With little fanfare, mining giant BHP late on Tuesday committed to nearly doubling its developing footprint in the global potash sectorThe formal approval of the $US4.9 billion investment in stage two of BHP’s Jansen project in Canada was expected.
With an estimated internal rate of return of between 15 and 18 per cent and EBITDA margins of 65 to 70 per cent, it should also be highly profitable.How successful the Jansen investment is will obviously depend on how the potash markets develops over the next several decades. There is latent increased capacity from both existing mines and new projects on the drawing boards of the dominant producers, although BHP’s confidence that Jansen will be at the lower end of the cost curve and below the break-even costs for new production from Canada’s solution miners provides some protection.
So essentially there hasn’t been much of a longer-term impact on the supply, although there have been shifts in the trade flows for potash as the Europeans and Americans look elsewhere for their requirements. What might help BHP when Jansen does start producing is the impact of the war and other geopolitical tensions on new investment by the incumbent producers.
Source: News Formal (newsformal.com)
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