market capitalization, sees potash as a key commodity in which to base its future growth despite prices are still hovering around $230 a tonne, less than half what they were only five years ago.
Speaking at the Bank of Merrill Lynch mining conference in Barcelona, Spain, chief executive Andrew Mackenzie confirmed the company’s commitment to the crop nutrient by announcing that the first phase for the company’s massive Jansen potash mine will be completed within six years.
BHP could seek approval from the board for Jansen’s expansion as early as June 2018, said chief executive Andrew Mackenzie.
“As we currently see it, we’re looking at a phased expansion into Jansen with an initial stage of four million tonnes per annum, and that will generate competitive returns,” Mackenzie said.
He added the company could seek approval from the board for such expansion as early as June 2018, with production beginning in 2023.
“As we progress this project we continue to optimize the development path as to how we might add a mine to those shafts so we can reduce risk and unlock value,” Mackenzie noted.
The world’s number one mining company has committed to date a total investment of $3.8 billion to move Jansen into production. From that total, $2.6 billion have been set aside for surface construction and the sinking of shafts, though analysts predict the total cost will be close to $14 billion.
According to BHP’s leader, a phased expansion of Jansen — which is projected to produce 8 million tonnes of potash a year or nearly 15% of the world’s total — is expected to generate competitive returns in stage 1, with significant potential upside in subsequent stages.
However, he didn’t seem in any rush to finish the project. Instead, he said that, as with every venture BHP embarks on, the company will only develop it “when the time is right.”
6 Comments
Mark
Into an already existing massive glut of potash? Highly doubtful. BHP could take their $10B and buy, for instance, a good chunk of PotashCorp with its $13.67B market cap. Or pick up the pieces when K+S eventually goes bankrupt. Continuing the Jansen project is completely and utterly uneconomic. The bigger question is when will BHP’s accountants force it to take a write-down of the project since the $2.6B they’ve sunk into it is obviously not worth anywhere near that.
Buy100ozSilver
Doesn’t seem like the best use of funds……they could consolidate the entire West African Gold region + take out NexGen whilst they are it for that type of money. Gold is one of the few commodities which will remain important over the next decade and beyond given where we are in the long term debt cycle, and they could propel themselves in the longer term as one of the top uranium producers whilst they are at it.
patentbs
Projects like this are long term investments. With Jansen the longer term view the better! The big issue with any mine is that there is no income until you have reached production.
There are other investments that will pay out sooner than Jansen but then BHP stand to lose a world class asset.
Those who say “buy PCS” have memories that are so short as to be non existent!
toorightmate
I predict that BHP might make one good decision this century.
It is now a few decades since their last good decision.
George
Sirius Minerals are due to open the worlds largest Polyhalite mine producing 10mtpa going up to 20mtpa. This product is cheaper to extract and of superior quality to potash. BHP potash is nineteenth century stuff.
George
This is a link to an article that mentions Sirius Minerals. The product, Polyhalite’ contains four of the six minerals needed for a balanced fertiliser.
http://www.dailymail.co.uk/wires/reuters/article-4516474/Undaunted-glut-new-potash-players-bank-fertilizer-rebound.html
The company is listed on the UK Stock Exchange withe the ticker SXX.