BHP approves plan to build Jansen potash mine near Saskatoon

A long-gestating potash project in Saskatchewan has been given the green light by one of the largest mining companies in the world, as the company also announcedit is getting out of the oil and gas business.

On Tuesday, BHP announced it had approved spending $7.5 billion to begin building the mine, which was originallyannounced in 2010.

At the time, the mine projectwas touted as the largest potash mine in the world andlocated 140 kilometres east of Saskatoon.

Since the initial announcement, the company has been building two mine shafts for the project. They areexpected to be completed in 2022.

The decision means the first potash ore is expected to be produced by the mine in 2027. Construction is expected to take six years, with a further ramp up of two years.

"This is truly a monumental decision," said Saskatchewan Premier Scott Moe.

"It represents, to date, the largest private economic investment that our province has ever seen."

WATCH| Premier Moe lauds massive BHP potash deal

Sask. premier lauds massive BHP potash deal

3 years ago

Duration 0:45

Saskatchewan Premier Scott Moe says BHP's new $7.5-billion potash mine east of Saskatoon will be the province's largest private economic investment.Matt Duguid/CBC

The company is expected to create 3,500 jobs during the peak of construction and 600 jobs once the mine is operational. BHP has also committed to a gender-balanced workforce and 20 per cent of its workers will be Indigenous.

Once it's completed, the mine is expected to produce 4.35 million tonnes of potash per year, with the potential for future expansions.

The project is also expected to be a windfall for the provincial government. The province expects to make tens of billions of dollars in taxes and royalties from the mine.

Moe said the decision shows the province is well-positioned as the world recovers from the COVID-19 pandemic.

"Saskatchewan most certainly has the resources, the food, the fuel, the fertilizer to provide and fuel that economic recovery that the world will enter into here in the months ahead," he said.

"We most certainly have the innovative, hard working people to ensure that we can bring value to those resources that we have here."

BHP has already spent roughly $5.7 billion on digging the mine shafts for the project, as well as buying the land and other preparatory work. The company noted that the amount of money spent so far was significant, and "our approach would be different if considering the project again today."

World class

Ragnar Udd, BHP's president of minerals-Americas, said the decision to invest in potash just made sense.

Udd said BHP makes large business decisions based on long-term 'megatrends' in the economy, such as decarbonization or electrification. One of those trends is population growth and the world's necessity to grow more food.

"When we look at Jansen, it's absolutely aligned with where we would like to go in terms of our organization," he said.

"It's a bit of a no-brainer in terms of a commodity. "

Udd said Saskatchewan's rich mineral basin is world class.

"The Saskatchewan potash [basin] is without a doubt the largest and we believe the highest quality of the deposits," he said.

"Fortunately, through some forethought from folks about 10 or 15 years ago, we've actually secured a premier position in that field."

He said the new mine will use new technologies to reduce carbon emissions and water usage.

As well, he said the company is committing to a gender-equitable workforceand has committed to hiring a 20 per cent Indigenous staff.

"We aim to have representation close to what we see in the neighbouring communities that are close to the mines," said Udd.

"We have to ensure that the benefits that we're deriving from the mine are actually being reciprocated to community leaders to employment and also to supplier relationships."

The new investment will also mean building a processing facility, storage building, automated rail loading system and port infrastructure to be built at Westshore Terminals in Delta, B.C.

The company said it expects international demand for potash to growand demand to rise by the late 2020s and 2030s. BHP expects to generate an internal rate of return between 12 to 14 per cent with an expected payback period of seven years from first production.

Good news

A professor from the Edwards School of Business at the University of Saskatchewan said the announcement is good news for the province's mining industry in general.

Brooke Dobni said Saskatchewan's mining sector has been slow for the past five to seven years, with numerous stories about mine slowdowns and temporary closures, especially in potash.

He said BHP's decision to enter the potash field is significant, mainly because such a large company carefully weighs the situation before it begins a large project.

"You've got to remember that BHP is one of the world's largest mining companies," he said.

"They have deep pockets and they don't make decisions on a whim. They analyze it and they wait for the right time."

Dobni expects the project will have a significant impact on the provincial economy, fromtaxes and royalties, to spin-off economic activity.

"We saw that boom last time when BHP started sinking shafts and whatnot, and that all stopped when they pulled out," he said.

"But that's going to be similar again."

Oil and gas

BHP also announced it was selling its oil and gas business to Woodside Petroleum, a large oil company based in Australia.

The expanded Woodside would be owned 52 per cent by existing Woodside shareholders and 48 per cent by existing BHP shareholders.

"The agreement to pursue a mergerof BHP's Petroleum business with Woodside will maximise the value of our oil and gas assets through increased operating scale and synergies," said BHP Chair Ken MacKenzie in a statement.

"BHP will be simpler and more efficient, with greater flexibility to shape our portfolio for the future."

Professor Dobni said he wasn't surprised to hear about BHP's decision.

"BHP has traditionally been a mining company," he said.

"I'm not surprised that they're looking at a merger with another company which could be in play in that space far more efficiently and effectively. Now, they can focus on what they do well."

Woodsideis expected to have yearly revenues of more than $8 billion USD.